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Investors hang on Warren Buffett's every move because he is the greatest investor of our time. Possibly of all-time. Since becoming CEO of Berkshire Hathaway ( NYSE:BRK-A )( NYSE:BRK-B ) in 1964, the Oracle of Omaha has returned an incredible 4,384,748% compared to a 31,233% return for the S&P 500.
That means if you had invested just $1,000 in Berkshire Hathaway back then and then did nothing else, today you would have over $43.8 million. That's why, to paraphrase an old E.F. Hutton commercial, when the Oracle speaks (or buys or sells a stock), people listen.
Buffett's most recent stock moves shook the market. Notably, that was because he sold half his stake in Apple ( NASDAQ:AAPL ) stock. While he is still the biggest shareholder in the tech giant with 400 million shares worth $91 billion, paring his holdings by such a large percentage caused a tsunami of speculation.
Yet Buffett wasn't just a seller of stock. He was buying, too. Below are three stocks he was scooping up for his portfolio.
Key Points About This Article:
- Warren Buffett is the greatest investor of our lifetime, doubling the annual average returns of the S&P 500 over the 59 years since he became CEO of Berkshire Hathaway .
- Some of his stock buys and sells raised eyebrows, but there is one stock you can always count on the Oracle of Omaha picking up every quarter.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features a software stock we’re confident has 10X potential.
Ulta Beauty (ULTA)
Woman looking at cosmetics in store
Arguably the second-most surprising investment decision Buffett made was his purchase of Ulta Beauty ( NASDAQ:ULTA ), the largest specialized beauty retailer in the U.S. It wasn't an especially big purchase for Berkshire Hathaway, though the 690,100 shares were valued at $266 million, good enough for a 1.4% ownership stake in the business.
Yet the move shouldn't have caught so many people off guard. Ulta Beauty is a typical Buffett stock. It's a consumer-facing business right in line with the types of companies the Oracle likes, similar to Apple, Coca-Cola ( NYSE:KO ), and Kraft-Heinz ( NYSE:KHC ). It is also trading at a discount.
We know Buffett doesn't like to overpay and ULTA stock trades at less than 14 times earnings estimates, less than twice sales, and 16x the free cash flow it produces. It's not a screaming bargain-basement deal, but rather a very good company offered at a good price.
Ulta operates over 1,400 stores in all 50 states, so while its heady growth days are probably behind it, the retailer still has significant expansion opportunities. It is pursuing omnichannel retailing and global expansion as well. It is also building out stores-within-stores inside Target ( NYSE:TGT ). There remains a lot of growth potential for the beauty products retailer, and as the premier stock in its field, Ulta Beauty fits the Buffett mold.
Chubb (CB)
Car damaged by tree falling on it
Buffett added another 1.1 million shares of insurer Chubb ( NYSE:CB ) to his portfolio, and now owns 27 million shares worth almost $7.7 billion. The additional 4.3% stake solidifies Chubb stock as a top 10 holding of Berkshire. It specializes in property and casualty insurance for personal automotive, homeowners, accident and health, agriculture, and reinsurance.
The real surprise for Buffett fans was back in the first quarter when he added $6.7 billion worth of stock to his existing holdings. Shares of the insurer are 26% year-to-date and 41% higher over the past year.
Insurance companies are an area Buffett knows well and loves, as his ownership of Geico , General Re , and others attests. It's also why he is able to invest as he does.
Insurers have significant cash flows they collect upfront in the form of premiums and only pay out when claims are made. These cash piles are then available to invest, buy back stock, or pay dividends.
Chubb has a decent track record of raising its dividend over the last three decades, though it has only recently begun increasing the payout at higher percentage rates. Over the last 10 years, CB's dividend has grown just 2.2% annually, but over the last five years it has risen to 4.1%. Its latest dividend increase was 6%.
Berkshire Hathaway
Warren Buffett
You might be surprised to learn that the one stock Buffett consistently buys is Berkshire Hathaway itself. He spent $345 million on the stock in the second quarter bringing the year-to-date total to $2.9 billion. In fact, every single quarter for the past six years, Buffett has bought Berkshire stock.
There's a reason for that. Prior to 2017, Buffett didn’t buy any Berkshire shares because he could only repurchase stock if BRK fell to 120% of its book value. It just never happened.
In July 2017, however, the board of directors gave Buffett and then-executive vice chairman Charlie Munger freedom to buyback shares if the stock was trading below its intrinsic value . So long as Berkshire holds at least $30 billion worth of cash, equivalents, and Treasury bills, Buffett is free to buy the stock.
At the end of the second quarter, Berkshire held $277 billion in cash and Treasuries. That means you can expect Buffett to continue buying up Berkshire Hathaway stock in the quarters ahead.
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