Activision Blizzard (ATVI)
Buffett made a small bet on game developer Activision Blizzard earlier this year. However, when it was announced that the company was being acquired by Microsoft, he quadrupled his stake.
He now owns 9.5% of the game maker’s outstanding shares.
In a meeting with Berkshire Hathaway shareholders, Buffett claimed this was now part of a merger arbitrage strategy.
Microsoft has offered to pay $95 per share for the company. However, Activision shares trade at more than $78 on the Nasdaq stock exchange. If the deal with Microsoft closes as planned, Buffett can pocket $17 per share in low-risk profit.
Floor & Decor (FND)
Georgia-based retailer Floor & Decor has a favorable position in the flooring niche. The stock trades at 30 times earnings and has relatively robust margins. It fits in perfectly with the Berkshire Hathaway portfolio of home services and specialty retail, including RH and Nebraska Furniture Mart.
Buffett added a whopping 3.9 million shares of FND to his portfolio in the first quarter.
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Buffett’s bet on energy is particularly noteworthy. The price of oil and gas has skyrocketed over the past year. It’s driven by a combination of rebounding demand and limited supply. The supply crunch is further exacerbated by sanctions on Russia — a key oil-producing nation — due to the country’s invasion of Ukraine.
This is a tailwind for companies like Chevron. The company produces 2% of global oil every year and also plays a key role in other parts of the energy supply chain.
Buffett first acquired a position in the company in 2020. However, he deployed much more capital in the first quarter of this year, making Chevron his fourth-largest position.
Occidental Petroleum (OXY)
Occidental Petroleum benefits from the same tailwinds as Chevron. The energy crisis has pushed this stock up 128% year to date. Despite that surge, it’s still trading at just 10.7 times earnings.
Buffett acquired 136 million shares of OXY in the first quarter of the year. It’s now the eighth-largest holding in the Berkshire Hathaway portfolio.
Berkshire’s portfolio is still dominated by one name: Apple Inc.
At the start of the year, the company held roughly 887 million shares of the iPhone maker. In this quarter, Buffett added nearly 4 million more — pushing the aggregate value of this bet up to $155.5 billion. That’s nearly 43% of the entire portfolio.
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The Oracle of Omaha seems to have overcome his reluctance to bet on technology companies. Besides Apple and Activision, Buffett also added a position in device manufacturer HP Inc.
The overlooked consumer tech giant could be attractive because of its steady profitability. Over the past five years, the company has consistently delivered an annual free cash flow of $4 billion. Some experts expect this to rise modestly to $4.5 billion.
That implies a free cash flow yield of 12%. An ideal fit for Buffett’s portfolio.
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