Buffett's stock-picking prowess has made him one of the wealthiest people on the planet, and investors across the globe look to his company Berkshire Hathaway (BRK:NYSE) forhints of what could be the next “big one”.
Those hints come in the way of 13-F disclosures the company has to file every quarter with the SEC which details the company’s changes in different stocks it owns.
The latest 13-F report indicates that Berkshire Hathaway has 48 stocks in its portfolio with no major new additions. The company however added to three of its existing positions in the second quarter. It also received one stock as a spinoff from one of its existing holdings (which essentially means turning a subsidiary into a new & separate company).
The three stocks Buffett just bought more of are…
First, Berkshire Hathaway added to about 10 million shares to its Kroger (KR:NYSE) position. Kroger has witnessed a resourceful turnaround since 2017 when costly expansion plans took a toll on margin and shares fell more of more than 50% from the highs it touched in 2016.
In view of this fall, the company implemented cost-cutting measures to sit back on healthy margins, the focus was shifted primarily on its core grocery business, and e-commerce led to a successful turnaround. This helped the share price to more than double.
Berkshire now owns 61.8 million shares of Kroger worth approximately $2.4 billion.
Berkshire Hathaway added over 35,000 shares in its existing position of luxury retailer RH (RH:NYSE), formerly known as Restoration Hardware. This means Berkshire now owns 8.5% of the company.
Home prices have significantly increased in the last year after plunging to their lowest in the March-May period in 2020 when the effects of the pandemic first hit the world. Industry tailwinds like pandemic-related mortgage bailout packages, fiscal & monetary stimulus measures, excessive liquidity by way of pumping money, and attractive mortgage rates are soaring the prices in real estate.
The pandemic also changed the trend from renting to owning a home which, due to its limited supply and increased consumer spending, has led to the meteoric rise in the housing market prices.
This meteoric rise has benefitted companies like RH, which has unlocked demand for their products, including luxury furnishings, and reported a 78% YoY topline sales growth.
Berkshire Hathaway has also been stockpiling shares of Aon (AON:NYSE).
Aon is the world’s second-largest insurance broker and provides financial risk-mitigation products. BH increased its holdings of Aon in the second quarter by over 300,000 shares. The total number of shares held by the company crossed over 4 million, making it the 24th largest position in Berkshire Hathaway’s portfolio.
Aon announced last year that it had plans to merge with Willis Towers Watson, which is considered the third-largest insurance broker. However, due to some anti-competitive risks cited by the U.S. Department of Justice, the $30 billion deal could not move forward.
Will this impact Buffett’s stance on the company? We’ll find out in the next 13-F report. Until then, these are three of the stocks that have been on Buffett’s buy list.