Since the mid-1960s, Warren Buffett has shown Wall Street that he knows a thing or two about investing. In the roughly 57 years he’s spent as CEO of Berkshire Hathaway (BRK.A) (BRK.B), the Oracle of Omaha, as he’s come to be known, has created more than $685 billion in value for shareholders, as well as delivered an aggregate return for the company’s Class A shares (BRK.A) of more than 3,800,000%, through Jan. 25, 2023.
Buffett’s ability to consistently outperform the S&P 500 has encouraged generations of investors to ride his coattails. Thanks to required quarterly 13F filings with the Securities and Exchange Commission, mirroring the Oracle of Omaha’s buying and selling activity is relatively easy.
But you might be surprised to learn that Berkshire Hathaway’s 13F doesn’t tell the complete story.
Back in 1998, Buffett’s company acquired General Re for $22 billion. While General Re’s reinsurance operations were the prize of this buyout, it also owned a specialty investment firm called New England Asset Management (NEAM). When Berkshire Hathaway bought General Re, it also acquired NEAM.
As of the end of September, New England Asset Management had nearly $5.9 billion in assets under management and positions in 184 securities. Even though Warren Buffett doesn’t guide NEAM’s buying and selling activity as he does Berkshire Hathaway’s investment portfolio, what New England Asset Management buys is, ultimately, owned by Buffett’s company. You could say it’s Buffett’s own secret portfolio.
What follows are three surprising stocks you probably had no clue Warren Buffett technically owns.
The first shocker is that Warren Buffett’s company is actually the owner of 15,154 shares of Walt Disney (DIS), courtesy of New England Asset Management. Walt Disney is what I’d regard as Warren Buffett’s biggest investing mistake.
In 1966, Warren Buffett and a consortium of investors purchased 5% of Disney, which equated to a $4 million investment. At the time, Disney was an up-and-coming theme-park operator with proprietary film content that didn’t come close to matching its content library today. Buffett and his investors sold this 5% stake in Disney just one year later for a 50% return. Had Buffett and his consortium stuck around, this stake would be worth almost $9.9 billion today.
The interesting thing is that Warren Buffett owned shares of Walt Disney a second time — and, once again, chose not to stick around all that long. When Disney acquired Capital Cities/ABC in 1996, which Berkshire Hathaway held a position in, Buffett’s company came into possession of roughly 73.84 million split-adjusted shares of the “House of Mouse.” These shares, which were sold by Buffett and his team between 1999 and 2000, would be worth approximately $8 billion today. Including dividends paid, the Oracle of Omaha missed out on more than $19 billion in gains.
But thanks to NEAM, Warren Buffett indirectly has a chance to redeem himself.
Walt Disney’s most exciting growth driver at the moment looks to be its streaming operations. In less than three years following its launch, Disney+ amassed more than 164 million subscribers, which demonstrates the lure of the Disney brand. If CEO Bob Iger is successful at increasing prices for Disney’s streaming platforms while being mindful of expenses, profitability for this segment shouldn’t be too far off.
A second stock you’ll be jaw-dropped to find as a holding by Warren Buffett’s company is gold miner Newmont (NEM). New England Asset Management held 37,328 shares of Newmont as of the end of the third quarter.
To not beat around the bush, the Oracle of Omaha dislikes gold as an investment. According to Buffett:
[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.
As you can gather, Buffett is a fan of businesses that produce ongoing utility and value. Whether it’s utilities that provide electricity, oil companies that fuel your car, food and beverage businesses that fill your belly, or banks that create pathways for homeownership, the Oracle of Omaha only invests in businesses that can continually provide utility.
Nevertheless, gold is revered as a hedge against inflation and economic uncertainty, which is what’s made it such a popular holding for much of the past year. Newmont is the world’s largest gold producer, with annual production expected to average around 8 million gold equivalent ounces through 2031. The company is also sitting on 96 million ounces of gold reserves and countless projects that should take its production well into the 2040s.
Given that gold stocks historically perform their best during the very early stages of a new bull market, we’re getting close to the sweet spot for Newmont and its mining peers.
The third surprising stock you’d never have guessed Warren Buffett owns is graphics card and semiconductor solutions specialist Nvidia (NVDA). New England Asset Management’s third-quarter 13F showed it held 3,050 shares of Nvidia.
The reason this is a such a shock is simple: Warren Buffett generally avoids tech stocks. With the exception of Apple, pretty much every other tech-oriented company in Berkshire Hathaway’s portfolio has been added by one of Buffett’s investing lieutenants (Todd Combs and Weschler). The Oracle of Omaha has never had the time nor drive to keep up on the changing tech landscape, and has preferred devoting most of his energy and research to the financial and consumer staples sectors.
On the bright side, Nvidia is a beast in the graphics processing unit (GPU) arena. It accounts for close to 20% of the global GPU market and an astounding 80% of global discrete graphic cards. The latter being GPUs that are separate from the processor. Maintaining such a large role in the GPU space has allowed Nvidia to become a major player in the gaming industry.
But things are far from perfect for one of the United States’ largest publicly traded companies. For instance, U.S. regulators barred Nvidia from shipping its artificial intelligence-driven A100 GPUs to China for security reasons in early September. Even though Nvidia developed a slower GPU for China, the end result could be a significant reduction in expected sales.
We’re also seeing macroeconomic weakness in key markets for Nvidia. A bear market in cryptocurrencies has limited the purchase of mining solutions, while COVID-19 vaccine uptake has caused gaming GPU demand to fall off a cliff. Gaming revenue fell 51% from the prior-year period in the fiscal third quarter.
Long story short, I wouldn’t expect Buffett to be championing Nvidia as a buy for Berkshire Hathaway’s investment portfolio anytime soon.
— Sean Williams
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Source: The Motley Fool