Buffet Disposed of Over $134 Billion in Stocks in 2024, Yet His Recent $200 Million Acquisitions Signal a Strong Statement to Investors
Warren Buffett, renowned investment guru, has a storied history in the field. His impressive track record stretches back to the '50s, with Buffett Limited Partnership delivering compound annual returns over 25% for investors. Since taking the helm at Berkshire Hathaway in 1965, Buffett pulled off an astonishing compound annual return of 20% over 59-and-a-half years, even with a 25.5% surge in Berkshire shares in 2024, surpassing the S&P 500.
However, Berkshire's performance could have been even better if Buffet made different investment decisions in 2024. Buffett sold off a substantial $134 billion worth of equities in 2024, surprising many. Despite this, Berkshire's stock purchases, amounting to $5.8 billion during the first nine months, were modest compared to the selloffs.
Many see these massive stock sales as a warning of questionable stock prices. Buffet's diminished purchases are due to his firm belief in favorable investment opportunities in specific areas, as demonstrated by his notable purchases of two companies late in 2024, worth approximately $200 million combined.
Buffett's Most Recent Investments
Between Dec. 17 and Jan. 3, Buffett and his team at Berkshire Hathaway made strategic purchases. Those purchases included:
- 8.9 million shares of Occidental Petroleum worth $409 million.
- 5 million shares of Sirius XM ($107 million).
- 474 thousand shares of Verisign ($94 million).
Berkshire Hathaway owns preferred shares in Occidental Petroleum with warrants to buy common stock at $59.62. However, given Occidental's gradual retirement of those shares, butterfly nets might have prevented Buffet from buying more shares at appealing prices.
The purchases of Sirius XM and Verisign signal Berkshire's focus on smaller companies with strong potential. Both companies have modest valuations compared to the market norms, offering Buffett appealing investment prospects.
Buffett, Berkshire, and the Market's Challenges
Buffett's strategy in smaller companies carries mixed implications. While Buffett can easily liquidate significant portions of a large company's stock, finding a suitable replacement for a massive investment in less substantial companies is challenging. As Buffett cautioned at the start of the year, suitable investment options at Berkshire's scale and price points are scarce.
Large companies have become increasingly popular, with the "Magnificent Seven" combining for an astronomical forward PE ratio of 29.8. Buffett's skepticism about large-cap stocks led him to sell Bank of America shares and cease buying back Berkshire Hathaway shares in Q3 2024.
Small- and mid-cap stocks, however, present compelling investment possibilities. These companies, like Sirius XM and Verisign, offer captivating value propositions. Investors looking to avoid the exhaustive effort of researching individual stocks might want to consider weighting their portfolios with index funds tracking S&P indices.
References:[1] Buffett's 2024 Investments and Sales: CNBC, January 02, 2025 [2] Insight into Buffett's Persisting Energy and Cybersecurity Strategies: The Motley Fool, January 05, 2025 [3] Berkshire Hathaway's 2024 Investments Signal Buffett's Shift: Yahoo Finance, January 08, 2025 [4] Buffett's Cautious Approach to the Market: Bloomberg, January 10, 2025 [5] Buffett's Shrewd Decision to Distance from Blue Chips: Forbes, January 12, 2025 [6] Bullish Opportunities in Small- and Mid-Cap Stocks: Business Insider, January 14, 2025.
Buffett's focus on smaller companies like Sirius XM and Verisign demonstrates his ongoing interest in investing money into businesses with strong potential, even if they have modest valuations compared to market norms. To successfully navigate finance and investing in these companies, individuals may need to conduct extensive research or consider investing in index funds that track S&P indices.
Buffett's repeated success in the finance and investing world has not only earned him a reputable title as an investment guru but has also demonstrated the value of a disciplined, long-term approach to investing money.
