Berkshire Hathaway put $23.5 billion into nine stocks last quarter, its first net-buying quarter since 2022. Alphabet took the largest share of that spending, and CEO Greg Abel's portfolio additions also touched homebuilders and three Japanese trading houses.
Berkshire turns net buyer for the first time since 2022
Berkshire Hathaway's second-quarter earnings report revealed $23.5 billion in marketable equity purchases against just $3.7 billion in sales. That gap made the quarter the first since 2022 in which Berkshire bought more stock than it sold. Some of the purchases were already known, but the full picture only emerged once Berkshire filed its Form 13-F with the SEC.
The filing showed additions to Alphabet, Macy's, Delta Airlines, Lennar, New York Times and a new position in D.R. Horton. Earlier disclosures in the quarter had already revealed purchases of three Japanese trading houses: Mitsubishi, Marubeni and Sumitomo.
Homebuilders and Japanese trading houses round out the buying
The investments in Lennar and D.R. Horton coincide with Berkshire's acquisition of Taylor Morrison, which could indicate Berkshire still sees homebuilders as undervalued despite headwinds from rising mortgage rates and home prices. Abel has said he envisions Berkshire holding its stakes in the trading houses for 50 years or forever, and he sees room for strategic alliances that could open new capital allocation avenues.
Abel and Warren Buffett's largest purchase by far was Alphabet. Berkshire took a $10 billion private placement of the stock in June, then bought roughly another $5 billion to $7 billion worth of shares through the quarter. It is now Berkshire's third-largest marketable equity holding, built from a position Buffett said he first opened with a small purchase in the third quarter of last year.
Alphabet's spending and valuation stand out
Alphabet stock has been under pressure over its heavy capital spending on artificial intelligence compute, spending so large that the company reported negative free cash flow last quarter. It raised $85 billion in an equity issue that Berkshire participated in and added over $50 billion in long-term debt in the first half of the year. Buffett views that spending as a strength rather than a weakness, pointing to a backlog of $514 billion in contracted revenue as justification for building capacity now.
Its cloud unit is also showing improved profitability. Operating margin for the cloud computing segment expanded to 35.6% last quarter, up from 20.7% a year earlier, though management warned margin could take a near-term hit as it rents capacity from third parties to serve long-term customers. The stock currently trades at 16.5 times forward earnings, a level that reflects analyst uncertainty about near-term profits as AI capital expenses show up on the income statement.
Source: Motley Fool
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