Top 5 Warren Buffett Stock Buys in Q3 2022: New Money Looks At Recent Additions To His Portfolio In Q3 2022

Semiconductor giant pushing the boundaries with new efficient processes.

• Buffett’s most notable new buy for Q3 2022 was TSMC, the global leader in semiconductor manufacturing located in Taiwan. Buffett purchased 60,060,880 ADRs in Q3 to build a position worth around US$4.12 Billion. This purchase marked the first time the company has appeared among Berkshire Hathaway’s holdings and presently accounts for 1.39% of the Berkshire portfolio.
• The Taiwanese manufacturing giant falls under the banner of companies you don’t even realise you engage with. Tech powerhouses like Apple, Sony, Nvidia, Broadcom and Qualcomm are all end customers of TSMC’s semiconductor chips. There’s a solid chance that the phone or computer you’re reading this on has TSMC’s chips inside.
• TSMC’s third quarter was supported by strong demand for the 5nm technologies most commonly used in smartphones. The company was able to post earnings of US$9.02 Billion for the quarter which stands as an 79.7% increase from this time last year, and an 18.5% increase from the previous quarter. Shipments of 5nm technologies accounted for 28% of total wafer revenue and while sales are yet to be seen on the income statement, production of the company’s new 3nm wafer technology is expected to ramp up in 2023.
• While mass-production is still a fair way out, TSMC’s has made strides with its N2 technology which shows a marked increase on the soon-to-be-released N3 technology. The smaller 2nm node boasts a 10-15% speed improvement at the same power, or 25-30% power reduction at the same speed. N2 is scheduled to begin production in 2025.

Oil and Gas major ramping up production and seeking greener initiatives.

• Buffett continued his purchasing of oil stocks in Q3 2022, adding a further 3,919169 shares to the Berkshire portfolio. This recent purchase is illustrative of a 2.43% increase to his Chevron position. Chevron seems to have been a favourite for Buffett as this most recent addition marks the fifth consecutive quarter in which he’s added to his Chevron holding. The recent purchase now has Chevron sitting as Berkshire’s third largest holding, comprising 8.02% of the portfolio and is valued at US$23.8 Billion.
• It’s no surprise that Buffett has taken an interest in oil, with the US energy sector as a whole massively outperforming the rest of the market over the past year, delivering +61.01% returns compared the the -21.67% delivered by the US market as a whole.
• Chevron has been benefiting from looming supply pressures and has enjoyed a lofty rise in the realised price per barrel in both US domestic and international markets. In the US alone, the company’s average sales price of crude oil was $76 per barrel in Q3 2022, up from $58 a year earlier. The average sales price of natural gas was $7.05 per thousand cubic feet in third quarter 2022, up from $3.25 in last year’s third quarter.
• The company has been busy this quarter from a business perspective, having received approval to increase light crude oil processing capacity by 15 percent at the company’s refinery in Pasadena, Texas.
• The company also completed its acquisition of Renewable Energy Group Inc. in June of this year in an all-cash transaction valued at $3.15 billion. The acquisition of REG’s clean energy assets is expected to push Chevron further towards its goal to grow renewable fuels production capacity to 100,000 barrels per day by 2030.

Oil and gas player reducing debts and returning capital to shareholders.

• Buffett’s oil obsession continued with his recent purchases of Occidental Petroleum in Q3 2022. The recent purchase of 35,801,921 OXY shares stands as the largest addition to a current holding in percentage terms, adding 22.58% to his Occidental Petroleum position. Behind the purchase of TSM, this is the second largest acquisition in the quarter from a change in portfolio percentage perspective, boosting his position in OXY by 0.74% so that it now accounts for 4.03% of Berkshire Hathaway’s holdings valued at US$11.9 Billion. This is the third consecutive quarter in which Buffett has added to his Occidental holding following an initial purchase in Q1 2022.
• Buffett has expressed his affinity for stock buybacks and so it’s no surprise to see his purchase given that Occidental Petroleum has repurchased over 28.4 million shares as a cost of US$1.8 billion during the Q3 2022. Year-to-date repurchases from the company amount to a total of 41.8 million shares at a value of US$2.6 billion through to the most recent earnings release in November.
• In times where debt is getting increasingly more expensive, it’s a positive takeaway for shareholders that the company repaid US$1.3 billion of debt during the quarter, with year-to-date repayments of $9.6 billion through to the earnings release in November. All up, the commitment to reducing debt exposure has culminated in a 34% reduction of total outstanding principal debt.
• OXY reported quarterly earnings of US$2.5 Billion, compared to $3.2 Billion for the previous quarter on an adjusted basis. Despite higher volumes on oil and gas commodities, the cooling off of oil prices negatively impacted earnings. For Q3 2022, the average worldwide realised crude oil prices decreased roughly 12% from the prior quarter to US$94.89 per barrel. While this isn’t ideal, earnings are still kept buoyant as realised oil prices are still elevated on a year-on-year basis.

