Having covered George Soros' latest deals in a recent article, who manages a private fund worth more than $5 billion, it is now the turn of the best of the best. Even though Warren Buffett and his Berkshire Hathaway were not as active in the second quarter as they were in the previous one, there are still some significant changes that we will take a closer look at in this article.

The 13F documents are out

Just a quick reminder. Securities and Exchange Commission rules mandate that investment funds that manage assets in excess of $100 million and include exchange-traded funds must disclose their holdings each quarter in a form called a Form 13F. This report is intended to promote transparency about what different funds are doing, but it has the added benefit of allowing investors to see what top-level investors are doing with the capital they manage.

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Berkshire Hathaway's cash position

Let's start with the company's cash position, for which the Omaha fortune teller has long been criticized for not using free cash at a time when markets were rising strongly. But that all changed this year, where while Berkshire held nearly $144.854 billion in cash at the end of last year, it was down to just $102.687 billion in Q1 of this year. Buffett was thus very active in the first quarter of this year, putting more than $40 billion into the market. However, the pace of purchases slowed in Q2 and the cash position settled at $101.337 billion. Thus, Berkshire now holds about a third of its portfolio in cash, with the rest invested in equities. That's still plenty of cash that Buffett can eventually put into the market.

Changes in the stock portfolio

Berkshire's $300 billion investment portfolio consists of 47 companies, down two stocks from last quarter. Despite having more money invested in its stock portfolio, the value is down from $364 billion at the end of the first quarter due to a more than 16% decline in the S&P 500 index.

The five largest holdings account for more than 74% of the total portfolio. The top five holdings in order of holding size are Apple, Bank of America, Coca-Cola, Chevron, and American Express. Apple had nearly 41% of the portfolio at the end of the second quarter!

Now let's take a closer look at a few select Berkshire positions where there has been some change. Activision Blizzard $ATVI+0.1% is one of them. Microsoft announced an agreement to acquire Activision for $95.00 per share in cash on January 18, 2022. At Berkshire's annual meeting, Buffett discussed the previous increase in Activision's stake and noted that it was an arbitrage opportunity, a bet that Microsoft would complete the acquisition.

Buffett and Berkshire also continued to increase their position in the popular Apple $AAPL+0.2%. Berkshire added roughly 3.9 million shares and now has 894.8 million shares in the tech giant. That values Berkshire's position in Apple at nearly $155 billion, representing a nearly 5.7% stake in the company. Given that Berkshire had roughly $300 billion at the end of the second quarter, that means Apple made up 40.7% of the portfolio at the end of the quarter when you exclude Berkshire's $105 billion in cash and cash equivalents.

The oil bet

Warren Buffett is on an Occidental Petroleum $OXY+0.0% buying spree . The billionaire Berkshire Hathaway company has added nearly 20 million more shares to its portfolio since July. In addition, on Friday, August 19, Berkshire announced that the Federal Energy Regulatory Commission granted Buffett's company approval to purchase up to 50% of the available shares of OXY.

Occidental Petroleum is primarily in the oil and gas business. However, it also has a petrochemical segment that has performed well in recent quarters.

Oil and gas stocks have consistently outperformed the market in 2022, with Occidental Petroleum's stock up roughly 131% YTD, making it the top-performing company in the S&P 500.

Berkshire also boosted its large stake in the other major U.S. oil producer Chevron $CVX+0.2% by 2.26 million shares. Berkshire now owns more than 161.4 million shares, bringing Berkshire's stake to $25.3 billion, or roughly 8.2%.

How Buffett views oil investment

One of Buffett's earliest articles in 1957 claimed that Oil & Gas Property Management, which looked after oil and gas facilities, was his favorite hedge against inflation. This logic applies equally well today. In fact, the rising price of oil is one of the factors behind inflation, so Berkshire Hathaway views oil as a good investment in a time of rising prices. Companies like Chevron and Occidental are flush with cash. Moreover, Buffett saw from the chaos in the energy markets caused by the Russia-Ukraine war that the world has not turned away from oil and gas as much as he would like. Buffett knows that the age of oil is not yet over.

That Buffett is aggressively accumulating oil stocks like Chevron and Occidental signals his belief that oil and gas prices will remain high for a long time. For example, major oil companies significantly reduced their capital spending during the COVID-19 pandemic because of the uncertainty of energy commodity prices and the historic decline in demand. Add to this the Russian invasion of Ukraine, which threatens to cripple the flow of oil and gas to certain parts of the world (e.g. Europe). These supply chain issues will not be resolved overnight, setting the stage for oil and gas prices to remain well above their historical norms.

DISCLAIMER: All information contained herein is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.