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The Street

Warren Buffett Beats the Market Rout Again

Billionaire Warren Buffet is one of two people in the top ten richest people in the world who has seen his net worth rise since January, according to the Bloomberg Billionaires Index.

The CEO of Berkshire Hathaway ( (BRK.A Get Berkshire Hathaway Inc. Class A Report, is ranked number five on the index, which is a daily ranking of the world’s richest people. His total net worth is $112 billion and he has gained $2.62 billion year-to-date through the end of trading on May 12.

The only other billionaire in the top 10 of the Bloomberg list is Gautam Adani, an Indian infrastructure magnate that owns real estate, commodities and power generation and transmission, whose total net worth is $102 billion and his year-to-date performance is a profit of $25.5 billion.

Out of the top 100 richest people, only 24 billionaires saw their net worth rise year-to-date through the end of trading on May 12.

Buffett's Berskhire Hathaway allocated $7 billion to oil producer Occidental ( (OXY Get Occidental Petroleum Corporation Report), increasing its stake to over 14%. The conglomerate also added to its Chevron ( (CVX Get Chevron Corporation Report) stake that vaulted the investment into Berkshire’s top four common stock holdings. Chevron is now its fourth top holding. The conglomerate spent about $41 billion of net purchases during the first quarter.

Energy stocks rebounded from their decline in 2020 when the economy shutdown. Occidental's stock rose by 100.38% during the past six months and 155.30% in the past year in reaction to reopenings. Chevron's recovery was smaller, but the stock gained 43.7% during the past six months and 53.35% in the past year.

Buffett's Investing Style Stays the Course

While his detractors focus on companies Buffett should have invested in earlier such as Apple ( (AAPL Get Apple Inc. Report) because of his aversion to owning tech stocks and his blunders with airline stocks, the 91-year old has maintained his investing strategy of buying quality companies, Robert Johnson, a finance professor at Creighton University, told TheStreet.

"So many of their businesses are these stable, unsexy companies that constantly produce cashflows and aren't valued at above market multiples," he said. "Too often people want to try to change their investing style to suit the market. Buffett is true north. He does not do that."

The stocks that have lost billions of dollars in market cap recently were ones that relied on future earnings or narrative stocks like Coinbase ( (COIN) ) with "questionable business models and poor fundamentals," Johnson said.

Since Buffett does not "operate in that end of the market," his company benefits when "there is a flight to quality," he said.

The conglomerate owns a myriad of companies from smaller stakes to outright holdings ranging from railroads, insurance, utilities to tech companies and its infamous holdings such as Coca-Cola ( (KO Get Coca-Cola Company Report), Kraft Heinz ( (KHC Get Kraft Heinz Company Report) and See's Candies. 

"Companies that are more value oriented companies may decline in value at some point, but they will hold their value better than highly speculative ones," Johnson said.

Berkshire's strategy has also included maintaining a large amount of free cashflow. The billionaire reiterated that cash stockpile position and said his company could perform “better than the banks” at providing credit lines to companies at their annual shareholder meeting in May.

Buffett sold shares of Wells Fargo ( (WFC Get Wells Fargo & Company Report), JPMorgan Chase ( (JPM Get JPMorgan Chase & Co. Report) and Goldman Sachs ( (GS Get Goldman Sachs Group, Inc. Report) during the past two years and has instead prioritized ownership of retail banks, keeping his stakes of Bank of America ( (BAC Get Bank of America Corp Report), his second largest position after Apple ( (AAPL Get Apple Inc. Report) and U.S.Bancorp ( (USB Get U.S. Bancorp Report). 

Berkshire has benefited from the volatility in the market. Buffett said the conglomerate spent $41 billion in stocks during the first quarter and paid for them via their cashflow.

“That’s why markets do crazy things, and occasionally Berkshire gets a chance to do something,” Buffett said.