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The Essays of Warren Buffett: Lessons for Corporate America

1997, The Essays of Warren Buffett

The Essays of Warren Buffett: Lessons for Corporate America. Selected, Arranged, and Introduced by Lawrence A. Cunningham

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The Essays of Warren Buffett: Lessons for Corporate America Paperback – Import, 19 October 2019

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There is a newer edition of this item:

The fifth edition of The Essays of Warren Buffett: Lessons for Corporate America continues a 25-year tradition of collating Warren Buffett's philosophy in a historic collaboration between Mr. Buffett and Prof. Lawrence Cunningham. As the book Buffett autographs most, its popularity and longevity attest to the widespread appetite for this unique compilation of Mr. Buffett's thoughts that is at once comprehensive, non-repetitive, and digestible. New and experienced readers alike will gain an invaluable informal education by perusing this classic arrangement of Mr. Buffett's best writings."Larry Cunningham has done a great job at collating our philosophy."-Warren Buffett "Larry Cunningham takes Buffett's brilliant letters to a still-higher level by organizing them into single-subject chapters. The book begins, moreover, with an excellent introduction by Larry."-Carol Loomis "The book on Buffett-a superb job."-Forbes "Extraordinary-full of wisdom, humor, and common sense."-Money "A classic on value investing and the definitive source on Buffett.""-Financial Times

ISBN-10 1531017509
ISBN-13 978-1531017507
Edition 5th
Publisher Carolina Academic Pr
Publication date 19 October 2019
Language English
Dimensions 16.51 x 1.91 x 24.77 cm
Print length 342 pages
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Introduction to the Essays of Warren Buffett: Lessons for Corporate America

GWU Law School Public Law Research Paper No. 2019-71

GWU Legal Studies Research Paper No. 2019-71

26 Pages Posted: 13 Dec 2019 Last revised: 17 Dec 2019

Lawrence A. Cunningham

George Washington University; Quality Shareholders Group

Date Written: December 11, 2019

This is Professor Cunningham's Introduction to his renowned edited collection of Warren Buffett's famous letters to shareholders of Berkshire Hathaway Inc. The collection was originally prepared for a symposium held in New York City in 1997 and has been regularly updated through five editions, with additional Buffett material and Cunningham annotations. This Introduction, from the fifth edition (2019), serves as an encapsulation of the main themes of the resulting collection and locates them in contemporary debates on matters of corporate governance; corporate finance and investing; mergers and acquisitions; and accounting and taxation.

Keywords: value investing, Warren Buffett, margin of safety, circle of competence, modern finance theory, executive compensation, corporate governance

JEL Classification: M10, G34, G24, G31, M41, M43, M44, M45, H25

Suggested Citation: Suggested Citation

Lawrence A. Cunningham (Contact Author)

George washington university ( email ), quality shareholders group ( email ).

HOME PAGE: http://https://qualityshareholdersgroup.com/

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The Essays of Warren Buffett: A Complete Book Summary

Books and Resources , Investing 101
Andy Shuler
March 17, 2020

I feel like I’ve been reading the Essays of Warren Buffett for literally a lifetime, and although it hasn’t nearly need that long, it does feel like I’ve obtained a lifetime of information from his book.

Looking back at some of the previous summaries that I have written, Buffett does an amazing job of making sure that he starts off with a great foundation for the new investor and then by the end of the book, things are moving along at 70MPH on the highway so you better buckle up!

That might seem intimidating, but it shouldn’t. It should actually make you happier that you might not understand it all because the that just means that it will be able to provide value to you now, and in the future, as your investing career continues.

Like I said – I’ve written quite a few different summaries on a lot of these chapters, and I’ve even skipped some really good ones so I wasn’t essentially rewriting the book, but I’ve narrowed my list down to my Top 5 chapters in The Essays of Warren Buffett for our beginner investor:

Defining Intelligent Investing According to Warren Buffett

Buffett’s big investment philosophy is that we should be looking for companies that can drastically change their value for the long-term, not just looking for some sort of short-term gain. Don’t buy a company and then sell it when it goes up 10% – look for that stock that’s going to become a tenbagger!

This is the exact reason why they don’t usually invest in tech companies because the future is so uncertain in terms of what will be a competitive advantage for those tech companies, and he lives by the saying “if you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

In summary, Buffett said that if you want to be a successful, average investor, you need to focus on two things:

Find out how to value a business
Understand how to think about market prices

If you can successfully do both of these then you’re going to be poised for long-term success during your time investing in the stock market. It’s very important for you to understand first and foremost what you think a company is worth, and while this might seem hard to do, you can do so by understanding the financial ratios of the company and their potential path forward.

