When the Oracle of Omaha speaks, Wall Street and everyday investors listen attentively. That's because Berkshire Hathaway (BRK.A -0.39%) (BRK.B -0.56%) CEO Warren Buffett has trounced the benchmark S&P 500 in the return column since taking the reins at his company nearly six decades ago.
Through the end of October, Buffett has overseen a nearly 4,200,000% aggregate return in his company's Class A shares (BRK.A). Meanwhile, the broad-based S&P 500 hasn't yet reached a 30,000% total return, including dividends, over the same nearly six-decade timeline.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Investors often wait on the edge of their seats to see what one of Wall Street's brightest minds has been buying and selling. Following the Oracle of Omaha's trades is relatively simple, thanks to quarterly Form 13F filings with the Securities and Exchange Commission (SEC).
A 13F provides an under-the-hood look at what Wall Street's top money managers bought, sold, and held in the most recent quarter. Berkshire Hathaway is set to file its latest 13F next week, which will detail its trading activity during the September-ended quarter.
But you don't have to wait until next week to uncover some of the Oracle of Omaha's latest moves. A handful of deals and filings with the SEC show that Buffett has pared down or disposed of two holdings while, surprisingly, continuing to add to another less-than-conventional stock.
Stock No. 1 Warren Buffett is selling: HP
The first Buffett stock that's been given something of a heave-ho is personal-computing (PC) and printing solutions specialist HP (HPQ -0.45%).
In instances where investment companies hold greater than 10% stakes in a public company, money managers are required to file Form 4 with the SEC when shares are purchased or sold. Berkshire Hathaway has filed multiple Form 4s since mid-September with the SEC for HP, resulting in the sale of 33,339,676 shares of HP stock. With its stake now below 10%, Buffett's company isn't required to provide any further updates via Form 4. However, any additional buying and selling activity can be viewed in future 13F filings.
The Oracle of Omaha and his investing lieutenants, Todd Combs and Ted Weschler, likely piled into HP because of its value proposition. Shares are currently trading at a multiple of just 8 times forward-year earnings.
More importantly, PC and printing product sales don't change much from one year to the next, which leads to highly predictable cash flow. For a mature company like HP, this cash flow will be used to pay dividends and buy back stock.
The impetus that may have caused Buffett and his team to seemingly mash the sell button in recent months is HP's lackluster third-quarter operating results. While Buffett rarely puts much weight into a single quarterly report, Enrique Lores, the President and CEO of HP, noted that "the external environment has not improved as quickly as anticipated." With little momentum from a revenue and profit perspective, and the company repurchasing far fewer shares of its common stock in fiscal 2023 ($100 million) compared to fiscal 2022 ($3.547 billion), through nine months, the tailwinds for HP have dissipated.
While HP may represent an intriguing value for investors with a very long-term mindset, Buffett's trading history suggests he may continue paring down this position.
Stock No. 2 Warren Buffett is selling: Activision Blizzard
A second stock Warren Buffett has certainly given the boot is gaming company Activision Blizzard.
As of June 30, Berkshire Hathaway held 14,658,121 shares of Activision. But following the closure of Microsoft's (MSFT -1.73%) $95-per-share all-cash deal to acquire Activision last month, these shares are now gone.
Interestingly, the Oracle of Omaha and his team jettisoned a significant portion of Berkshire's stake in Activision well before rulings were made that determined the deals' fate. Given the timing of Berkshire's initial purchases in Activision, it's not clear if Buffett's company made much in the way of profit.
However, Buffett was crystal clear during his company's annual shareholder meeting in 2022 that the Activision Blizzard stake was solely a short-term arbitrage opportunity. This type of trade is highly uncharacteristic for the long-term-minded Buffett and may signal just how difficult it's been for the Oracle of Omaha and his team to locate value stocks in the current market.
Assuming Warren Buffett and his investing lieutenants held the remaining 14.66 million shares until the official closing date a little over three weeks ago, their company would have received nearly $1.4 billion in cash in exchange for its Activision shares.
As much as Buffett values the company Bill Gates built, don't expect this capital to be reinvested in shares of Microsoft. Although the addition of Activision Blizzard gives Microsoft an avenue to grow its metaverse ambitions and increase in dominance in the gaming arena, it remains a tough sell at more than 28 times forward earnings -- at least for the value-oriented Buffett.
Image source: Getty Images.
The surprising stock Warren Buffett can't stop buying: Occidental Petroleum
On the other hand, there's one somewhat surprising stock the Oracle of Omaha hasn't stopped buying since the curtain opened in January 2022. I'm talking about energy stock Occidental Petroleum (OXY 0.75%).
Based on the latest round of Form 4s filed with the SEC, Berkshire Hathaway's stake in Occidental has grown to more than 228 million shares in less than two years. It's now Berkshire's sixth-largest holding by market value ($14.1 billion).
Having north of $14 billion invested in an oil and gas stock strongly signals that Buffett and his team believe the spot price of crude oil will head higher or, at worst, tread water for the foreseeable future. In particular, two macro factors suggest crude oil prices could remain well above their historic norm.
To start with, Russia's invasion of Ukraine has created energy supply uncertainties for Europe that have no immediate cure. The other macro tailwind for the spot price of crude is the three-year reduction in capital expenditures from energy majors during the COVID-19 pandemic. Whenever the supply of a needed commodity is constrained, there's likely to be upward pressure placed on its price.
Although Occidental Petroleum is an integrated operator (i.e., it's a driller that also operates chemical plants), it generates most of its revenue from drilling. Compared to other integrated energy companies, Occidental is far more sensitive to swings in the spot price of crude oil. If the spot price does head higher, Occidental should disproportionately benefit, relative to its peers.
What makes this ever-growing position so unconventional is Occidental Petroleum's balance sheet. Warren Buffett is a stickler for owning well-run, financially stable businesses. Though Occidental has reduced its net debt by nearly $15 billion in roughly two years, it's still carrying around nearly $19.7 billion in net long-term debt. It has far less financial flexibility than integrated oil and gas juggernaut Chevron, which is another core holding for Berkshire Hathaway.
While the ability to exercise warrants in Occidental common stock may be spurring Buffett to buy, it's a nevertheless unconventional company for the Oracle of Omaha to be enamored with.