Media conglomerate finding success in the streaming segment.

• Following an initial purchase in Q1 2022, Buffett has looked favourable upon Paramount in recent times. For the third consecutive quarter, Buffett has continued to build his holdings in the mass media and entertainment conglomerate, acquiring 12,794,865 new shares representative of a 16.32% increase in his holdings this quarter. This is a vote of confidence in what’s been a trying period for Paramount, who’s seen their stock drop some 40% over the last 6 months. After the recent addition, Paramount Global now accounts for 0.59% of the Berkshire portfolio and is valued at US$1.74 Billion.
• Paramount’s subsidiaries are huge players in the media world, with Paramount Pictures, CBS, Showtime ComedyCentral, MTV and Nickelodeon just some of the companies operating under the Paramount Global banner.
• Paramount Global is in the midst of what can only be described as a ‘streaming war’ with the likes of Disney, Netflix, Hulu etc. Paramount’s premium subscription service Paramount+ performed well over the quarter, adding 4.6 million new subscribers and growing revenues by 95%. At the end of the quarter, total Paramount+ subscribers had grown 46 million. While this is an appreciative effort, Paramount+ still trails the likes of Disney+ and Netflix with 164M and 223M respectively. However, Buffett’s optimism could be attributed to the fact that Paramount+ ranked highest among streaming services in the US for gross subscriber additions, likely lead by the launch of the Walmart+ partnership and the start of the NFL and Premier League seasons and the UEFA Champions League.
• Paramount’s Film and TV media also performed exceedingly well, with Paramount Pictures securing it’s sixth box office #1 for the year with Smile. Revenue for the movie segment grew 48% on a year-on-year basis aided by a return to regular releases following the COVID-19 pandemic and the huge success of Top Gun: Maverick in cinemas and on streaming.

Chemical manufacturing giant with a diverse product catalogue.

• In what appears to be a common theme, Buffett has once again shown his faith in acquisitions made at the start of the year, adding 6.04% to his holdings in the technology and speciality materials company Celanese Corp. This quarters’ purchase of 553,469 CE shares is the third consecutive quarter of purchases following an initial purchase of 7,880,998 shares at the start of the year. Following the latest acquisition, Celanese Corp makes up 0.30% of Berkshire Hathaway’s holdings which is valued at around $877m.
• Celanese is a well-known player in the chemical manufacturing industry and is notable as the world’s largest producer of acetic acid and vinyl acetate monomer (VAM).
• On November 1st, the company announced it had completed its acquisition of the Mobility & Materials (M&M) business of DuPont for US$11 billion in cash. Through this transaction, Celanese acquired a vast portfolio of engineered thermoplastics and elastomers and global production assets. The acquisition should be immediately fruitful for Celanese and is expected to generate US$450 million in annual synergies for the long term.
• Celanese’s circle of influence is vast, with many of the products they output finding their way into numerous different use cases such as electric vehicles, to construction materials, to medical implants to name a few. The diversity in Celanese’s end consumer could form part of appeal to Berkshire Hathaway who will see it as a way to reduce volatility as it helps reduce the exposure to crises in specific industries.
• The company recently announced price increases for a range of its trademarked engineered materials, which has seen a resurgence particularly in the medical segment off the growth in the medical implant business post-COVID. Even though inflation-driven cost increases have been felt across the board, Celanese’s competitive advantage in scale and depth of intellectual property assets allows for it to navigate cost-driven strain by passing it on prices to the end consumer as competition remains low.