Warren Buffett’s Stock Portfolio and 10 Newest Investments in 2022
In this article, we discuss Warren Buffett’s 10 newest investments in 2022. If you want to see more stocks in this selection, check out Warren Buffett's Stock Portfolio and 5 Newest Investments in 2022.
Warren Buffett’s Berkshire Hathaway acquiring a $4.1 billion stake in chipmaker Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) during the third quarter of 2022 has made headlines since the latest securities filings were disclosed. Wall Street is taking Buffett’s new stock investment as an indication that the semiconductor stocks might be due for a rebound soon.
On November 15, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) shares climbed more than 12% to $81.62 in mid-day trading as Buffett disclosed his stake, while other chip makers also rose, including Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA Corporation (NASDAQ:NVDA), and Marvell Technology, Inc. (NASDAQ:MRVL). These firms are also TSMC’s customers.
In recent years, Warren Buffett has been willing to invest in technology, with the Berkshire portfolio featuring notable stocks like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and HP Inc. (NYSE:HPQ). Jim Shanahan, an analyst at Edward Jones, noted that tech and communications businesses now represent approximately half of Berkshire’s portfolio, which he said provides a good balance as the firm’s “portfolio companies are more old economy”.
Our Methodology
We selected the 10 stocks which were either new additions to the Berkshire Hathaway portfolio, or where the fund increased its holdings during the end of the third quarter of 2022, for this analysis. Two of these ten stocks were added to the Berkshire holdings in the last two years. The stocks are arranged according to the hedge fund’s stake value in each holding. Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022 was used to assess the hedge fund sentiment around the securities.
Warren Buffett's Stock Portfolio and Newest Investments in 2022
10. Jefferies Financial Group Inc. (NYSE:JEF)
Number of Hedge Fund Holders: 33
Berkshire Hathaway’s Stake Value: $12,790,000
Jefferies Financial Group Inc. (NYSE:JEF) is a New York-based company that engages in investment banking, capital markets, and asset management businesses in the Americas, Europe, the Middle East, Africa, and Asia. The company operates through Investment Banking and Capital Markets, Asset Management, Merchant Banking, and Corporate segments. Warren Buffett’s Berkshire Hathaway added Jefferies Financial Group Inc. (NYSE:JEF) to its Q3 2022 portfolio by purchasing 433,558 shares worth $12.8 million.
On September 28, Jefferies Financial Group Inc. (NYSE:JEF) declared a $0.30 per share quarterly dividend, in line with previous. The dividend is payable on November 29, to shareholders of record on November 14. Jefferies Financial Group Inc. (NYSE:JEF)’s dividend yield on November 18 came in at 3.22%.
Keefe Bruyette analyst Michael Brown on September 5 upgraded Jefferies Financial Group Inc. (NYSE:JEF) to Outperform from Market Perform with a price target of $38, up from $30. The analyst said Jefferies Financial Group Inc. (NYSE:JEF) is an attractive way to play an investment banking recovery "with idiosyncratic catalysts and limited downside."
According to Insider Monkey’s data, 33 hedge funds were bullish on Jefferies Financial Group Inc. (NYSE:JEF) at the end of Q3 2022, compared to 29 funds in the prior quarter. Robert Rodriguez and Steven Romick’s First Pacific Advisors is the biggest stakeholder of the company, with 5.7 million shares worth $169.5 million.
Like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and HP Inc. (NYSE:HPQ), Jefferies Financial Group Inc. (NYSE:JEF) is also backed by Warren Buffett.
