Warren Buffett’s ability to pick winning stocks has made his company, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), one of the most closely watched investment firms on the planet. While Buffett is usually mum when it comes to discussing his latest buys, Berkshire Hathaway reveals his latest transactions in a 13-F filing with the Securities and Exchange Commission every quarter. The company’s latest filing reveals that Berkshire Hathaway’s established a new position in Barrick Gold (NYSE:GOLD) and increased its exposure to Liberty SiriusXM Group (NASDAQ:LSXM.K), Store Capital (NYSE: BIG), Suncor Energy (NYSE:SU), and Kroger (NYSE: KR).
All that glitters is gold
At first glance, Barrick Gold’s appearance in Berkshire Hathaway’s portfolio is the most surprising of these buys. However, as fellow Fool Dan Caplinger points out, Buffett’s past criticism has focused on gold itself, not the companies digging it out of the ground. And when it comes to mining gold, Barrick Gold’s been very successful.
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The world’s second biggest gold miner by production with proven and probable gold reserves totaling 71 million ounces, Barrick Gold’s got a history of being one of the lowest-cost producers, which means more profit resulting from rising gold prices flows to investors.
For example, Barrick Gold pocketed $1,725 per ounce at an all-in sustaining cost of $1,031 per ounce in the second quarter of 2020, resulting in adjusted net earnings of $0.23 per share, up 44% year over year. That performance prompted management to bump its dividend up by 14% to $0.08 per share.
Those results are impressive, but if gold prices drop, it could take a toll on the company’s financials. This risk doesn’t seem to worry Buffett, though. Buffett apparently believes fiscal and monetary stimulus will continue to weaken the dollar versus other currencies, and since gold is negatively correlated to the U.S. dollar, that should support gold prices and Barrick Gold’s results.
If he’s right, then Berkshire Hathaway’s decision to buy 20.9 million shares would be savvy. However, investors ought to keep in mind his stake in the gold miner only represents a little more than one-quarter of one percent of Berkshire Hathaway’s portfolio. Therefore, it’s a relatively small bet.
Nibbling on the margins
Unlike his Barrick Gold purchase, Buffett already had positions in the other stocks he bought last quarter.
Berkshire Hathaway’s Liberty SiriusXM stake increased 37% to 43.2 million shares worth nearly $1.5 billion. Meanwhile, his stake in Store Capital grew 31% to 24.4 million shares, and his Suncor Energy and Kroger positions increased by 28% and 15%, respectively.
However, none of these positions is big enough to rank them among Berkshire Hathaway’s top 10 holdings, so these purchases aren’t likely to have a huge impact on future performance. For perspective, Liberty Media comprised 0.74%, Store Capital comprised 0.29%, Suncor Energy comprised 0.16%, and Kroger comprised 0.37% of Berkshire Hathaway’s portfolio exiting June.
Nevertheless, these buys reflect Buffett’s penchant for hunting in the bargain bin for deals. Suncor Energy and Kroger are in the midst of turnarounds, and Store Capital’s shares were recently beaten up because its business relies on leasing free-standing buildings to retailers, including furniture stores and movie theaters hard-hit by COVID-19 restrictions.
His Liberty SiriusXM purchase is similarly bargain hunting because those shares track Liberty Media’s 71% ownership stake in Sirius XM and historically, Liberty SiriusXM has traded at a steep discount to the actual value of Liberty’s ownership of Sirius XM.
Oh, and one bonus buy: Bank of America
Buffett’s third-quarter buys won’t be revealed until the next Berskhire Hathaway 13-F report in about three months, but the company did recently file Form 4 reports with the SEC detailing additional purchases of Bank of America stock.
Overall, Berkshire Hathaway bought about $1.8 billion worth of Bank of America stock so far this quarter, bringing its total position to about 1.02 billion shares worth about $25 billion. Given that this brings its ownership in the bank to about 11.8%, the additional purchases are significant, but investors might not want to extrapolate the purchase as confidence in the banking industry overall.
In Q2, Berkshire Hathaway reduced the number of shares it owns in JPMorgan Chase, PNC Financial, and Wells Fargo by 61%, 41%, and 26%, respectively. Therefore, it appears this is a stock-specific bet by Berkshire Hathaway.
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