I know that many people will likely get stressed or overwhelmed by me saying you need to “understand the financial ratios of the company” and I totally understand that, but that’s exactly why Andrew created the Value Trap Indicator to help get you the information that you need without having to be as in the weeds as other investors. I mean, work smart, not hard, right?

The VTI also takes into account the market price of the company you’re evaluating, but this is another thing that’s very beneficial for you to understand on your own. The market price of the company is quite simply the price that other investors are willing to pay for the company, not what the company is actually worth.

Now, when I first started investing, I told myself that whatever the company is selling for is what the company is worth because ‘perception is reality’ so if people are willing to pay for it, then that’s what it is worth. While that might sound great in a bull market, when things really get tough, that company that still has negative earnings is likely going to get hit extremely hard and that share price is going to drop faster than a hot potato.

Don’t believe me? Well, during this coronavirus scare, the S&P 500 has dropped 14% over a 3-week span and Tesla has dropped 33%.

In other words, there’s really two pieces you need to know as an investor – what is the intrinsic value of the company and what is the current price of the company.

When you can identify those, your job as an investor is to find the companies that are being sold for well under their intrinsic value, buy some shares, and then sit back and reap the rewards.

Thoughts on the High Yield Bond Market from Warren Buffett

This article essentially says that Bonds have a place in the investing world, but it has to be for a very specific person in a very specific situation. The average bond earns 2-4% while the Stock Market average CAGR is 11%, so if you’re investing in bonds waiting for the downturn in the market, you probably are missing out on much larger gains just to buy low in the years despite missing all of that uptick.

Buffett explains that Bonds are good for the investor that needs to have access to short-term cash because that is very liquid and easy to access as compared to investing in company stocks for a major company like Berkshire.

So, how does that impact the average investor?

Well, you should follow the same advice – only invest in bonds if it’s for the short-term. Personally, I invest in a high-yield savings account for my emergency fund but bonds can work well, especially if you use a bond ladder. The only issue is that it’s not as liquid as a savings account, so it’s a bit of risk vs. reward.

Like I said, bonds are usually a good thing if you’re simply just looking for some security that is going to perform right around, or maybe a bit above, the inflation rate, but I wouldn’t expect much more as an investor. I have bonds in my HSA because the last thing that I would want to have happen is for me to invest in stocks, the market crashes and my portfolio is cut in half, and then I need that money for a health related issue and now I might not even be working since it is a health issue.

If it’s not something that you could see yourself needing in the immediate future, avoid bonds! Regarding my retirement accounts – I have 0% invested in any of them because I am young. If you’re going to need the money in 5 years or less, I am ok with you investing in bonds. Any time frame that is greater than 5 years, put it into the market, baby!

Let the entire investing history be your “proof in the pudding” and trust that even if a downturn arises, like the coronavirus fears that we are currently in, then trust that the market will rebound.

You might be asking why you should have that trust and the answer is simple – because it has rebounded in the past and it’s more than likely going to rebound in the future as well.

Here’s the Optimal Dividend Policy According to Warren Buffett

DIVIDENDS! Andy loves him some dividends, and so does Buffett! I mean, I’d even go to a dividend buffet if one existed…. Get it? Buffett? Buffet? Bad joke, I know…

While Buffett does love dividends, he is more so focused on the company employing their capital correctly. This doesn’t mean always paying a dividend or never paying one – it means that the company should do what is will be the most useful for continued success of the company.

“For every dollar of retained earnings by the corporation, at least one dollar of market value will be created for owners.”

For the company to decide to not pay out that $1 in dividends, they should make sure that they’re able to use that $1 of earnings to generate a future value of something that is $1, at a minimum, or likely much more.

In other words, if the company only paid out a $1 dividend and kept the remaining $3, then that $3 that they retained better generate at least that much in the future and if it doesn’t, then the company is quite simply underutilizing their capital, and that can be a major red flag for investors.

The Real Benefits of Share Buybacks as Explained by Warren Buffett

In general, share buybacks are perceived as a good thing! Buying back shares of the company has a couple major benefits that Buffett goes into that should help you as an investor of the company:

1 – The Straight Cash Reason

When a company buys backs shares, the total amount of outstanding shares is shrinking, so this should help you as an investor when looking at the total EPS for the company. It’s important to understand when your companies are buying back shares, however, so that you’re not tricked into thinking that the earnings of the company are growing when in fact they might be shrinking, but since the total outstanding shares are shrinking at a greater speed, the total EPS looks higher.

