Warren Buffett Spends Big as Stock Market Sells Off

The Omaha-based company bought 901,768 shares of Occidental Petroleum Corp. OXY -5.36% last week, according to a regulatory filing. The move makes Occidental, in which Berkshire began buying shares in late February, one of its 10 biggest holdings.

In the past few months, Berkshire has also boosted its stake in Chevron Corp. CVX -2.64% ; placed a merger-arbitrage bet on Activision Blizzard Inc ATVI -0.79% ; bought shares of HP Inc. HPQ -6.99% , Citi group Inc., Paramount Global PARA -2.38% and Ally Financial Inc ALLY -5.20% ; and added to its position in Apple Inc., which remained its biggest stockholding. Citi, Paramount and Ally shares all jumped early Tuesday, outperforming the S&P 500, following the disclosure of Berkshire’s purchases.

Meanwhile, Berkshire exited its position in Wells Fargo & Co. , formerly one of its top stockholdings and a part of the Berkshire portfolio since 1989.

Investors got a look at what Berkshire has been buying—as well as what it has been selling—when it filed what is known as Form 13F with the Securities and Exchange Commission on Monday. The SEC requires all institutional investors that manage more than $100 million to file the form within 45 days of the end of each quarter. Because institutions must disclose their equity holdings on the form, as well as the size and market value of each position, investors often use 13Fs to gauge how large money managers are playing the stock market.

One takeaway from Berkshire’s filing was this: The market’s tumult has allowed the company to go on a spending spree.

Mr. Buffett, a longtime adherent of value investing, has long advised that investors “be greedy when others are fearful.” That philosophy was likely difficult to practice for much of the past two years, during which investors’ mood largely seemed anything but fearful. Now that the market is slumping, Berkshire is in a prime position to add to its mammoth stock portfolio, investors say.

“Cash is dry powder, and he has a lot of it,” said Rupal Bhansali, chief investment officer for global equities at Ariel Investments, of Mr. Buffett. Ms. Bhansali manages Ariel’s global mutual fund, which owns Berkshire shares.

Ms. Bhansali, among others, also believes that Berkshire’s investments in Chevron and Occidental might reflect a bet that commodities prices will stay elevated for some time.

Energy stocks have been by far the best-performing group in the S&P 500 this year, benefiting from a surge in commodities prices that began after Russia’s invasion of Ukraine raised concerns about disruptions to oil and gas supply lines. Chevron shares are up 47% this year, while Occidental shares have gone up 134%. In comparison, the S&P 500 has fallen 16%.

“They’re clearly owning companies that are likely to be an inflation hedge,” Ms. Bhansali said.

Energy stocks also offer two characteristics that Mr. Buffett has traditionally gravitated toward: low valuations, as well as shareholder returns in the form of buybacks and dividends, said Jim Shanahan, senior equity research analyst at Edward Jones.

Dividend-paying stocks have outperformed the S&P 500 this year, in part as investors whipsawed by market volatility have sought out stocks that can offer steady cash returns. 

“It fits the profile,” Mr. Shanahan said of Berkshire’s Chevron and Occidental share purchases.

Berkshire ramped up its purchases of bank stocks, which also tend to trade at relatively low valuations and offer dividends. The company bought 55 million shares of Citigroup in the first quarter, a stake valued at about $3 billion. The move marks a reversal of sorts for Berkshire: it unloaded much of its bank stocks in 2020, selling Goldman Sachs Group Inc. , JPMorgan Chase & Co. and much of its Wells Fargo stake, only to miss out on the financial sector’s remarkable rally in the second half of the year and 2021. 

“They faced a lot of criticism for not having done more in March and April 2020,” Mr. Shanahan said of Berkshire. “But they defended it by saying back then they didn’t know how bad it was going to get. It was a different environment.”

Mr. Shanahan said that while the pandemic marked a period of missed opportunities for Berkshire, he is pleased to see the company ramping up its investment activity again.

With stock volatility remaining elevated, many investors and analysts expect Mr. Buffett, as well as Berkshire portfolio managers Ted Weschler and Todd Combs, to keep putting cash to work in the market over the coming months.

Berkshire ended last year with a mountain of cash on its hands—not necessarily out of a desire to build up its war chest, but because it had been impossible to find companies that seemed worth investing in for the long term, Mr. Buffett said to shareholders in his annual letter sent out in February. It had $106.3 billion in cash as of March 31, down from $146.7 billion at the end of 2021.

This year has changed that. With tightening monetary policy, slowing economic growth and sustained supply-chain disruptions putting markets on edge, Mr. Buffett is in his element, said David Kass, a finance professor at the University of Maryland’s Robert H. Smith School of Business.

“This is what I’d consider to be Warren Buffett’s sweet spot,” Mr. Kass said. “The almost wholesale selling in the market has provided Berkshire an opportunity to buy securities at bargain prices.”

Write to Akane Otani at akane.otani@wsj.com