Warren Buffett has stated in the past that he doesn’t like to sit on a mountain of cash. But that’s pretty much what he did in the fourth quarter of 2022.
Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) submitted its 13F and 13G filings to the U.S. Securities and Exchange Commission (SEC) on Tuesday. Buffett didn’t initiate any new positions in Berkshire’s portfolio. However, he did add shares to four existing positions.
What Buffett bought
Buffett’s biggest purchase in Q4 was adding to Berkshire’s stake in Occidental Petroleum (NYSE: OXY). At the end of the third quarter, Berkshire owned 21.4% of the oil company. By the end of the year, that stake was up to 28%.
Berkshire also added significantly to its stake in Louisiana-Pacific (NYSE: LPX) during Q4. This position was first initiated in the third quarter of 2022, when Berkshire bought nearly 5.8 million shares of the building-products manufacturer.
In Q4, Buffett increased this stake by more than 21.5%. Berkshire now owns more than 7 million shares.
Paramount Global (NASDAQ: PARA) is another relatively recent addition to Berkshire’s portfolio. Buffett first bought shares of the entertainment company in the first quarter of 2022. He added to that position in subsequent quarters. In the fourth quarter, Berkshire scooped up more than 2.4 million new shares of Paramount Global.
The fourth stock that Buffett bought in Q4 is arguably his favorite stock other than Berkshire itself. That stock, of course, is Apple (NASDAQ: AAPL). It’s by far the biggest holding in Berkshire’s portfolio. And now it’s an even bigger position, as Buffett added an additional 333,856 shares in Q4.
Why he liked these stocks
Buffett believes that Occidental is a bargain, and he’s always been a value investor at heart. Occidental fits right into the value investing philosophy, with its shares trading at less than nine times expected earnings.
I suspect valuation is also a big reason why Buffett likes Louisiana-Pacific. The building-products company’s shares trade at below five times trailing-12-month earnings.
Granted, Louisiana-Pacific’s earnings outlook is much weaker this year. However, Buffett is probably looking at data that shows an ongoing housing shortage in the U.S. More houses will be needed, which bodes well for Louisiana-Pacific’s longer-term prospects.
There’s a similar story with Paramount Global. The stock looks dirt cheap, with shares trading at less than five times trailing earnings. Paramount’s earnings are expected to decline this year, though.
Still, the company could gain more momentum for its Paramount+ streaming service. Buffett also no doubt likes its juicy dividend yield that currently stands at nearly 4.5%.
It’s not surprising whatsoever that Buffett added to Berkshire’s position in Apple in the fourth quarter of 2022. Why? Just look at his activity earlier in the year.
The Oracle of Omaha bought shares of Apple in both the first and second quarters. He stated in an interview with CNBC in May 2022 that the only reason he quit buying was that the stock rebounded.
Apple’s share price fell in the fourth quarter below the levels where it traded in Q1 and Q2. Perhaps the biggest mystery is why Buffett chose not to buy more heavily than he did.
Best of the bunch
I don’t think there’s much of a contest deciding which of these four stocks Buffett bought in Q4 is the best of the bunch. In my opinion, Apple is the hands-down winner.
Occidental just might be Buffett’s best-performing stock this year. However, the company’s fortunes definitely hinge on oil prices. That makes the stock potentially volatile. It’s not as strong of a long-term pick as Apple is, in my view.
Unlike Louisiana-Pacific and Paramount Global, Apple continues to deliver solid earnings growth. Buffett said three years ago that Apple was “probably the best business I know in the world.” I don’t think he’s changed his mind.
Sure, Apple faces some of the same macroeconomic headwinds that many other companies face. In particular, the strong U.S. dollar is problematic for Apple because of its high level of international sales.
However, Apple’s iPhone ecosystem is still going strong. Its Apple TV+ streaming service is gaining traction. The company has significant growth opportunities in healthcare and augmented reality.
And don’t overlook Apple’s artificial intelligence (AI) prospects, either. CEO Tim Cook stated in the company’s recent quarterly call that AI “will affect every product in every service that we have.”
There’s a reason why Apple is the biggest position in Berkshire’s portfolio. While it’s not wise to blindly follow in Buffett’s footsteps and buy every stock that he does, I don’t think long-term investors will go wrong by copying the legendary investor in buying shares of the tech giant.
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Keith Speights has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.