I’ve written before about how important it is to understand this because you could very easily get tricked, but if the earnings are continuing to increase and the total outstanding shares are decreasing, then your investments are just becoming more and more valuable by the second

2 – The Breath of Confidence Reason

This is more of a qualtitative factor than a quantitative one, but if the company is buying back shares, then they hopefully think that the stock is undervalued, otherwise it would be foolish to buy back shares. Now, while a management team of ANY company is likely the most bullish opinion of their company, and rightfully so, it should still be a breadth of confidence that they’re saying that their stock is undervalued and willing to put their money where their mouth is and buy back those shares.

Of course, you still need to do your homework and make sure that you agree with their analysis of their stock value, but this is definitely a good sign and the market will likely view it as a positive as well!

An Example of Accounting Fraud as told by Warren Buffett

In summary, the main goal of this chapter is to make sure that the management team of your investments have the same goals that you do. Some management teams are only focused on the short-term, some on the long-term, some are only focused on getting the company to IPO and then cashing out and moving on.

Regardless of what their goal is, you need to understand it BEFORE you invest in that company, because if you don’t, you could very well find yourself with a ‘bad’ investment simply because the management is steering the company in a different way than you were hoping the company was going to go.

In short, just like almost every other chapter, do your homework!

If you purchase the book, you’re going to be able to learn many, many more lessons from Buffett about his investing journey and things that he thinks are incredibly important. In a sense, I think some of these chapters are just Buffett getting some things off his chest. He goes on these rants at times about things that he thinks are just completely ludicrous, such as how Owner Earnings are reported or even talking about the difference in economic goodwill and accounting goodwill .

I’ve included my top 5 chapters for the new investor above in this article, but I’ve also written some other summaries including one on arbitrage trading and how it can have an impact on Buffett’s business as well as in your own personal portfolio .

To buy the essays of Warren Buffett will set you back about $30 but I guarantee you will get much, much greater rewards than $30 by learning directly from the value investing GOAT, Warren Buffett.

Chances are, you might even be able to find the book at your local library but I really encourage you to consider purchasing it because I can tell you for a fact that this book is one that I am going to find myself reading more than once, and likely on a fairly regular basis.

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Has the Long Friendship of Bill Gates and Warren Buffett Reached Its Final Act?

Growing tensions between the two billionaires, over issues both substantive and stylistic, have roiled the world of philanthropy.

Warren Buffett standing with his arm on Bill Gates's shoulder.

By Anupreeta Das

Anupreeta Das is the author of the forthcoming book “Billionaire, Nerd, Savior, King,” from which this article is adapted.

In the summer of 1991, Mary Gates, the mother of the Microsoft billionaire Bill Gates, convinced her workaholic 35-year-old son to spend the July 4 holiday at Hood Canal, a scenic, outdoorsy location about two hours from Seattle that had long been the family getaway.

The Oracle of Omaha, Warren Buffett, was among the guests. When Mrs. Gates tried to introduce her son to Mr. Buffett, however, he brushed her off, saying that he didn’t want to meet a “stockbroker.”

But the two men hit it off immediately. Settling into a patterned couch, Mr. Buffett, dressed in a red polo shirt and dark trousers, his left foot propped up against the coffee table, and Mr. Gates in a tennis outfit — shorts and a white shirt, his white socks coming up to mid-calf, his mop of hair tousled — talked for 11 hours straight. The other guests had to pull them apart. Mr. Gates was surprised by the penetrating questions Mr. Buffett directed at him about the software business, and found himself warming to the avuncular Midwestern billionaire.

The two have been close friends ever since. Once, recounting the story of their meeting to students at the University of Nebraska-Lincoln, Mr. Gates called it an “unbelievable friendship.” Mr. Buffett quipped, “The moral of that is, listen to your mother.”

Theirs has been an unusual friendship. Mr. Buffett is folksy and outgoing, and never passes up an opportunity to crack a joke. He likes to speak in aphorisms. He enjoys breaking down complex investing principles into simple nuggets that anyone could understand. When he meets new people, Mr. Buffett is genuinely curious about their backgrounds. He asks them questions and listens intently, eyebrows furrowed, to the answers. Banter comes to him easily.

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Warren buffett details berkshire's apple, chevron and capital one sales while also buying more chubb.

Associated Press

OMAHA, Neb. – Warren Buffett offered more details Wednesday about the stocks he has been selling lately, including confirming that he sold more than 389 million Apple shares during the second quarter.

Berkshire Hathaway still owns 400 million shares of the iPhone maker, so it remains the biggest position in the conglomerate's stock portfolio, according to the company's latest filing with the Securities and Exchange Commission. The news that Buffett had unloaded a huge chunk of Apple came out in Berkshire's earnings report earlier this month, but the exact number of shares he sold wasn't clear until Wednesday.

