There are some fundamental truths about this market we can learn from watching Warren Buffett.

That’s certainly the case when his $770bn investment giant Berkshire Hathaway (NYSE: BRK.B) sells stocks.

And the third-quarter results are in. So let’s dig into what got culled, and what crucial lessons I’ve learned.

Results out

Berkshire Hathaway has boosted its cash pile from $130bn at the start of 2023 to a record $157bn today.

It has heavily cut positions in a series of top US stocks, the company revealed.

Results published in mid November showed the legendary investment firm sold off its last shares in American car stalwart General Motors. That was a position totalling £850m earlier this year. Buffett also trimmed his Amazon holdings and sold 10% of his position in oil giant Chevron.

There’s more. A total £100m stake in consumer goods giant Procter & Gamble and healthcare conglomerate Johnson & Johnson has been a good earner for Buffett. But he also sold these winners to make room for other opportunities, SEC filings show.

These bring the total Berkshire Hathaway sell-offs to $40bn in 2023 alone.

What to learn

Many investors incorrectly sum up Warren Buffett’s philosophy as being: buy and hold forever. Looking at his own moves, that’s patently false.

As chief executive of Berkshire, Warren Buffett has continued to sell shares in publicly traded companies before taking new positions.

That’s because being overinvested is a surefire way to miss opportunities when they arise. Overinvested, in this context, means having all one’s capital tied up in stocks with no extra cash left over.

So if a company an investor likes sees a dip that they think is overdone, the cupboard is bare when they come to take advantage.

Sometimes funding great ideas comes with a painful selling period to find the available cash.

But conviction is important. If I see more upside in one investment than another, I have to trust my gut and my experience. Warren Buffett certainly does.

Between July and the end of September 2023, the Oracle of Omaha sold stakes worth more than $5bn in US and offshore companies.

Pick unloved companies

It’s all very well piling into hot stocks when they make headlines. But I’ve made some of the best gains of my investing career by tracking undervalued companies and swooping in when nobody’s watching.

These businesses should be growing their profits and market share no matter what wider economic conditions look like.

I should look at a company’s balance sheet and scratch my head, thinking: “I don’t understand why this has sold off so much.”

Most new investors get this next part wrong, too. My job is not just to try to pick stocks to outperform the market. Even more important is to protect my capital and not lose money.

I can’t do that if my attention is split, or I’m constantly chasing the shiny new flavour of the month company.

In the dotcom boom, Berkshire Hathaway was ridiculed for ignoring internet stocks. But when the bubble burst and the Nasdaq lost 72% of its value from 2000 to 2002? Berkshire Hathaway increased its value by 80%.

Warren Buffett didn’t make his billions chasing fads. And neither should I.

The post Warren Buffett just sold these stocks appeared first on The Twelfth Magpie.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Tom Rodgers has positions in Amazon. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Recently, I was taking a look at Warren Buffett’s stock portfolio. And one thing jumped out at me – over 70% of his portfolio is invested in just five stocks.

Here, I’m going to highlight those five stocks Buffett is betting big on. I’ll also discuss whether I’d buy these shares for my own portfolio today.

Apple

Buffett’s largest holding is currently technology giant Apple (NASDAQ: AAPL). At 30 June, he held 915.23m Apple shares, worth about $137bn at today’s share price.

This is a stock I already own. And it’s one of my largest positions. So it’s fair to say I’m quite bullish on it.

Would I buy the stock today though?

Well, I would if I didn’t already have such a large position. To my mind, Apple’s P/E ratio of 22 is quite reasonable, given its brand power, ecosystem, growth prospects (healthcare and electronic payments), and strong balance sheet.

Risks to consider with Apple include supply chain disruptions from China and weaker consumer spending globally. Overall however, I see the long-term risk/reward skew as attractive.

Bank of America

Buffett’s second-largest holding is Bank of America. He held 1.03m shares at 30 June, worth around $39.7bn at today’s share price.

While Buffett is clearly bullish here, this is not a stock I’d buy for my own portfolio. One reason is that banks are extremely cyclical. If the economy goes downhill, bank profits tend to follow. Another reason is that big banks tend to have very complex balance sheets, so it’s hard to assess risks.

It’s worth pointing out that this stock is quite cheap right now. However, that doesn’t change my view. There are other stocks that are better fit for my portfolio.

Chevron

Oil giant Chevron is Buffett’s third-largest holding. At 30 June, he owned 163.5m shares, worth $30.5bn at today’s share price.

This is another Buffett stock I’d pass on. Chevron is doing well at the moment due to high oil prices. This is reflected in its share price. However, in the long run, the company could face structural challenges as the world transitions to renewable energy. So this stock is not for me.

Coca-Cola

His fourth-largest holding is Coca-Cola. At 30 June, he owned 400m shares, worth around $24.5bn at today’s share price.

This is a stock I would certainly consider for my own portfolio. It has strong brands, a good long-term track record in terms of profitability, and pays a decent dividend. Overall, there’s a lot to like.

My only issue with Coca-Cola is that it looks a little expensive right now. Currently, the P/E ratio is 24. I would prefer to buy the stock at a lower valuation to ensure a margin of safety.

American Express

Finally, there’s American Express. Buffett owned 151.6m shares at 30 June, worth about $23.5bn today.

I can see both a bull and a bear case here right now. On the bullish side, the company looks set to benefit from higher interest rates and increased travel spending. On the bearish side however, it could experience higher loan losses due to weaker economic conditions.