Here is what GoodHaven Capital Management specifically said about Jefferies Financial Group Inc. (NYSE:JEF) in its second-quarter 2022 investor letter:
“Jefferies Financial Group Inc. (NYSE:JEF) was our next biggest dollar detractor, and had also been a strong contributor in prior periods. As we have previously mentioned, while Jefferies has become a better business it is still a cyclical business, and that some moderating earnings after the recent boom were to be expected. In the first six months of their fiscal 2022, Jefferies earned a ROATE (Return on Adjusted Tangible Equity) of over 11%, reasonable given the very material slowdown in the capital markets lately. They also repurchased over $620 million of their shares at $34+ per share and Jefferies’ stock now trades below tangible book value/share. Given the obvious slowdown in capital raising transactions industry wide, we expect continued muted results in the near-term but also continued share buybacks. Our long-term enthusiasm remains, as does our view of the material upside for the shares from recent levels.”
9. Louisiana-Pacific Corporation (NYSE:LPX)
Number of Hedge Fund Holders: 28
Berkshire Hathaway’s Stake Value: $296,692,000
Louisiana-Pacific Corporation (NYSE:LPX) is an American company that manufactures and markets building products primarily for use in new home construction, repair and remodeling, and outdoor structure markets. Warren Buffett added Louisiana-Pacific Corporation (NYSE:LPX) to his Q3 portfolio by purchasing 5.8 million shares worth about $297 million, representing 0.10% of the total holdings.
On October 28, Louisiana-Pacific Corporation (NYSE:LPX) declared a $0.22 per share quarterly dividend, in line with previous. The dividend is payable on December 1, to shareholders of record on November 9. Louisiana-Pacific Corporation (NYSE:LPX)’s dividend yield on November 18 came in at 1.44%.
BofA analyst George Staphos on September 20 downgraded Louisiana-Pacific Corporation (NYSE:LPX) to Underperform from Neutral, trimming the price target to $56 from $64. The analyst lowered operating rate and pricing forecasts across primary wood products to reflect BofA's housing and building product views. He believes Louisiana-Pacific Corporation (NYSE:LPX) shares will have a hard time outperforming given a tough macro and a "looming recession."
According to Insider Monkey’s data, 28 hedge funds were bullish on Louisiana-Pacific Corporation (NYSE:LPX) at the end of September 2022, with collective stakes worth $514.2 million, compared to 28 funds in the prior quarter worth $213.3 million. Jim Simons’ Renaissance Technologies is a prominent stakeholder of the company, with 953,400 shares worth $48.80 million.
Here is what L1 Capital International specifically said about Louisiana-Pacific Corporation (NYSE:LPX) in its Q2 2022 investor letter:
“We have invested in Louisiana-Pacific Corporation (NYSE:LPX) due to its Smartside siding business. Smartside has consistently increased its share of the siding market in the U.S., not just new residential construction but repair and renovation, shed and other markets. Louisiana Pacific has not been able to keep up with demand for Smartside and is sold out to the end of 2022. New capacity is being added currently which will support future growth.
Between 2015 to 2022, Smartside EBITDA increased from around US$100 million to a run-rate approaching US$400 million. We believe Smartside has many years of strongly profitable growth to come (see Figure 12).
Imagine being offered to buy a business. This business is breakeven in a down year, makes an operating profit of a few hundred million dollars in a normal year, and in an exceptional period in 2021 made around US$1.5 billion profit. The person offers to sell you the business for nothing. This is the current investment opportunity for Louisiana Pacific. In addition to owning Smartside, it also owns the second largest oriented strand board business in North America and a successful woods product business in South America. The price of OSB is exceptionally volatile, but has recently delivered super-normal profits to Louisiana Pacific, enabling management to buy back 45% of shares on issue while maintaining net cash. At Louisiana Pacific’s current share price, we are paying the bottom end of fair value for Smartside and getting the OSB business practically for nothing.”
8. RH (NYSE:RH)
Number of Hedge Fund Holders: 48
Berkshire Hathaway’s Stake Value: $580,724,000
RH (NYSE:RH) is a California-based retailer of home furnishings, providing furniture, lighting, textiles, bathware, and home decor. In Q3 2022, Warren Buffett strengthened his hold on RH (NYSE:RH) by 9%. The hedge fund had 2.36 million shares of RH (NYSE:RH) worth $580.7 million at the end of September, representing 0.19% of the total 13F securities. Buffett has held a position in RH (NYSE:RH) since the third quarter of 2019.
