Staff Reporter

Approximately 40,000 shareholders of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) are set to gather in Omaha, Nebraska, during the first weekend of May. This annual meeting, led by CEO Warren Buffett, provides a platform for investors to pose questions to the “Oracle of Omaha” about Berkshire Hathaway and the broader stock market.

Before the extensive Q&A session, Buffett traditionally shares insights into the company’s first-quarter financial results. Anticipation is high that these financial statements will reveal an increase in one of Berkshire’s largest investment holdings. Investors can expect Buffett to address this topic in detail on May 3.

Insights from Berkshire’s Financial Statements

While the complete portfolio disclosure for the end of the first quarter won’t be available until May 15, early signs indicate some significant moves from Buffett and his team this year. Recent SEC filings show that in January and February, Buffett acquired shares of Verisign, Sirius XM, and Occidental Petroleum, totaling around $93.5 million. Additionally, Berkshire sold about $147.7 million worth of DaVita to keep its ownership below 45%.

Buffett has also made notable investments in five Japanese trading houses, amounting to an estimated $2.7 billion.

It’s unlikely Buffett engaged in any major stock purchases recently, given that the S&P 500 began the year near all-time highs and continued to rise until mid-February. Despite a dip in March, stocks have remained relatively stable. Large-cap stocks, in particular, have retained high valuations, causing Buffett to exercise caution in his buying strategy. He has even paused share buybacks for Berkshire Hathaway.

However, Berkshire’s portfolio generates substantial dividends, and its wholly owned businesses contribute even larger operating income. This influx of cash needs to be put to use.

At the end of the fourth quarter, Berkshire Hathaway held approximately $300.9 billion in Treasury bills and an additional $33.3 billion in cash. Investors are keenly awaiting Buffett’s next major investment, though it’s unlikely to have occurred in the first quarter.

Fortunately, Buffett is benefiting from patience, with six-month Treasury bills yielding about 4.3% during the first quarter, translating to around $3.2 billion in quarterly income from existing holdings.

Should Investors Follow Buffett’s Lead?

Buffett faces a unique challenge: Berkshire Hathaway’s vast portfolio makes it difficult to find opportunities that warrant in-depth analysis. For a stock to be significant to Berkshire, it must be large enough to absorb billions of dollars, narrowing the field considerably.

The silver lining for individual investors is that they don’t need to invest billions. A few thousand dollars can often suffice, broadening the range of potential investments. Buffett’s recent strategies suggest that many attractive opportunities lie within smaller companies.

Over the past two years, Buffett has focused on companies with market capitalizations between $15 billion and $50 billion, while divesting from some of the largest firms as their valuations surged. Individual investors might find even greater value among mid-cap or small-cap stocks. Notably, the small-cap S&P 600 and mid-cap S&P 400 are trading at significantly lower valuations compared to the large-cap S&P 500.

Investors can emulate Buffett by selecting individual stocks of smaller companies that are fairly valued or by investing in index funds targeting small- or mid-cap indices or the equal-weight S&P 500 index.

In his 2024 letter to shareholders, Buffett stated, “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses.” While opportunities for Berkshire to acquire strong businesses remain limited, many options exist for individual investors seeking value.

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