Given the credit risk, I’d probably buy Visa or Mastercard (both also held by Buffett) over American Express right now. Unlike Amex, these companies don’t face credit risk as they simply operate payments networks.

The post 74% of Warren Buffett’s portfolio is invested in these 5 stocks appeared first on The Twelfth Magpie.

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Ed Sheldon has positions in Apple, Mastercard, and Visa. The Motley Fool UK has recommended Apple and Mastercard. Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company.  Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As a savvy investor I looked for investing role models, and who better than The Sage of Omaha, Warren Buffett. Here are some famous quotes from the man himself. I used them to shape my portfolio.

Warren Buffett says invest for the long term!

“Our favourite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint”.

From the above quote, I learnt about buying and holding for the long term. There are many investors and strategies that are all about making a quick profit. This includes flipping stocks and shares when they may be up and down. I’ve adopted the approach of choosing quality stocks to own for a long time.

Taking advantage of price dips, like now!

Warren Buffett said, “When we’re talking about socks or stocks, I like buying quality merchandise when it is marked down”.

I learnt that when a stock I have on my buy list dips in price, there is an opportunity to buy shares, or buy more shares in a stock I already own, at a cut price. I would expect the share price to bounce back, providing me with capital returns too. A perfect example of this is the current economic volatility. I have scoured the FTSE for many UK shares that I believe are marked down currently. Presently, the stock market is struggling against the backdrop of soaring inflation and geopolitical issues.

Research, read, think!

“The best way to think about investment is to be in a room with no one else and to just think. If that doesn’t work, nothing else is going to work”.

It is said that Warren Buffett spends approximately 80% of his day reading and thinking. What I took from this is a core part of my investment mantra. I do as much research and due diligence as possible before buying a stock. I must confess this is one of my favourite lessons and I do admit to making mistakes in my early days due to a lack of research.

Expertise

“The important thing is to know what you know and know what you don’t know”.

This particular quote hits home with me personally. Warren Buffett has publicly admitted in the past he has passed up the opportunity to invest in quality companies because he did not understand them.

I don’t profess to be an expert in any given field. However, I do have a decent understanding of technology, and property. I’ve tried to keep my portfolio diverse, and only purchased stocks I know enough about, including the sector they operate in. I own a number of tech stocks, such as Sage Group, as well as real estate investment trusts (REITs), such as Warehouse REIT.

To summarise, these, and many more, of Warren Buffet’s lessons have helped me shape my holdings.

The post Here’s how I follow Warren Buffett to shape my portfolio! appeared first on The Twelfth Magpie.

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Jabran Khan has positions in Warehouse REIT and Sage Group. The Motley Fool UK has recommended Sage Group and Warehouse REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Warren Buffett is known as one of the greatest investors of all time. Indeed, since becoming CEO of Berkshire Hathaway in 1965, he has managed to deliver a return of 3,600,000% for the company’s shareholders. This has far outperformed the S&P 500.

That is not to say that all of Buffett’s investments have been great. For example, a few years before the pandemic, he made investments into all four major US airlines, before selling them at the lows of the pandemic. Since this moment, the airlines have recovered well. He also admitted that he paid far too much for Kraft Heinz, which was one of his largest purchases. Therefore, I do not blindly follow Buffett’s investments. Instead, I opt to do my own thorough research. Here’s one of his investments I would buy and one I am staying clear of. 

One of Warren Buffett’s most successful investments

Warren Buffett first started building a stake in Apple (NASDAQ: AAPL) in 2016 and has made around a 400% return since then. Recently, he has been adding to his position, buying around another $600m worth of Apple stock in Q1. I believe that now is a good time to add to my own position. 

The group is performing excellently right now. In the recent second quarter, it posted record revenues of $97.3bn, up 9% year on year. At the same time, net income reached over $25bn, up from $23.6bn the year before. This demonstrates that Apple has dealt well with inflationary pressures and continued reporting strong growth. 

However, the company is not immune to macroeconomic worries. For instance, it has warned that due to strict Covid-19 lockdowns in China and supply constraints, revenue is likely to be hit by around $4bn to $8bn in the third quarter. 

Even so, I am happy to buy more Apple stock in the next few months. The company is in excellent financial shape, as shown by a recent $90bn increase to the share repurchase programme. I am also encouraged by its further move into finance, through its new buy now, pay later service. This could offer a further form of growth. 

An investment I would avoid

Buffett has continued to buy Occidental Petroleum (NYSE: OXY) over the past few months. As the price of oil has surged, the oil giant has been able to post extremely large profits. For instance, in Q1, the company reported net income of $4.7bn, which was a record for the company. Without the inclusion of a $2.6bn non-cash tax benefit, adjusted income reached $2.1bn, far higher than the $346m loss reported in the same period last year. 

These excellent results allowed the company to repay $3.3bn of debt. Once it manages to pay an additional $1.7bn of debt, the company’s focus will be to expand the $3bn share repurchase programme. This may help boost the Occidental share price further. 

However, despite these excellent results, I am staying away from oil stocks right now. In fact, as recognised by Occidental themselves, it sees “the potential for market conditions to dampen slightly in the second half of the year”. Further, with climate change one of the most pressing issues in society, I believe that the long-term future of oil stocks is unstable. As I invest for the long term, I will, therefore, not be adding Occidental shares to my portfolio.  

The post A Warren Buffett stock I’d buy and one I’d avoid appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in Apple. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.