Warren Buffett released his fourth-quarter 13F filing this week, and there were some major takeaways for his fans.
The Oracle of Omaha trimmed his stake in Apple and select U.S. bank stocks, with new positions in oil behemoth Chevron and American telecom Verizon, as well as a top-up in T-Mobile. There were many other less remarkable moves, such as additions to some of his favourite health care stocks, but in this piece, we’ll focus on the three most remarkable moves that can assist value investors in their hunt for value.
While many pundits would argue that this market is expensive, overdue for a correction and that there’s a lack of bargains to be had, Warren Buffett’s fourth-quarter bets suggest that there is still plenty of value out there for contrarian stock pickers. And I think his recent moves should act as a clue as to where the biggest deals exist in today’s low-rate world.
Big oil isn’t dead
It’s not a mystery that Uncle Warren sees value in the ailing energy patch. This isn’t his first venture into the oil market, and it probably won’t be his last, following his massive US$4.1 billion stake in Chevron.
Buffett had previously bet on Albertan oil sands kingpin Suncor Energy, among many other oil plays. And while I’m surprised that the Oracle of Omaha didn’t back up the truck on Suncor shares on their latest dip, his vote of confidence in the energy sector is a sign that fossil fuels are not yet dead, although I’m sure many green energy investors would disagree.
In many prior pieces, I noted that if investors wanted to achieve above-average returns over time, they’d need to look to the ugliest areas of the market. While there’s no denying the secular downtrend faced by the oils, it’s vital to remember that the transition to renewable energy isn’t going to happen overnight.
There’s still gushing cash flows and value to be had with today’s battered energy giants. Just ask Warren Buffett!
Warren Buffett’s Verizon bet suggest the big telecoms reek of value
It’s official: Warren Buffett is a massive bull on U.S. telecom companies after buying up US$8.6 billion worth of Verizon shares in the quarter ended December 31. With big bets top competitor T-Mobile, it’s clear that Warren Buffett is a fan of the industry as a whole.
With a potential 5G wireless tech boom on the horizon, it’s not a mystery as to why the man scooped up shares amid what I believe to be a temporary bout of weakness.
In numerous prior pieces, I noted that the telecoms would be among the first to recover from the COVID-19 crisis fully — and that contrarians had an opportunity to lock-in a sizeable yield alongside big capital gains in a return to normalcy.
BCE, a Canadian telecom behemoth, is my top pick on this side of the border. I think it makes for a great Canadian way to ride on Warren Buffett’s coattails.
Defensive growth at a discount?
Finally, Warren Buffett has been betting big on his favourite basket of health care stocks. The industry offers defensive growth through and after this horrific pandemic. Moreover, his bets on a wide number of pharmaceutical plays suggest that he sees deep value in the industry as a whole.
The Foolish takeaway for Warren Buffett fans
Warren Buffett seems to see value in the energy, telecom, and health care sectors. He’s right on the money and I therefore would encourage bargain hunters to look to these bruised areas of the market for a better shot at above-average results over time.