Snowflake exit

Ulta Beauty and Heico were among Berkshire’s few purchases in a quarter marked by a hasty retreat from stocks.

Berkshire sold $77.2 billion of stocks during the period, including about 390 million shares of Apple, close to half its stake.

It also exited a nearly $1 billion investment in cloud computing company Snowflake and its remaining stake in media company Paramount Global .

Stock purchases totaled just $1.6 billion.

The selling left Berkshire with $276.9 billion of cash and equivalents, up from $189 billion at the end of March.

Buffett’s company has not said if it sold more Apple in the third quarter, though Buffett said in May he expected the iPhone maker to remain its biggest stock holding by year-end.

Berkshire has sold more than $3.8 billion of stock in Bank of America , its second-largest stock holding, in the third quarter. It stopped selling at least temporarily after the bank’s share price fell 12% from mid-July.

Buffett at the Berskshire annual meeting in May.

During the second quarter, Berkshire also reduced its stakes in Capital One, Floor & Decor Holdings, Louisiana-Pacific and T-Mobile, and added to stakes in Chubb and Sirius XM.

Buffett turns 94 on Aug. 30. He has run Berkshire since 1965.

Meanwhile, billionaire investor William Ackman built new stakes in Nike and investment management company Brookfield during the second quarter.

Dividend Growth Investor

I am a long term buy and hold investor who focuses on dividend growth stocks

Wednesday, August 14, 2024

Warren Buffett on investing and selling

Warren Buffett started his investment career in the 1950s by focusing on traditional value investing strategies, as practiced by Ben Graham

You can rea about the three categories of investments he made here: (Source: Buffett Partnership Letters )

These were plentiful up until the late 1950s and the early 1960s.

It allowed him to compound at high rate of return.

Unfortunately, these started drying up, as the stock market was in the midst of exuberance and stocks were bid up.

In addition, his assets under management were growing and reaching a big enough size, where he needed larger investments to move the needle. Traditional value investing strategies had a maximum carrying capacity that he had outgrown.

So Buffett had to adapt to his environment.

He still focused on buying value, but had to redefine how value is defined.

“Far better to buy good company at a decent price than bad one at a steal price”

He started understanding the value of franchises.

He did two particular investments at the time.

One was buying Disney (DIS).

Another was buying American Express (AXP).

He sold Disney for a quick 50% gain.

He held on to AXP and sold for a triple.

He then wound up his partnership in 1969, citing unfavorable and frothy market conditions and started focusing on building out Berkshire Hathaway as his second retirement project. In his words, he had retired at 25 actually.

Yet, while he never really mentions it, he probably saw Disney and AXP delivered amazing returns through 1972. Those companies kept growing and delivering to shareholders. Everyone was enthusiastic about their prospects during the Nifty-Fifty boom.

Check out the page for Disney from the 1980 Moody's Manual of Stocks

Even after it went bust in 1973- 1974 bear market, these stocks were still selling much above the levels at which Buffett sold them. They then managed to deliver amazing returns too.

However, they were selling at inflated valuations in 1971 - 1972, which were unsustainable. They had in fact pulled forward returns to the present and investors were paying dearly for the growth of the next decade. With a high degree of certainty and lack of any meaningful margin of safety.

Disney sold at 50 - 60 times earnings between 1971 and 1973. That was a time to clearly take advantage of the irrational exuberance and sell. Even in 1970, the stock was selling at a P/E of 30, which was high. By 1980, Disney stock was selling at close to the levels it did close to a decade earlier, and generating no real returns to anyone that bought the stock at those high valuations. That's despite the fact that the company managed to grow earnings per share pretty well. This was a result of the valuation multiple shrinking to a P/E of 11 by 1980.

American Express did sell at a high valuation in 1971- 1973 of roughly 25 - 30 times earnings. It was not as high as that of Disney, but still elevated. Forward returns were also pulled forward in this case as well. By 1980 however, the stock sold at the same levels as those from a decade earlier. That's despite the fact that earnings oer share grew. This lack of returns was mostly as a result of the shrinking in the valuation to a P/E of 7.

I am sure that this experience reinforced the idea for Buffett to buy quality companies and hold them. If you buy a good business, the right time to sell is never.

This example probably sat on the back of his mind, as Buffett does like to revisit his old investments. That’s how he has come up with the sins of omission and sins of commission.

