The Oracle of Omaha has been buying stocks.
Each quarter, fund managers controlling at least $100 million in assets must publicly report their stock holdings to the U.S. Securities and Exchange Commission via Form 13-F. The 13-F filings allow investors to see behind the curtain of some of the wealthiest and most successful hedge funds in the world. The quarterly filings of Wall Street legend and Berkshire Hathaway (BRK.A, BRK.B) CEO Warren Buffett are always some of the most eagerly anticipated disclosures. Last week, Buffett reported buying nine different stocks in the most recent quarter. Here are the latest Buffett stocks to buy.
AbbVie (ticker: ABBV)
AbbVie was one of several new health care stocks Buffett started buying in the third quarter of 2020, and he added to most of those positions in the fourth quarter as well. Buffett may be betting that the health care sector will get a boost from the Joe Biden administration and a Democrat-controlled Congress. AbbVie is a global pharmaceutical company and the owner of leading drugs Humira and Imbruvica. AbbVie is a typical Buffett value stock, trading at just 7.6 times forward earnings and paying a 4.95% dividend. Buffett’s stake in AbbVie is now worth about $2.7 billion.
Merck is another health care stock that Buffett began buying in the third quarter and continued buying in the fourth. The global pharmaceutical giant is the owner of blockbuster cancer drug Keytruda, which is on patent through 2028 and has already been approved for more than 20 indications. Merck is also testing additional potential indications, such as breast and colon cancer. Merck’s diverse product portfolio generated $7 billion in net income in 2020. The company isn’t losing exclusivity on any of its major brands until at least 2022. Buffett’s stake in Merck is now worth about $2.1 billion.
Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb is another blue-chip health care stock that is typical of Buffett’s long-term value investing approach. The company has a long track record of successful acquisitions, including its $74 billion buyout of Celgene in 2019. Celgene has a large portfolio of cancer drugs, which historically generate some of the highest margins in the pharmaceutical space. Bristol-Myers has six promising pipeline drug candidates that can potentially help mitigate declining Revlimid sales once generic competitors enter the market in 2022. Bristol-Myers trades at just 7.5 times forward earnings and pays a 3.2% dividend. Buffett’s stake in BMY stock is now worth around $2 billion.
Following its merger with Sprint, T-Mobile is now the second-largest U.S. wireless provider and has more than 100 million customers. Warren Buffett seems to like the outlook for 5G wireless carrier stocks as the companies continue to roll out their upgraded 5G networks. The Sprint merger helped T-Mobile generate 71% revenue growth last quarter. Like the health care stocks, Buffett took a brand new position in T-Mobile in the third quarter and added to that position in the fourth quarter. Buffett’s T-Mobile stake is now worth around $617 million.
Verizon Communications (VZ)
Buffett started buying shares of U.S. wireless leader Verizon Communications in the third quarter, but the investment was granted confidential status. The SEC grants confidential status when an entity such as Berkshire convinces them that disclosing its stake would move the stock price so much that it would hinder its ability to complete its purchasing process. Verizon is a classic Buffett value investment, trading at 11 times forward earnings and paying a 4.5% dividend. Buffett has been extremely aggressive in buying Verizon in the last two quarters, and his brand new stake is worth about $8.3 billion.
Buffett doesn’t have the best track record when it comes to investing in oil stocks, but his massive new stake in oil major Chevron demonstrates he isn’t giving up on the oil space just yet. Buffett famously took a more than $2 billion loss mistiming an investment in ConocoPhillips (COP). On the surface, the Chevron investment makes sense for Buffett, who is known for saying investors should be “greedy when others are fearful.” Investors were understandably fearful about oil stocks in 2020 when oil prices dipped to historically low levels. Buffett’s new stake in Chevron is worth about $4.8 billion.
Buffett first invested in grocery store chain Kroger in the fourth quarter of 2019 and has been adding to his position ever since. Grocery stores were relatively immune to the economic downturn in 2020. Buffett has previously invested in other major grocery stocks, including Walmart (WMT) and Costco (COST). Buffett sold his last Walmart shares in 2018 and his stake in Costco in 2020 after owning both stocks for 20 years. Today, Kroger looks like a more attractive value play, trading at a forward earnings multiple of only 12.7. Buffett’s Kroger stake is now worth around $1.1 billion.
Marsh & McLennan (MMC)
The third brand new position Buffett recently disclosed is insurance broker Marsh & McLennan. Berkshire has a significant presence in the insurance industry, including its wholly owned Geico subsidiary. Marsh & McLennan’s business was relatively unphased in 2020, and the company reported positive earnings and revenue growth during the year. Buffett started buying in the third quarter and added to his position in the fourth quarter. Even after Buffett’s vote of confidence, the stock trades at just 20 times forward earnings estimates and is roughly flat compared to a year ago. Buffett’s MMC stock stake is worth about $504 million.
Buffett first invested in high-end home furnishings company RH in the third quarter of 2019, and he added to his stake for the first time last quarter. Formerly known as Restoration Hardware, RH has rebranded itself as a “lifestyle” company focused largely on online sales. In the third quarter of 2020, RH reported 26.7% operating margins, more than double its previous quarterly record. The company projects at least 10% annual revenue growth over the next decade, but the stock is still a reasonable value priced at just 26.2 times forward earnings. Buffett’s stake in RH is worth about $884 million.
Stocks Warren Buffett just bought:
— AbbVie (ABBV)
— Merck (MRK)
— Bristol-Myers Squibb (BMY)
— T-Mobile (TMUS)
— Verizon Communications (VZ)
— Chevron (CVX)
— Kroger (KR)
— Marsh & McLennan (MMC)
— RH (RH)