Warren Buffett Has a $277 Billion Treasure Chest -- and This Is the 1 Stock I'd Guarantee He Purchased in the 3rd Quarter

Source The Motley Fool

For almost 60 years, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has left professional and everyday investors in awe. Without the aid of fancy trading algorithms or specialized software, the "Oracle of Omaha" has consistently located plain-as-day value and absolutely crushed the benchmark S&P 500 in the return column.

The greater than 5,500,000% cumulative gain in Berkshire Hathaway's Class A shares (BRK.A) since Buffett became CEO has earned him quite the following. Mirroring Buffett's buying and selling activity has been a highly profitable investment strategy for decades.

But over the last two years, there's been considerably more selling than buying. Despite this, there's one time-tested, outperforming stock that I'd guarantee Warren Buffett purchased in the third quarter with his company's $277 billion (and growing) treasure chest.

A jubilant Warren Buffett surrounded by people at Berkshire Hathaway's annual meeting.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

Warren Buffett has been an increasingly selective buyer of late

On numerous occasions throughout his tenure as CEO of Berkshire Hathaway, Buffett has emphasized the importance of long-term investing and cautioned investors to not bet against America. Though Buffett is well-aware that economic downturns and stock market corrections are inevitable, he understands that periods of economic growth and bull markets last considerably longer.

But just because Berkshire's chief has a positive long-term outlook on the U.S. economy and stocks, it doesn't mean he'll buy equities at valuations outside of his comfort zone.

For seven consecutive quarters (October 2022 through June 2024), the Oracle of Omaha and his investment team have been net-sellers of stocks, with the aggregate total of this net-selling activity approaching $132 billion.

Between Oct. 1, 2023 and June 30, 2024, Buffett green-lit the sale of more than 500 million shares of Apple, and he's overseen the disposition of around 230 million shares of Bank of America (NYSE: BAC) stock since July 17. The ongoing selling we've witnessed in BofA, which topped $9.4 billion during the third quarter (as of Sept. 27, 2024), all but ensures that Berkshire's brightest investment minds have been net sellers for eight straight quarters.

Although Buffett values the respective competitive advantages these two core holdings bring to the table, he opined during Berkshire Hathaway's annual shareholder meeting in May that tax implications may be playing a role in this selling activity -- at least when it comes to Apple. Berkshire's chief believes the corporate tax rate will rise, thus making for a smart decision, in hindsight, to lock in a sizable chunk of Berkshire's unrealized gains now.

However, I've also opined that Warren Buffett and his investing lieutenants, Ted Weschler and Todd Combs, may be less than thrilled with current stock valuations. There have only been a few instances throughout history, when back-tested over the last 153 years, where the S&P 500 has been this pricey. Buffett has demonstrated a willingness to sit on his hands and wait for price dislocations to occur before putting his company's cash to work.

This patience, coupled with a lot of selling activity, explains why Berkshire Hathaway's cash pile, including U.S. Treasuries, has ballooned to an all-time record $276.9 billion, as of the end of June.

A stopwatch whose second hand has stopped above the phrase, Time to Buy.

Image source: Getty Images.

Warren Buffett has purchased this stock for 24 consecutive quarters

But even though the Oracle of Omaha has been a decisive net-seller of stocks for two years, he's still able to find value every now and then. For instance, he's been adding to Berkshire's stake in integrated oil and gas stock Occidental Petroleum with some degree of regularity since 2022 began.

However, Occidental Petroleum isn't the stock Warren Buffett purchased shares of during the third quarter. We know this, because Berkshire would have needed to file Form 4 with the Securities and Exchange Commission since Buffett's company holds a greater than 10% stake in Occidental.

Rather, the one stock I'd guarantee Buffett purchased during the third quarter using Berkshire's $277 billion treasure chest is a company near and dear to his heart. It's also a stock Buffett has purchased shares of for 24 consecutive quarters, from July 2018 through June 2024. This favorite stock in question is none other than... Berkshire Hathaway.

Share buybacks haven't always been easy to come by for Buffett's company. Prior to July 2018, repurchases were only allowed if Berkshire Hathaway's shares dipped to or below 120% of book value -- i.e., no more than 20% above listed book value per share, as of the most recent quarter. Since Berkshire's stock never fell to this threshold, Buffett wasn't able to put a single cent toward buybacks prior to July 2018.

On July 17, 2018, Berkshire Hathaway's board altered the "rules" governing buybacks to allow Buffett and right-hand man Charlie Munger, who passed away in November 2023, to be more involved. The new criteria allow Buffett to buy shares of his own company without a ceiling or end date as long as Berkshire Hathaway has at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet, and Buffett believes his company's stock is intrinsically cheap.

During the June-ended quarter, Warren Buffett oversaw the repurchase of $345 million worth of his company's stock, and has cumulatively bought back almost $78 billion worth of Berkshire's shares since July 2018. With roughly $277 billion in available cash, there's little reason to believe this 24-quarter streak of buybacks didn't extend into the September-ended quarter.

Share repurchases mark the easiest way for Buffett to reward his company's shareholders -- in case a greater than 5,500,000% aggregate return in his company's shares since the mid-1960s isn't enough.

Buying back stock and lowering the number of outstanding shares is incrementally increasing the ownership stake of existing shareholders. In other words, it's promoting the long-term thinking that Buffett regularly recommends when investing.

Additionally, reducing Berkshire Hathaway's outstanding share count has provided a lift to its earnings per share (EPS), which is likely going to make the company's stock more fundamentally attractive to value investors.

Although we'll have to wait until Berkshire Hathaway releases its third-quarter operating results for confirmation, I believe it's a guarantee that Buffett was a buyer of his own company's stock during the third quarter.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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