In hindsight, selling those great businesses when they became too overvalued in 1971- 1972 would have likely been a smart move. But timing is always tricky, and there are also costs associated with selling. You have taxes and opportunity cost – aka the cost you may have sold too early, and that you are wrong on the company you sell. After all, valuation is part art, and part science. A stock may look expensive at 30 – 40 times earnings but only optically. If that company managed to deliver EPS growth that is dependable and long lasting, it may turn out to be a steal in hindsight. On the other hand, a stock selling at a P/E of 10 may turn out to be expensive, if it ends up stagnating EPS or even seeing them decline and turns out to be a melting ice cube.

That being said, at some astronomical price, it may not make sense to hold on to a security, because forward returns may be terrible. Think Nikkei 225 selling at 100 times earnings in 1989 or dot-com companies selling at 100+ times earnings in 1999 .

Next, Buffett was able to acquire See’s Candies in 1972 at a very good price and saw it grow earnings at a steady and consistent clip, while also showering him with billions of dollars in dividends to allocate elsewhere.

He then went ahead and bought Coca-Cola in 1988 – 1994 . This consumer company kept growing, and investors bid up the stock. It went from 15 times earnings in the late 1980s to close to 30 times earnings in the early 1990s. The stock sold above 40 times forward earnings in 1997 – 1998, which incidentally was also around the time that EPS hit a high point that it didn’t exceed for several years.

A high multiple at the start, coupled with stagnating EPS is a recipe for disaster for investors in a high-flying growth stock. Speculators run for the exits, negative news articles circle around, and the valuation multiple shrinks, leading to poor total returns. Only a consistent and growing dividend could have kept investors sane and holding.

That being said, Buffett seems to have felt that Coca-Cola is indeed overvalued in 1997 - 1998. He has expressed regrets for not selling it at a high valuation. In hindsight, he could have done well as the stock didn’t have great returns really for a long time as valuation was shrinking.

In a way he did reduce portfolio exposure to Coca-Cola in 1998, since he acquired General RE, which had a substantial fixed income portfolio. This in effect diluted Coca-Cola impact on Berkshire Hathaway overall portfolio. But he would have likely still done better selling it. I know, hindsight is 50/50. But from a forward returns perspective, it would have made sense to allocate the funds elsewhere. But only because the valuation was egregiously high.

Buffett doesn’t really time the markets. But he does seem to be very picky about buying good companies at a good valuation. A lower valuation provides higher expected returns.

He does seem to be learning from his lessons, as he has also worked to try and reduce position sizes if valuation is too high.

For example, he recently reduced his exposure to Apple. It makes sense that he is doing this, as Apple has not really grown the business by much, yet sells at a P/E of 32+. The company is great, but overvalued.

The situation today valuation wise is much different than the situation in 2016/2017 when Buffett was buying it at a P/E of 10.

Future returns were pulled forward through that multiple re-rating.

Perhaps Buffett is learning from all his experience after all (of course he is).

That being said, that doesn’t mean Apple will crumble and fall to zero. It could still deliver very good results and surprise everyone. But from today’s information that we have, the most likely scenario is that forward expected returns are not so hot. Which means that there may be other opportunities that could deliver high expected returns, even after accounting for taxes on sales.

It may not always turn out to be correct. For example, he sold Costco around the $300’s, which was a high P/E. Yet, the stock is now almost a triple from there and still has a high P/E. But those are more of an exception than the rule.

For example, selling at a high valuation may work some times. But others, it may not. In the case of Costco, selling at high P/E in 2017 – 2023 seems to have been a mistake. But selling in 1999 – 2000 would have been a smart choice.

In the case of Coca-Cola, the stock sold at a high P/E as early as 1992. But selling then would have been a mistake as you would have missed on four fold increase in stock prices. But selling at a high P/E of 1997/1998 would have been smart. Again, hindsight is always 20/20.

While the experience of ignoring high P/E ratios in early 1990s paid off, they were actually costly to ignore in the late 1990s. Some lessons learned during one market environment may turn out to be wrong in another. Some experience is valuable during some times, but detrimental during others .

Perhaps Buffett is selling Apple today because it is overvalued, and earnings per share growth is not really very strong. Any share buybacks to prop earnings growth would not have the same effect at a P/E of 30 that they may have had at a P/E of 10. He's learned that selling may be a good idea overall, despite the opportunity costs involved. That's because forward return projections do not look very exciting for Apple investors from here.

That being said, Apple has been written off as an "expensive has been" for a long time. Even when the P/E ratio was low about 8 years ago, some folks were arguing that the P/E is high assuming earnings per share collapse as "the company is no longer innovating" amid fears that Apple's products would suffer the fate of other once hot technology companies that went into oblivion (Blackberry anyone?).

