After an Investing Hiatus, Warren Buffett Enters the “Gambling Parlor.”

Opportunity in Volatility

Legendary investor Warren Buffett recently called the current stock market “a gambling parlor,” arguing there are several mispriced companies amid the recent volatility. After years of mostly sitting on the sidelines, he is beginning to spend some of the significant cash that Berkshire has built up.

At the end of 2021, Berkshire’s cash stockpile was $146.72 billion. Closing out this year’s first quarter, cash on hand shrank to $106.26 as Buffett bought up shares of companies that he believes are undervalued.

Rethinking Oil’s Dinosaur Status

Oil is among the sectors that has gotten his attention. He went on a 2-week buying spree of Occidental Petroleum (OXY) and now owns 14% of the company. The oil giant’s stock price had been trading below 2011 levels. The first quarter also saw Buffett up his investment in Chevron (CVX) to $25.9 billion from $4.5 billion, making it one of the top four stock holdings in Berkshire’s portfolio.

Buffett says he sees the continued importance of the industry and supports the US upping its production of oil.

Berkshire’s Mixed Bag of Investments

Companies outside of energy that have gotten his attention include Activision Blizzard (ATVI), which Microsoft (MSFT) has made a bid to acquire. Berkshire owns 9.5% of the videogame developer that now sits beside the likes of Apple (AAPL), Bank of America (BAC), and American Express (AXP) as one of Berkshire’s top four holdings.

Buffett’s astute investing prowess has been rewarded with 20% compounded annualized returns for the roughly 55-year period ending in 2020 — double that of the S&P 500. Though it may be wise to consider the age-old saying: past performance doesn’t guarantee future results.

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