Last night, Berkshire Hathaway (NYSE:BRK.B) released its 13F filing for the August-October quarter. The report shows investors like me what Warren Buffett has been buying.
The headline news was a new $4bn investment in Taiwan Semiconductor Manufacturing Company. But it’s not the TSMC stake that grabbed my attention.
Warren Buffett’s stock portfolio
Over the last three months, Warren Buffett bought almost 4m shares in Chevron (NYSE:CVX). That takes Berkshire’s total ownership in the oil company to just over 165m shares.
It makes the stock the third-largest holding in Berkshire’s stock portfolio, meaning that Buffett has more money invested in Chevron than in Coca-Cola, American Express, or Kraft Heinz.
Buffett has been buying the stock steadily over the year or so. During that time the share price has increased by around 60%.
Right now, the stock trades at a price-to-earnings (P/E) ratio of around 10 and has a dividend yield of around 3%. So should I be following Buffett and buying Chevron shares today?
As an oil producer, Chevron’s fortunes are tied to the price of oil. According to its most recent investor presentation, the company has a break-even price of around $50 per barrel.
Buffett has said before that an investment in an oil company is a bet on the price of oil remaining high over the long term. Right now, the price of crude oil is around $85 per barrel.
The real question, then, is what will happen to the price of oil. More accurately, the question is whether the oil price will stay high enough to justify investing in Chevron at $186 per share today.
For my part, I’m not sure about this. I think that there’s a lot of uncertainty that makes the price of oil difficult to predict.
Most obviously, the Russian invasion of Ukraine earlier this year has caused a surge in demand for oil produced in the US. This has pushed prices higher.
When that situation resolves, I think that oil prices will come lower. But I don’t know when or how that will happen, which makes it difficult for me to predict what oil prices will do.
Having a clear view of what oil prices will be in future is important for investing in an oil company. Since I don’t have this, I’m unlikely to buy shares in Chevron.
Berkshire Hathaway shares
Since Buffett is buying shares in Chevron, I assume he knows something about the price of oil that I don’t. I’m not sure what that might be, but that might not matter.
Instead of buying Chevron stock, I plan to buy Berkshire Hathaway shares. I think that can give me the benefit of an investment in Chevron without having to figure out the business myself.
There’s an obvious risk that Buffett won’t be around forever. But looking to invest money right now, I see Berkshire Hathaway as one of the best places I can put my money.
The post Warren Buffett keeps buying this dividend stock. Should I? appeared first on The Motley Fool UK.
American Express is an advertising partner of The Ascent, a Motley Fool company. Stephen Wright has positions in The Kraft Heinz Company. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2022