When markets tumble and inflation is soaring it’s hard to know where to put your money. Cash seems like a bad option when it’s being eroded rapidly by inflation yet stocks seem like a worse idea when they’re plunging to lower prices.
In perilous times, turning to Warren Buffett to see what he’s buying is a worthy time investment. And as it turns out, only one stock has made the grade in Buffett’s eyes when bear markets hit.
If you had to guess what would it be, you might pick Apple. After all, Buffett has an astonishing 40.76% of his portfolio in that single stock as of the last quarterly filing. If there’s one company Buffett believes in above all others, Apple appears to be it.
But it turns out there’s another company that Buffett likes even more than Apple.
What is it?
His own Berkshire Hathaway, of course.
Buffett’s Favorite Stock
When Buffett snapped up an old textile mill called Berkshire Hathaway back in 1965, he quickly realized that good leadership wouldn’t overhaul an ailing business with structural forces working against it.
As manufacturing was increasingly outsourced to China at lower costs, U.S. manufacturers would struggle. He kept the name Berkshire Hathaway for his new holding company, but pivoted the business model to snap up other firms. And over the past 57 years since assuming the mantle of CEO, he as generated an astonishing average annual return of just over 20% for Berkshire investors.
To give you an idea of just how extraordinary that return is, a $5,000 investment in 1965 would be worth approximately $180,000,000 today. It’s no wonder that Buffett’s connection to Berkshire trumps even his love of Apple. It’s also evident from his commitment to buy back shares during bear markets.
When markets crashed in 2020 and during the most recent bear market, only 1 stock earned Buffett’s favor enough to warrant purchase: Berkshire Hathaway. His criterion for buying back Class A Berkshire shares has evolved over the years. Most recently he has communicated that if he believes the company is trading below 120% of its book value, he is willing to buy.
How Much Has Buffett Bought?
And buy he has. You could say that Buffett has gone on a buying spree of Berkshire Hathaway shares.
When we examined his August 6, 2022 filing for Q2 results, we spotted a few key line items near the end of the 10-Q filing. It states that just under 2,400 A-shares were repurchased alongside over 25,000 B-shares. Combined that meant Buffett and his right-hand man Munger, decided to snap up a billion dollars worth of Berkshire stock.
For Buffett a billion dollars is a mere drop in the ocean. Perhaps more interestingly he’s snapped up over $62 billion worth of Class A shares in the past 4 years. To give you an indication of how that compares to the stock touted to be his favorite, Apple, the two don’t compare.
Certainly Buffett owns a lot of Apple, he is sitting on close to $100 billion in profits and his combined holding was worth as much as $157 billion earlier this year. But in 2018 he “only” spent $36 billion buying a 5% stake in Apple. In the past 4 years he’s spent almost double that buying Berkshire shares.
The takeaway is clear: while Buffett is a huge fan of Apple, the numbers state that he’s almost twice a big of a fan of Berkshire, and he’s willing to back his preference up with real capital.
If you’re wondering where to allocate capital during these turbulent times, following the maestro has historically proven to be a smart bet, and that means buying Berkshire Hathaway shares.