Should You Buy the Dip Like Warren Buffett With ETFs?

·4 min read

Billionaire investor Warren Buffett has been buying stocks amid the prolonged market rout this year.  In the past few months, his Berkshire Hathaway Inc (BRK-A) boosted its stake in Chevron Corp. CVX placed a merger-arbitrage bet on Activision Blizzard Inc. ATVI, acquired shares of HP Inc. (HPQ), Citigroup Inc. C and Ally Financial Inc. (ALLY), and continued adding to its position in Apple Inc. (AAPL), which emerged out as his favorite and biggest stockholding.

The Omaha-based company bought 901,768 shares of Occidental Petroleum Corp. OXY last week, according to a regulatory filing, as quoted on Wall Street Journal. The move made Occidental one of Buffett’s 10 biggest holdings. Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.” He is adopting that strategy currently and buying stocks as the market is slumping.

Berkshire ended 2021 with a near-record cash balance of $146.7 billion andinjected $51.1 billion into the market at the start of this year as global stocks are reeling under pressure.

With rising rate worries and geopolitical crisis bringing about uncertainties in the global investment backdrop, many are waiting for the investing tactics of the Oracle of Omaha. For them, below we highlight a few investing strategies.

Buffett Big on Energy: Buy on Low Valuation & Favorable Operating Backdrop

The energy sector has everything – decent valuation, higher dividends and an upbeat operating backdrop. WTI crude ETF United States Oil Fund LP USO is up 53% this year. The oil and gas rally this year has been driven by the Russia-Ukraine war (Russia is energy-rich) and rising pent-up demand as global COVID cases are ebbing.

The energy sector recorded a 240.6% earnings expansion in Q1, with 174.1% growth expected in Q2 – the highest in the S&P 500 index. The “Oracle of Omaha’ is bullish on Chevron and Occidental. Chevron pays a 3.38% dividend yield.  Chevron-heavy ETFs like Energy Select Sector SPDR Fund XLE and Vanguard Energy ETF (VDE) could be bought as long the trend is your friend. Invesco Dynamic Energy Exploration & Production ETF PXE is an Occidental-heavy fund to invest in.

Bet on Citigroup-Heavy ETFs

Warren Buffett’s Berkshire Hathaway has made a big bet worth $3 billion on Citigroup. Citi now holds a 2.8% stake in Berkshire Hathaway, according to filings with regulators.The investment came as Buffett exited Wells Fargo, a rival bank that was in Buffett’s portfolio for more than three decades, as quoted on Financial Times.

Citigroup is down 21% this year, underperforming the average financial sector stock in the S&P 500 Index, which is down 16%. It is the only big U.S. bank that trades below book value at 52 cents a dollar, according to FactSet, as quoted on Financial Times.Invesco KBW Bank ETF KBWB is heavy on Citigroup.

Media Could be in Your Cards

Buffett’s company also invested $2.6 billion in Paramount Global PARA, the U.S. media group formerly known as ViacomCBS. Its dividend yield is 3.39% annually. iShares Evolved U.S. Media and Entertainment ETF IEME and Invesco S&P 500 Equal Weight Communication Services ETF (EWCO) are two ETFs that have exposure to Paramount Global.

Apple & HP: Buffett’s Tech Favorites

Berkshire’s biggest holding was still Apple. One can bet on Apple ETFs likeTechnology Select Sector SPDR Fund XLK, Fidelity MSCI Information Technology Index ETF (FTEC) and Vanguard Information Technology ETF (VGT).

He is also bullish on HP Inc., which is the surviving entity following the November 2015 split of Hewlett-Packard Company into publicly traded entities — Hewlett Packard Enterprise Company and HP Inc.

The company is a leading global provider of personal computing and other access devices, imaging and printing products, etc. HP Inc. has exposure to American Customer Satisfaction ETF ACSI.

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Citigroup Inc. (C) : Free Stock Analysis Report
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
United States Oil ETF (USO): ETF Research Reports
Invesco KBW Bank ETF (KBWB): ETF Research Reports
Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports
American Customer Satisfaction ETF (ACSI): ETF Research Reports
iShares Evolved U.S. Media and Entertainment ETF (IEME): ETF Research Reports
Paramount Global (PARA) : Free Stock Analysis Report
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