On November 18, Wedbush analyst Seth Basham downgraded RH (NYSE:RH) to Neutral from Outperform but trimmed the price target to $270 from $274. RH (NYSE:RH) has been successful in safeguarding its brand without discounting, but this has contributed to higher market share losses, the analyst wrote in a research note. He sees increasing evidence of a course-correction to its strategy of "climbing the luxury mountain." The analyst, however, "surprisingly found" that RH (NYSE:RH) slashed prices by 2%-9% since March on half of the products. This "potential course-correction" in the company's strategy and the worsening macro outlook led to the downgrade.
Among the hedge funds tracked by Insider Monkey, 48 funds were long RH (NYSE:RH) at the end of Q3 2022, compared to 59 funds in the earlier quarter. Stephen Mandel’s Lone Pine Capital held a notable stake in the company, comprising 1.7 million shares worth $436.2 million.
Here is what GreenWood Investors specifically said about RH (NYSE:RH) in its Q2 2022 investor letter:
“Gary Friedman, the owner manager of RH (NYSE:RH), has been talking about the company climbing the luxury mountain over the past few years. Wall Street is skeptical RH can hold its leading margin profile after elevated demand during Covid, and it surely doubts that it is a luxury company, at 10x earnings. We’ve been looking to get involved in the housing ecosystem given the dramatic selloff in the sector over the past year, and our first investment here is via RH. Demographically, we expect US household formation to remain very strong after a decade of underinvestment in housing supply. Gary strategically with-held new product launches in the aftermath of Covid, when times were easiest, and is now releasing a new premium product lineup. We believe there is a lot of latent pricing power in home furnishing, and while high interest rates are trapping people in a home they would otherwise possibly leave, we believe the consumer, particularly the high-end consumer, will look to continue to upgrade their homes.
The truest test of Gary’s quest to make RH a true luxury company is in fact a recession. One of the reasons why there are few, if any, American luxury businesses, is that without a family controlling the company, optimizer-oriented management teams cannot withstand the pain that comes from not discounting a product line into weak demand. We can’t recall a single American company that has “destroyed” inventory like the French luxury companies in the face of a recession. Many have tried. Few, if any, have succeeded.
Anchored by Gary’s 21% ownership of the company, RH has a good chance. And not only is it not tempted in the current volatile environment to discount, but he is actually raising prices. With a buyback authorized for over 30% of the shares outstanding, Friedman is also not shying away from making bold investments in the current environment. He is aggressively expanding galleries and introducing new marquee European properties. The combined product launch cadence, increased prices, aggressive footprint investments and forthcoming share repurchases, not to mention low valuation, made us move off the sidelines and take a position in RH. While we are certainly not hoping for a recession, we are excited that such an environment could solidify Gary’s mission to make RH a rare American luxury brand.”
7. Ally Financial Inc. (NYSE:ALLY)
Number of Hedge Fund Holders: 42
Berkshire Hathaway’s Stake Value: $834,901,000
Ally Financial Inc. (NYSE:ALLY) is a Michigan-based digital financial services company that provides its products and services to consumer, commercial, and corporate customers in the United States and Canada. The company operates through four segments – Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations.
Ally Financial Inc. (NYSE:ALLY) is one of the newest investments in the Berkshire portfolio. The hedge fund added Ally Financial Inc. (NYSE:ALLY) to its portfolio in the first quarter of 2022, and as of Q3 2022, Berkshire had 30 million shares of the company worth $835 million, representing 0.28% of the total holdings.
On October 26, Compass Point analyst Giuliano Bologna downgraded Ally Financial Inc. (NYSE:ALLY) to Neutral from Buy with a price target of $27, down from $50, following Ally Financial Inc. (NYSE:ALLY)’s Q3 earnings miss and issuance of a "significantly weaker" guidance for earnings through FY23.