So it is possible that Buffett's sale is a mistake. But for his opportunity set, probably not as high probability wise. Of course, the game of investing is about probabilities, and things are not certain until after the fact (which is when you can tally who won and who lost).

The game of investing is fascinating, because there are no hard and fast rules. The same type of logic and reasoning could work very well under one set of conditions, and fail miserably under another. The investor can only hope that consistent application of sound principles could average out to an overall record of profits.

You need to keep learning, but also beware that you may end up being fooled by randomness as well.

However, to stand a chance in this game of investing, you need to try an improve the odds of survival, before improving your odds of succeeding.

Those include buying quality businesses with strong moats at attractive valuations, and then holding them for as long as it makes sense. While this goes contrary to what Buffett does, us mere mortals should diversify and avoid leverage in order to increase our staying power in a position. Last but not least, keeping costs low matters a lot, as well as making sure we have the proper behavioral mindset that would allow us to avoid being scared from stock market fluctuations. However, we do need an exit plan when we buy a stock, and follow it religiously.

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Warren Buffett's Latest $345 Million Buy Brings His Total Investment in This Stock to Almost $78 Billion in 6 Years

Warren Buffett has overseen a greater than 5,180,000% return in Berkshire's Class A shares (BRK.A) since becoming CEO in the mid-1960s, and it's earned him quite the following on Wall Street.
Buffett and his top investment advisors have been net-sellers of equities for seven consecutive quarters.
Despite being very selective about recent purchases, Buffett simply can't stop buying shares of his most-loved stock.
Motley Fool Issues Rare “All In” Buy Alert

NYSE: BRK.B

Berkshire hathaway.

The aptly named Oracle of Omaha has purchased shares of his favorite stock for 24 consecutive quarters.

For nearly six decades, Berkshire Hathaway ( BRK.A 0.91% ) ( BRK.B 0.83% ) CEO Warren Buffett has been dazzling Wall Street with his investing prowess.

Since taking over the role as Berkshire's chief in the mid-1960s, the aptly named "Oracle of Omaha" has overseen a cumulative return in his company's Class A shares (BRK.A) of greater than 5,180,000%, and has practically doubled up the average annual total return, including dividends, of the benchmark S&P 500 . When you consistently crush the most widely followed index in the return column, you're going to draw an audience.

A jovial Warren Buffett at Berkshire Hathaway's annual shareholder meeting.

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

Buffett's phenomenal investment returns are what lure in the neighborhood of 40,000 people annually to Berkshire's annual shareholder meeting in Omaha, Nebraska. It's also what causes investors to wait on pins and needles for the release of the company's Form 13F . A 13F is a document filed on a quarterly basis with the Securities and Exchange Commission (SEC) that shows investors which stocks Wall Street's brightest minds have been buying and selling.

But the biggest surprise isn't always what's in Berkshire Hathaway's 13F. Rather, it's the buying activity for Warren Buffett's favorite stock, which won't be found in a 13F filed with the SEC.

Buffett has been a net-seller of equities for seven consecutive quarters

Even though Berkshire has yet to file its 13F for the second quarter -- it'll be filed with the SEC following the close of trading on August 14 -- the company's second-quarter cash flow statement points to a similar trend we've witnessed since the start of October 2022. Namely, Buffett and his top investment aides, Ted Weschler and Todd Combs, have been persistent net-sellers of equities.

The fair value estimate for Berkshire's position in Apple , as of the end of the second quarter, points to a nearly 50% reduction in Berkshire's stake in the tech giant. Further, Buffett and his crew sold shares of Bank of America , Berkshire's second-biggest holding by market value, for 12 consecutive trading sessions (July 17 – August 1), as of this writing.

Altogether, Buffett and Co. have been net-sellers of equities for seven consecutive quarters , with approximately $131.6 billion more in securities sold than purchased. This has ballooned Berkshire's cash pile to an all-time record $277 billion.

To be fair, Buffett and his team have done some buying -- it's just been very selective.

For instance, 13Fs and Form 4 filings with the SEC show that the Oracle of Omaha has been adding with some degree of regularity to oil and gas stock Occidental Petroleum ( OXY -0.35% ) since the start of 2022. In a span of roughly 30 months, Berkshire's brightest investment minds gobbled up more than 255.2 million shares of Occidental.

Considering the minimal role energy stocks have played in Berkshire's investment portfolio this century, having close to $15 billion tied up in Occidental Petroleum signals that Buffett and his crew expect the spot price of crude oil to move higher; or at the very least remain above its historic average.

