Image source: The Motley Fool
We are probably headed for a recession, and possibly a stock market decline as well. At times like this, many investors sell their stocks and flee to a safer place. But not billionaire investor Warren Buffett.
No, he went on a buying spree at Berkshire Hathaway. And I looked at his investments in the first quarter for ideas for my own portfolio. So what has he added to his holdings?
Invest in oil
Buffett has invested billions in oil. He bought massively in Chevron and western oil during the quarter, significantly increasing its holdings in both.
I’m unlikely to buy US stocks, but it reminds me of the FTSE100it is BP and Shell. Like Chevron, they are in all aspects of the oil industry. And they both benefited from soaring oil prices.
I wouldn’t buy just for the boost of a short-term oil rally. Warren Buffett doesn’t think short term either. If he sees long-term value in the sector, I’m definitely interested.
Buffett has always loved banks. He recently sold his remaining stake in Wells Fargobut in return, he has just invested nearly 3 billion dollars in Citigroup.
Citigroup is an international investment bank offering financial services. So perhaps the closest among UK listed banks is one of similar size HSBC Holdings. It’s exposed to China and Asia in general, which can be both a risk and a benefit.
Alternatively, there is the smaller Barclays. Interestingly, Citigroup is on a P/E of just around six, which I think was part of the attraction. Barclays’ P/E is slightly lower. He must be on my candidate list.
Empty the telecoms?
Buffett didn’t just buy. He also hit the headlines by selling almost all of his stake in Verizon Communications.
I’m quite bearish towards two major UK telecommunications companies, LV Group and Vodafone, during difficult times. For me, it is mainly because of their very high debts. But their valuations aren’t particularly attractive either.
Curiously, Verizon is on a relatively low P/E of less than 10, so it looks more like a Buffett value stock. It may be a confusing sale. But that will probably keep me from reconsidering UK telecoms stocks.
Insurance and pharmacy
Insurance has always had its attractions for Warren Buffett. This time, he bought a modest stake in marcel. It reinforces my feeling that the insurance industry is a business to be lived through good times and bad. And it makes me want to add to my Aviva holding. i think maybe Legal and general.
American pharmaceutical company McKesson is also part of Buffett’s holdings. He has already invested in Pfizer and Merck, among others. It reminds me of us GlaxoSmithKline and Astra Zeneca should stay on my list. I would only buy them when the ratings look right, mind you.
My main takeaway?
Over the years, I’ve come to like the same type of stocks as Warren Buffett. And his latest activity reminds me that the best companies can be good buyers regardless of the economic outlook. It’s just that hard times can make them even cheaper.
Each of the stocks I’ve mentioned here carries its own risks, and I would only buy after doing thorough research.