According to Insider Monkey’s data, 42 hedge funds were bullish on Ally Financial Inc. (NYSE:ALLY) at the end of September 2022, and Harris Associates held a significant stake, comprising 26.7 million shares worth $745.7 million.
Here is what Moon Capital Management specifically said about Ally Financial Inc. (NYSE:ALLY) in its Q3 2022 investor letter:
“We recently purchased shares of Ally Financial Inc. (NYSE:ALLY), the world’s largest digital-only bank. Ally’s legacy dates back more than 100 years when it was originally launched as GMAC, the in-house financing arm of General Motors. The company was spun out from GM and rebranded as Ally more than a decade ago, but has retained an automotive focus on the lending side, where it holds the largest position in prime auto lending.
Since the spinoff, Ally has transformed from an auto loan company into a comprehensive, independent finance provider for borrowers and savers of all types. The company has completely restructured the liability side of its balance sheet and has created a deposit-gathering engine that is now more than 85 percent deposit[1]funded. (Compared to issuing traditional corporate debt, deposits are a significantly less expensive capital source for banks.)
Due to the lower overhead associated with the digital bank’s lack of brick-and-mortar locations, the bank produces one of the best efficiency ratios in the industry. This low-cost position, combined with a relatively high loan portfolio yield of approximately 6.75 percent, has helped the company earn net interest margins well above those of many leading banks. These high margins translate into high returns on equity, which the company targets at 16-18 percent over the medium term. (Actual ROE in 2021 was 24 percent. When the company came public in 2014, its ROE was a paltry four percent.)..” (Click here to read the full text)
6. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 36
Berkshire Hathaway’s Stake Value: $877,219,000
Celanese Corporation (NYSE:CE) is a Texas-based technology and specialty materials company that manufactures and sells high performance engineered polymers in the United States and internationally. The company operates through three segments – Engineered Materials, Acetate Tow, and Acetyl Chain. Warren Buffett boosted his Celanese Corporation (NYSE:CE) stake by 7% in Q3 2022, holding 9.71 million shares worth $877.2 million, representing 0.29% of the total securities.
On November 10, Deutsche Bank analyst David Begleiter reiterated a Buy rating on Celanese Corporation (NYSE:CE) but lowered the price target on the shares to $105 from $110 following the Q3 results. He said that an EPS of $13 to $14 is achievable in 2023.
According to Insider Monkey’s data, 36 hedge funds were bullish on Celanese Corporation (NYSE:CE) at the end of the third quarter of 2022, with collective stakes worth $1.5 billion, compared to 36 funds in the prior quarter worth $1.8 billion. Thomas E. Claugus’ GMT Capital held a significant stake in the company, comprising 1.3 million shares valued at $116.6 million.
In addition to Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and HP Inc. (NYSE:HPQ), Celanese Corporation (NYSE:CE) is one of the top picks of Warren Buffett.
Here is what Vltava Fund has to say about Celanese Corporation (NYSE:CE) in its Q1 2022 investor letter:
“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stocks of Celanese (CE).
Celanese is the world’s largest producer of acetic acid and its chemical derivatives, including vinyl acetate monomers and emulsions. Their applications are used in a wide range of industries, such as automotive tobacco, coatings, construction, energy, telecommunications, food, and medical. Celanese recently closed the acquisition of a large part of DuPont’s business, which will make Celanese an even bigger player in the industry while reducing the cyclicality of it business. The acquisition is quite large and should deliver significant value to shareholders that in our view is not at all presently reflected in the share price. Celanese is a business that stands more or less aside from the main interests of most investors, but it is a company with very high returns on capital, strong free cash flow, and historically very efficient resource allocation.”
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Disclosure: None. Warren Buffett's Stock Portfolio and 10 Newest Investments in 2022 is originally published on Insider Monkey.