The biggest catalyst for Occidental Petroleum looks to be tight global crude oil supply . Approximately three years of reduced capital expenditures during the COVID-19 pandemic have created a scenario where global energy companies are unable to quickly increase production. As long as the supply of crude oil is constrained, its spot price should receive a boost.

This is particularly important for Occidental, which generates an outsized percentage of its revenue from its upstream drilling segment. Despite being an integrated operator that also owns chemical plants, its operating cash flow is highly dependent on swings in the spot price of crude oil.

A person writing and circling the word buy beneath a dip in a stock chart.

Image source: Getty Images.

The Oracle of Omaha has purchased almost $78 billion worth of his favorite stock

However, adding more than 255 million shares of Occidental Petroleum common stock is mere peanuts compared to what Warren Buffett has put to work in his favorite stock over the last six years.

As I alluded earlier, not all of Berkshire's buying and selling activity is going to be found in a 13F. For details on the Oracle of Omaha's favorite stock to buy, you'll need to dig into Berkshire Hathaway's quarterly operating results. Just prior to the executive certifications of every quarterly report from Berkshire, you'll find a detailed page describing the share repurchasing activity undertaken during the quarter. You guessed it... Warren Buffett's favorite stock to buy is none other than shares of his own company !

To be clear, buying back stock wasn't always easy for the Oracle of Omaha or his late, great right-hand man, Charlie Munger.

Prior to mid-July 2018, share buybacks were only allowed if Berkshire Hathaway's share price fell to or below 120% of its book value , as of the most recent quarter. At no point in the many years leading up to mid-July 2018 did Buffett company's fall to or below this threshold, which meant no buybacks were undertaken.

Everything officially changed on July 17, 2018. On this date, Berkshire's board reworked the criteria governing share repurchases to allow Buffett and Munger to come off the proverbial bench and swing for the fences.

According to this updated policy, buybacks can commence with no end date or dollar ceiling as long as:

There's at least $30 billion in cash, cash equivalents, and U.S. Treasuries on the company's balance sheet; and
Buffett believes that Berkshire's stock is intrinsically cheap.

While the last point is a bit subjective, it hasn't stopped Warren Buffett from repurchasing shares of his company for 24 consecutive quarters .

During the June-ended quarter, Buffett oversaw the retirement of 555 Class A shares (BRK.A) totaling $345,137,002! On an aggregate basis, this works out to nearly $78 billion worth of buybacks since this program was amended on July 17, 2018. This is more than double the amount of cash Buffett and his team spent buying shares of top holding Apple!

BRK.A Shares Outstanding data by YCharts .

Since Berkshire doesn't pay a dividend, share repurchases are an easy way to reward investors. Continually retiring shares via buyback is incrementally increasing the ownership stakes of long-term shareholders. You could say it's the perfect tool to instill the long-term ethos in investors that Buffett and Charlie Munger have appreciated so much .

Furthermore, buying back stock and reducing the outstanding share count can increase earnings per share (EPS) for companies with steady or growing net income (sans unrealized investment gains/losses). This should help make Berkshire even more attractive on a fundamental basis.

With $277 billion in cash in the coffers and little in the way of value piquing Warren Buffett's interest, it's a veritable certainty that the (re)purchase of Buffett's favorite stock will continue .

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 .

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Warren buffett's latest $345 million buy brings his total investment in this stock to almost $78 billion in 6 years.

For nearly six decades, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has been dazzling Wall Street with his investing prowess.

But the biggest surprise isn't always what's in Berkshire Hathaway's 13F. Rather, it's the buying activity for Warren Buffett's favorite stock, which won't be found in a 13F filed with the SEC.

Buffett has been a net-seller of equities for seven consecutive quarters

Even though Berkshire has yet to file its 13F for the second quarter — it'll be filed with the SEC following the close of trading on August 14 — the company's second-quarter cash flow statement points to a similar trend we've witnessed since the start of October 2022. Namely, Buffett and his top investment aides, Ted Weschler and Todd Combs, have been persistent net-sellers of equities.

Altogether, Buffett and Co. have been net-sellers of equities for seven consecutive quarters, with approximately $131.6 billion more in securities sold than purchased. This has ballooned Berkshire's cash pile to an all-time record $277 billion.

To be fair, Buffett and his team have done some buying — it's just been very selective.

For instance, 13Fs and Form 4 filings with the SEC show that the Oracle of Omaha has been adding with some degree of regularity to oil and gas stock Occidental Petroleum (NYSE: OXY) since the start of 2022. In a span of roughly 30 months, Berkshire's brightest investment minds gobbled up more than 255.2 million shares of Occidental.

