We’re probably heading into a recession, and maybe a stock market decline too. In times like this, many investors sell their shares and flee for somewhere safer. But not billionaire investor Warren Buffett.
No, he’s been on a buying spree at Berkshire Hathaway. And I’ve been examining his investments during the first quarter to find ideas for my own portfolio. So what has he added to his holdings?
Investing in oil
Buffett has ploughed billions into oil. He bought heavily into Chevron and Occidental Petroleum during the quarter, significantly raising his holdings of both.
I’m unlikely to buy US shares, but it makes me think about the FTSE 100‘s BP and Shell. Like Chevron, they’re into all aspects of the oil business. And they’ve both benefited from soaring oil prices.
I wouldn’t buy just for the boost from a short-term oil hike though. Warren Buffett doesn’t think short-term either. If he sees long-term value in the sector, then it definitely interests me.
Buying banks
Buffett has always liked banks. He recently sold off his remaining stake in Wells Fargo, but against that, he’s just invested close to $3bn in Citigroup.
Citigroup is an international investment bank offering financial services. So perhaps the closest among UK-listed banks is the similarly sized HSBC Holdings. That’s exposed to China and Asia in general, which can be both a risk and an advantage.
Alternatively, there’s the smaller Barclays. Interestingly, Citigroup is on a trailing P/E of only around six, which I expect was part of the attraction. Barclays’ P/E is slightly lower. It has to be on my candidates list.
Dump telecoms?
Buffett hasn’t only been buying. He’s also hit the headlines by selling almost his entire stake in Verizon Communications.
I’m quite bearish towards two big UK telecoms firms, BT Group and Vodafone, during challenging times. For me, it’s mainly because of their very high debts. But their valuations aren’t especially attractive either.
Curiously, Verizon is on a relatively low P/E of under 10, so it does look more like a Buffett value stock. It’s maybe a puzzling sale. But it will probably keep me from reconsidering UK telecoms stocks.
Insurance and pharma
Insurance has always had its attractions for Warren Buffett. This time he bought a modest stake in Markel. It strengthens my feeling that the insurance business is one to be in for good times and bad. And it makes me want to add to my Aviva holding. I’m thinking maybe Legal & General.
US pharmaceuticals company McKesson is also now among Buffett’s holdings. He’s previously had investments in Pfizer and Merck, among others. It makes me think our very own GlaxoSmithKline and AstraZeneca should remain on my list. I’d only buy them when valuations look right, mind.
My main takeaway?
Over the years, I’ve come to like the same kind of stocks as Warren Buffett. And his latest activity reminds me that the best companies can be good buys whatever the economic outlook. It’s just that hard times can make them even cheaper.
Each of the stocks I’ve mentioned here comes with its own risks, and I’d only buy after doing careful research.