Recently Buffett told Bloomberg that he spent in the last 4 months over $4 billion dollars on common stocks! This is not an insignificant sum even to Buffett. The question is where did he spend it? What did he buy that created that much conviction?
I think the key to these questions may lay in his current and previous portfolio. This is just my speculation and you should do your own homework/research. Plus, I own both of these stocks. I believe he is either buying more Wal-Mart or re-establishing his position in Bank of America.
Buffett has always had a fondness for Wal-Mart. It stock continues to go sideways in this market despite its sales, earnings and dividend increasing along with HUGE share buy back programs in place. These actions are making the company's stock very cheap from a historical basis. I believe this is exactly what he looks for in a stock investment. Plus, he is already developing a position.
Bank of America. This is a more complicated purchase. One, Berkshire already owned it and sold the position. Of course, Buffett said at the time he hired Todd Combs he sold out a portfolio regardless of his opinion to give hime the cash needed for the portfolio that he would manage. Buffett said he did not put his input into the sale decision but did so almost solely on the fact of not biasing the new managers decisions by giving him positions rather than cash. Berkshire had a position in the stock and at a far higher than currently. Buffett in my opinion likes banking. He seems to love Wells Fargo and US Bank, and maybe there is no room for another bank, however Berkshire owned Bank of America and also lost money investing in two Irish banks in the past according to his annual report.
The fact that he was willing to invest in two small Irish Banks that he lost money in says to me that he invests in banks for he likes the bank model and price along with balance sheet is his primary criteria. If so, then I would say that presently Bank of America trading beneath both book value as well as tangible book should look attractive to Buffett. Yes, he sold it in previous quarters. Iknow it and get it, however everything has a price that can change minds. Bank of America has moved down pretty dramatically for a bank most likely considered "systematically important". Recently, the FDIC passed a law I believe that says senior management of banks that need federal assistance will have their income from the last two years "clawed back". Thus, Wall Street believes banks can't earn superior returns on equity and not good investments. I agree with Buffett that said that even a less leveraged banking environment will support a more stable and less risky banking system along with still a favourable and attractive return on equity.
It all comes down to inflation is the likely course of all of Washington's political B.S. and the nation's debt situation. Thus, the best position is be the low cost provider of Brand name low cost, quickly used up items like food, soap, razor blades etc, I beleive Wal-Mart is tops in this category. This country will also need a banking system and it is hard to imagine that system not including BAC.
Happy investing to all!!! Please do your own homework.