Investors have endured a tortuous nine months characterised by volatility and uncertainty with stock markets plunging on a combination of surging inflation and rising interest rates, fears over the outlook for supply chains and global growth, lockdowns in China and conflict in Ukraine.

Year-to-date, the S&P 500 and Nasdaq Composite are down 21% and 29% respectively at the time of writing.

While the bears have been firmly in charge in 2022, Warren Buffett, the ‘Sage of Omaha’ and world’s lionised investor, has been actively buying stocks through his Berkshire Hathaway (BRK.B:NYSE) conglomerate, staying true to the second half of his oft-quoted contrarian mantra to be ‘fearful when others are greedy, and greedy when others are fearful’.

Buffett and Berkshire Hathaway often buy early during market downturns, snapping up quality merchandise when it is on sale; remember, Berkshire made large share purchases in late 2008, just months before the stock market bottomed in March 2009, so the recent buying spree suggests Buffett sees brighter times ahead for the markets.

FOLLOW THE MASTER

One of the world’s greatest value investors, the 92-year-old Buffett boasts an incredible track record and is famed for a focus on long term investing and buying businesses with wide economic moats that trade at below their intrinsic value.

Unsurprisingly, investors are always keen to follow Buffett when he puts money to work and one of the most widely watched filings each quarter is Berkshire Hathaway’s ‘13-F’, a form which all US-domiciled funds with $100 million or more in assets under management must publish.

The filing gives Buffett acolytes the chance to see what the great man has been buying and selling, though long-term business partner Charlie Munger and Berkshire’s two investing deputies – Todd Combs and Ted Weschler – also have influence at the Buffett-run holding company.

CONTRARIAN TASTE FOR TECH

Bear markets send investors of a nervous disposition heading for the exits, yet these situations create opportunities for investors such as Buffett to buy up chunks of what he sees as wonderful businesses which have been oversold.

Berkshire Hathaway’s 13-F and quarterly SEC filings reveal that the conglomerate has put billions of dollars to work in stocks in 2022 to date, and that’s on top of Berkshire Hathaway share buybacks which demonstrate Buffett and Munger believe their own company is undervalued.

According to the Q2 2022 13-F filing, the latest available, Buffett and his investing team purchased pushing on for 7.7 million shares in Berkshire’s biggest stock investment by value, namely Apple (AAPL:NASDAQ), during the first six months of the year.

Buffett has ramped up his stake in the iPhone maker, which has a wide economic moat, strong brand and pricing power. Berkshire held 894,802,319 shares in Apple at the end of the second quarter, a stake then worth $122.3 billion, which accounted for 41% of Berkshire’s share portfolio and will have ripened in value given a rise in the Apple share price through July and into August.

Buffett also beefed up Berkshire’s stake in Activision Blizzard (ATVI:NASDAQ) during the first half of the year.

Atypically for long term investor Buffett and Berkshire, this one is an arbitrage play. Software colossus Microsoft (MSFT:NASDAQ) made an all-cash offer of $95 per share to acquire Activision Blizzard back in January, but the shares have traded consistently below the bid price and currently swap hands for $75.32, with regulators weighing up whether to wave the takeover through.

FAN OF FINANCIALS

They might not quicken the pulse, but Buffett remains a big fan of financials and has invested in two new banking stocks and value plays in 2022-to-date, namely Citigroup (C:NYSE) and Ally Financial (ALLY:NYSE). Buffett appears to be backing Citigroup’s transformation plan under new CEO Jane Fraser. Based on date from the Gurufocus website, Berkshire’s near-2.9% stake in the bank was worth over $2.5 billion at the end of the second quarter.

Berkshire has also acquired a 9.7% interest in Ally Financial, a stake worth over $1 billion at the end of Q2 based on the latest filing. A digital bank with a large automotive loan book, Ally’s purely online presence means it is well-suited for tough economic times during which consumers tend to place a high value on convenience.

PIPELINE TO PROFITS

This year, Buffett has made a massive bet on the energy sector, piling back into high-flying oil and gas producer Occidental Petroleum (OXY:NYSE) at a higher share price than when he sold the stock in 2020, a rare miscalculation from the master.

Buffett has also increased his stake in energy giant Chevron (CVX:NYSE), a free cash flow monster Berkshire started buying in late 2020, by more than 320% in 2022, leaving Berkshire holding 8.25% of the company. Buffett evidently believes energy commodity prices will stay elevated for years to come given global supply issues and Russia’s disastrous incursion into Ukraine.

NEW IN 2022

New positions for Berkshire in 2022 include HP (HPQ:NYSE), the California-based and lowly valued computer hardware play with some of the hallmarks Buffett looks for in a company, such as savvy capital allocation by the pandemic beneficiary’s management. The PC-to-printer maker has also introduced shareholder-friendly initiatives, returning capital to investors through dividends and share buybacks.

Also among Buffett’s spate of recent stock purchases is Paramount Global (PARA:NASDAQ), the entertainment titan offering exposure to traditional distribution and streaming services and a wide moat in the form of a huge film catalogue. Berkshire has also initiated positions in chemicals concern Celanese (CE:NYSE), a maker of advanced engineered materials such as polymers that fits the Buffett bill, since it generates a superior return on equity than many peers, which suggests the company has competitive advantages that rivals cannot easily replicate.

Shares in pharmaceuticals distributor-to-medical supplies provider McKesson (MCK:NYSE) have also been bought, bringing Buffett exposure to a pharmaceutical distribution business generating steadily growing revenue without the risk of clinical failures. Also new in 2022 is specialty insurance company Markel (MKL:NYSE). Buffett is renowned as a fan of insurance companies, which collect premiums up front and pay out claims later, leaving them with a ‘float’ they can invest until policyholder claims deplete it. Insurers also have pricing power and the ability to raise premiums, a sought-after quality during times of high inflation.

This year, Berkshire has sold its stake in telecommunications company Verizon (VZ:NYSE) and exited positions in drug royalties firm Royalty Pharma (RPRX:NASDAQ) and pharmaceutical firm AbbVie (ABBV:NYSE).

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