Some random thoughts about recent investments.
Could the recent investments in OXY, HPQ and VZ signal a change in Buffett’s strategy for using the enormous cash pile?
Maybe he has stopped waiting for opportunity to bag an elephant. Instead he is finding relatively safe securities to deploy cash and earn a total return superior to cash/bonds.
Both HPQ and Verizon are part of an oligopoly of three companies, which are unlikely to be significantly disrupted and their products/services should continue to be used for a decade or longer. Likewise, OXY is well positioned with its acreage in Texas, and is mending its BS and returning cash through dividends and share repurchases. Again its products will be used for at least a few decades, and any prospect of climate related regulatory/legislative action has faded with the Russian invasion of Ukraine. None of these may be high growth businesses, but may provide reasonably good, even market beating returns over the next decade. In the 1990s he bought a 15% stake and praised the management of General Dynamics when it repurchased 30% of its shares through a tender offer. GD deliberately shrunk the company, after it lost some defense contracts.
Buffett made a similar huge pivot when he started investing in high capital, guaranteed return investments like BNSF and energy after years of favoring capital light businesses. And that has proven a great success.
It will be interesting to see if Buffett has slowed the pace of BRK share repurchases, as share price has increased this year. This will make the search for alternatives for the use of cash more important.
Repositioning BRK to make it easier for his successors may also be a factor in the recent investments. The Allegheny purchase also brings Joseph Brandon back to BRK and there has been speculation that he may replace Jain eventually.
Of course, we may never know unless Buffett chooses to talk about it or respond to AGM questions.