Buying shares of Warren Buffett is a classic example of why you want to be “greedy only when others are afraid”

This has been a big year for Berkshire Hathaway and CEO Warren Buffett. The conglomerate just revealed its investments in other companies at the end of the third quarter, and one name and one sector stands out.

In its 13F filing with the Securities and Exchange Commission on Nov. 14, Berkshire disclosed investments in 50 shares as of Sept. 30 with a combined market value of $296.1 billion.

Berkshire opened three new equity positions during the third quarter:

Agency

Ticker

Value of Berkshire holdings – 30th September ($ million)

Berkshire ownership stake

Total return: from 2022 to 15 November

Taiwan Semiconductor Manufacturing Co. Ltd. ADR

TSM,
+10.10%

$4,118

1.16%

-39%

Louisiana-Pacific Corp.

LPX,
+9.51%

$297

7.85%

-24%

Jefferies Financial Group Inc.

JEF,
+1.33%

$13

0.19%

-2%

Sources: Berkshire Hathaway 13F papers, FactSet

Click on the tickers for more information on each company. Read Tomi Kilgore’s detailed guide to the wealth of information on MarketWatch’s quote page for free.

Filing 13F doesn’t say exactly when the shares were purchased, but Berkshire built its $4.1 billion position in Taiwan Semiconductor TSM.
+10.10%
after the semiconductor industry collapsed. Semiconductor manufacturing has traditionally been a cyclical business, and TSM is the world’s highest-volume computer chip maker.

“Our goal is more modest: We simply seek to be fearful when others are greedy and to be greedy only when others are fearful.”


– Berkshire Hathaway CEO Warren Buffett in his 1986 annual letter to shareholders.

Semiconductor stocks plunged as investors perceived the group had entered a bear cycle. The iShares Semiconductor ETF hit its 2022 closing low on Oct. 14, when it was down 44% for the year, before climbing 25% through Nov. 14.

When SOXX bottomed, Taiwan Semiconductor was hit even harder, dropping 46%, possibly due to tensions between China and the US over China’s claim to Taiwan. (All returns in this article include dividends reinvested.)

Taiwan Semiconductor fell to a 2022 low on Nov. 3, when it was down 49% for the year. Berkshire built its position in TSM between June 30, when the stock fell 35% for 2022, and September 30, when it fell 41% for the year.

It appears Buffett’s timing was excellent, following part of the long-term strategy he discussed in his annual shareholder letter included in Berkshire’s 1986 annual report. Buffett explained that market disruptions were unpredictable.

“Our goal is more modest: We try simply to be fearful when others are greedy and to be greedy only when others are fearful,” he wrote.

You can see the full list of Buffett’s letters to shareholders here.

And now, with President Biden saying he doesn’t expect a quick attempt by China to invade Taiwan after his meeting with Chinese President Xi Jinping followed by Berkshire’s revelation (both on Nov. 14), TSM’s stock is skyrocket November 15th.

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More Berkshire stock added, sold or cut

During the third quarter, Berkshire increased its holdings of the following stocks. They are sorted according to the market value of the holdings as at 30 September:

Agency

Ticker

Value of Berkshire holdings – September 30 ($mil)

Value of Berkshire holdings – June 30 ($mil)

Ownership share – September 30th

Total return: from 2022 to 15 November

Chevron Corp.

CVX,
+0.46%

$23,757

$23,373

8.55%

63%

Occidental Petroleum Corp.

OSS,
+1.50%

$11,943

$9,335

21.38%

154%

Global Class B Paramount

PARA,
+6.52%

$1,737

$1,935

14.99%

-37%

Celanese Corp.

THERE IS,
-1.72%

$877

$1,077

8.96%

-36%

RH

RH,
+2.55%

$581

$461

9.95%

-47%

Sources: Berkshire Hathaway 13F papers, FactSet

While Berkshire added to its holdings of Paramount Global PARA,
+6.52%
and Celanese Corp. CE,
-1.72%
during the third quarter, September 30th position values ​​were down from June 30th because the shares were down 22% and 23%, respectively.

Berkshire sold all of its shares in Store Capital Corp. during the third quarter. This position was valued at $385 million as of June 30.

Here are other Berkshire stock positions partially sold during the third quarter:

Agency

Ticker

Value of Berkshire holdings – September 30 ($mil)

Value of Berkshire holdings – June 30 ($mil)

Ownership share – September 30th

Total return: from 2022 to 15 November

General Motors Co.

GM,
+0.30%

$1,605

$1,971

3.43%

-32%

Kroger Co.

kr,
+0.58%

$2,199

$2,744

7.02%

5%

Bank of New York Mellon Corp.

BK,
-0.39%

$2,396

$3,018

7.70%

-23%

American bank

USB,
-0.90%

$3,136

$5,818

5.24%

-20%

Activision Blizzard Inc.

ATVs,
-0.62%

$4,471

$5,326

7.69%

12%

Sources: Berkshire Hathaway 13F papers, FactSet

Berkshire’s performance: how to rest easier

Here is a five-year chart showing the return of Berkshire’s BRK.B Class B,
-0.34%
shares against the benchmark S&P 500 SPX,
+0.17%
until 14 November:

Fact set

Berkshire’s five-year total return was slightly higher than the S&P 500. Perhaps your first reaction is that this performance is nothing to write home about.

If you had taken the same five-year look at Berkshire’s performance relative to the index a year ago, you would have seen Berkshire’s 81% return behind a 136% return for the S&P 500 and could have accepted the idea that the investment philosophy of Buffett’s value had expired.

But over the past year, the S&P 500 is down 14%, while Berkshire’s B-shares are back 8.5%.

For many investors, the ability to get a better night’s sleep could make Buffett’s value approach more worthwhile.

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