What companies is Warren Buffett investing in? With stock prices riding high, the Oracle of Omaha has been holding off on big purchases recently, and his company, Berkshire Hathaway, has not acquired any companies in the last few years. In 2019, Berkshire Hathaway tweaked its holdings downwards in several companies where it owns stock (notably Apple) and increased them in some others. But there were a few companies it invested in for the first time, and a couple of them should surprise you. They provide some insight into his thinking that might help guide your own investment decisions.

Buffett has famously said that investing is a better game than baseball because you can choose not to swing as many times as you like and you will never strike out. After a few years of bull markets, he's been choosing not to swing quite a lot lately. Here are some companies Berkshire Hathaway did decide to invest in. 

1. Amazon

Berkshire Hathaway bought nearly $1 billion of Amazon shares in 2019. In an interview last year, Buffett said that the shares were actually purchased by one of Berkshire's two investment managers, Todd Combs and Ted Weschler. The 89-year-old Buffett and his 96-year-old partner Charlie Munger have wisely been preparing Berkshire Hathaway and its investors for their eventual departure. Handing over some of the purchasing decisions to Combs and Weschler is part of that preparation. But it's more than likely that such a high-profile investment was only done with Buffett's approval.

Buffett has said repeatedly that Amazon is a great company and last year in an interview, said that he was "an idiot" for not buying Amazon shares in the past. You can see why he might have regrets -- Amazon stock sold for $18 at the company's 1997 IPO and its price has risen more than a hundredfold since then. But Buffett has also said that over the years that his investing philosophy has gone from "buying fair companies at great prices" to "buying great companies at fair prices." Buffett clearly believes that Amazon is a great company. Apparently, he also believes that $1,850 is a fair price for it, since that's approximately what the shares cost when Berkshire purchased them. So far, the bet's paid off. Even after Monday's coronavirus-related selloff, Amazon is trading at well over $2,000.

2. RH (Formerly Restoration Hardware)

Berkshire Hathaway already owns several furniture chains, so it makes sense that the company would invest further in an industry it knows well. But San Francisco-based RH is very much more at the luxury end of the scale than Buffett's other furniture holdings. At around $365 million, Berkshire Hathaway's stake in RH is relatively modest, but it's made a big difference to the company. Its share price had already made solid gains for 2019 when Buffett divulged the purchase. The stock price shot up 8 percent in one day on the news. "I never got so many people call or text me about an event ever in the history of my career," CEO Gary Friedman said afterward.

3. Kroger

Kroger is the nation's largest grocery retailer (it owns multiple brands, including QFC). Though Berkshire Hathaway at one time owned a stake in Walmart that it has since sold off, it hasn't traditionally gotten into the grocery business. This $549 million investment was, again, a purchase made by one of the company's two investment managers, Buffett revealed in a recent interview, but it sounds like he approves. He has said the company is doing a "good job" in a tough business where others, such as Amazon and Costco are "sweating it out."

4. Biogen

Although Berkshire Hathaway has invested relatively little in pharmaceuticals and biotech in the past, it added a $200 million stake in biotech company Biogen in 2019. This may have been another purchase by Combs or Weschler, although again likely with Buffett's approval. It was in some ways a surprising bet because Biogen's future fortunes hang on the tangled question of whether its Alzheimer's drug aducanumab will gain FDA approval or not.

Aducanumab thus far has traveled a bumpy road. Last year, Biogen was in the process of seeking FDA approval and had begun a multi-year trial of the drug with 3,500 Alzheimer's patients. Then about a year ago, it abruptly pulled the plug, saying the drug had failed "futility analysis," meaning that it did not seem to be particularly effective. Then, in October, Biogen reversed course again, saying that it had studied a larger data set of patients in the trial, and noted that those on higher doses were indeed seeing benefits from the drug. The FDA recently gave Biogen approval to restart its clinical trials, which will likely happen in March.

That approval, which came at the end of January, lifted the stock price sharply, so that Berkshire Hathaway has already seen its investment gain value significantly. On the other hand, if the second trial fails and the FDA does not wind up approving the drug, Biogen will see its stock price tumble. But Buffett says that investors should buy stocks with a view to owning them for a decade or more, so he or his deputies must believe Biogen has solid prospects even if that happens.

5. Berkshire Hathaway

One of the company's biggest investments in 2019 was in buying back its own stock, $5 billion worth, which is the most it's ever spent on stock repurchase in a single year. It's a pretty logical move when you consider that Berkshire is sitting on about $128 billion in cash that it hasn't invested while Buffett and his crew let pitches go by without swinging at them.

Buffett wrote in his annual letter to shareholders that his and Munger's philosophy is to buy back Berkshire shares if they believe those shares are selling at less than their true value and if doing so will still leave the company with plenty of cash. That philosophy led them to buy back approximately 1 percent of the company in 2019.

Over time they want the number of outstanding Berkshire shares to go down, he added, and if the pricing is sufficiently favorable, he anticipates even more repurchases. In fact, he's inviting people with at least $20 million in shares that they're ready to sell to contact the company.

One of Buffett's often-repeated pieces of advice is to "invest in yourself." Apparently, he's walking the talk.

Published on: Feb 25, 2020
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