Even at the ripe old age of 91, Warren Buffett still has the capacity to surprise.
Witness his latest punt. Reversing some of his long-term bets on the banking sector, the Sage of Omaha has waded into oil and gas.
The latest filings by his giant Berkshire Hathaway Inc (NYSE:BRK.B) investment vehicle reveal the group now owns shares worth US$13bn in industry giants Chevron and Occidental.
It was part of a US$55bn spending spree on stocks in a period in which global equities have been on the slide with inflation, higher interest and the war in Ukraine applying the wet blanket.
That the energy sector is one of the few to survive, prosper and hit record levels makes Buffett’s move all the more intriguing. In other words, what has he seen?
Well, the most coherent analysis suggests that after unloading stakes in Wells Fargo, JP Morgan and Goldman Sachs (NYSE:GS) (which proved prescient given the US sector’s recent underperformance), oil and gas companies currently provide the most reliable earnings and income streams.
And, despite the run-up in valuations recently, the sector is still seen as undervalued based on current growth fundamentals.
Certainly, there has been a lot of Wall Street research and comment supporting this thesis recently.
Buffett, probably the world’s most successful investor, convened his first in-person Berkshire Hathaway annual meeting over the weekend.
Known as the Woodstock of Capitalism, thousands made the pilgrimage to Buffett’s home city of Omaha, Nebraska, to hear the Sage’s homespun pearls of investing wisdom.
Over almost 50 years, he and his right-hand man, the sprightly 98-year-old Charlie Munger, have transformed Berkshire into a behemoth of investing that now has almost US$1 trillion of assets under its purview.
It has also turned Buffett into one of the world’s richest people with an estimated fortune ofUS$127bn.