The biggest catalyst for Occidental Petroleum looks to be tight global crude oil supply. Approximately three years of reduced capital expenditures during the COVID-19 pandemic have created a scenario where global energy companies are unable to quickly increase production. As long as the supply of crude oil is constrained, its spot price should receive a boost.

The Oracle of Omaha has purchased almost $78 billion worth of his favorite stock

However, adding more than 255 million shares of Occidental Petroleum common stock is mere peanuts compared to what Warren Buffett has put to work in his favorite stock over the last six years.

To be clear, buying back stock wasn't always easy for the Oracle of Omaha or his late, great right-hand man, Charlie Munger.

Prior to mid-July 2018, share buybacks were only allowed if Berkshire Hathaway's share price fell to or below 120% of its book value, as of the most recent quarter. At no point in the many years leading up to mid-July 2018 did Buffett company's fall to or below this threshold, which meant no buybacks were undertaken.

According to this updated policy, buybacks can commence with no end date or dollar ceiling as long as:

There's at least $30 billion in cash, cash equivalents, and U.S. Treasuries on the company's balance sheet; and

Buffett believes that Berkshire's stock is intrinsically cheap.

While the last point is a bit subjective, it hasn't stopped Warren Buffett from repurchasing shares of his company for 24 consecutive quarters.

With $277 billion in cash in the coffers and little in the way of value piquing Warren Buffett's interest, it's a veritable certainty that the (re)purchase of Buffett's favorite stock will continue.

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Warren Buffett's Latest $345 Million Buy Brings His Total Investment in This Stock to Almost $78 Billion in 6 Years was originally published by The Motley Fool

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The Essays of Warren Buffett: Lessons for Investors and Managers

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The Essays of Warren Buffett: Lessons for Investors and Managers Paperback – December 24, 2013

Print length 352 pages
Language English
Publisher John Wiley & Sons
Publication date December 24, 2013
Dimensions 7.32 x 0.87 x 9.17 inches
ISBN-10 1118821157
ISBN-13 978-1118821152
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Product details

Publisher ‏ : ‎ John Wiley & Sons; 4th edition (December 24, 2013)
Language ‏ : ‎ English
Paperback ‏ : ‎ 352 pages
ISBN-10 ‏ : ‎ 1118821157
ISBN-13 ‏ : ‎ 978-1118821152
Item Weight ‏ : ‎ 1.13 pounds
Dimensions ‏ : ‎ 7.32 x 0.87 x 9.17 inches
#2,909 in Finance (Books)
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About the author

Lawrence a. cunningham.

Lawrence Cunningham's two dozen books include The Essays of Warren Buffett, which Cunningham self-published into an international best-seller that he has arranged for translation into a dozen languages.

An influential thought leader in both value investing and corporate governance, Cunningham's other notable books include Quality Investing (long time best seller with AKO Capital), The AIG Story (with Hank Greenberg) and Margin of Trust (which Warren Buffett singled out for special mention in his 2020 letter to Berkshire Hathaway shareholders).

Cunningham advises companies, boards and shareholders, for many years as the founder of Quality Shareholders Group and recently as special counsel at Mayer Brown LLP. He has served on numerous corporate boards, of both private and public companies, including Markel Group (New York Stock Exchange) and Constellation Software Inc. (Toronto Stock Exchange).

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The cozy atmosphere of this place allows guests to relax after a hard working day. Courteous staff members work hard, stay positive and make this place great. According to the clients, the main problem of this spot is the downscale service. Here you will pay adequate prices. This restaurant can be characterized by the spectacular decor inside. But people rate Burger King below average on Google.

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Night in Cherepovets ‎ (1 C, 3 F)
Aerial photographs of Cherepovets ‎ (1 C, 48 F)
Culture of Cherepovets ‎ (5 C)
Economy of Cherepovets ‎ (3 C)
Health in Cherepovets ‎ (1 C)
History of Cherepovets ‎ (2 C, 3 F)
Maps of Cherepovets ‎ (1 C, 2 F)
Nature of Cherepovets ‎ (4 C, 9 F)
People of Cherepovets ‎ (8 C, 12 F)
Postcards of Cherepovets ‎ (17 F)
Sports in Cherepovets ‎ (2 C)
Structures in Cherepovets ‎ (1 C, 1 F)
Symbols of Cherepovets ‎ (5 F)
Transport in Cherepovets ‎ (6 C)
Wikivoyage banners of Cherepovets ‎ (2 F)

Media in category "Cherepovets"

The following 5 files are in this category, out of 5 total.

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