London’s FTSE 250 index contains around 250 of the next largest companies after those in the lead FTSE 100 index. That’s broadly as measured by their market capitalisations.

Many FTSE 250 companies still have expanding businesses. So, a FTSE 250 tracker fund can be a decent way to get some growth potential into a diversified portfolio.

But I reckon there’s even more potential for growth if I select some of the best stocks from within the FTSE 250 and invest directly in those. But, of course, higher potential also comes with higher risk if I concentrate my money into just a few names.

However, I’m prepared to embrace the risks in pursuit of higher returns. And in that spirit, I like the look of Beazley (LSE: BEZ) right now.

Pre-pandemic earnings recovered

The company is a global insurer with offices in Europe, Asia, and North America. In 2021, the business underwrote gross premiums worldwide of just over $4.6bn. And that achievement follows steady growth over more than three decades.

The areas covered by the firm include professional indemnity, cyber liability, property, marine, reinsurance, accident & life, political risks, and others. And in last week’s full-year results report for 2021, the company posted a “robust” pre-tax profit of just over $369m.

That outcome suggests a major recovery is underway in the business after the pre-tax loss of almost $50m in 2020. And chief executive Adrian Cox said first-party pandemic-related claims have “almost entirely been paid and fully accounted for“.

Cox said Beazley experienced growth across all its lines of business. And, looking ahead, he’s “particularly encouraged” by the opportunity in the cyber market where the company is seeing “significant” improvement in rates. 

Robust growth estimates

City analysts have pencilled in double-digit percentage increases for earnings in 2022 and 2023. And the directors reinstated dividends by declaring an interim payment of 12.9p per share for the 2021 trading year. They also declared the company’s intention to operate a progressive dividend policy in the years ahead.

Overall, Beazley strikes me as a business that has recovered from the effects of the pandemic with robust growth opportunities ahead. Meanwhile, with the share price near 502p, the forward-looking earnings multiple for 2023 is just under 10. And the anticipated dividend yield is running around 2.5%, when set against analysts’ expectations.

For a growing business with strong immediate prospects, I find that valuation to be undemanding.

Cyclicality could be a challenge

However, one of the uncertainties involved in an investment in Beazley shares is the inherent cyclicality of the business. Over the long term, the company has so far grown — a lot. But we’ve seen how fast short-term events such as the pandemic can damage the business in the short term. And there’s a significant amount of risk for shareholders in that situation.

It’s also worth me bearing in mind the company goes ex-dividend on 17 February regarding the declared interim payment. So we’ll likely see some share price weakness as the stocks adjust to account for the payment.

Nevertheless, Beazley tempts me. And I’d add the stock to my long-term diversified stock portfolio with the aim of capturing its potential for ongoing growth.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The International Consolidated Airlines Group (LSE: IAG) share price is only up fractionally on a 12-month basis. But the FTSE 100 share’s shot up since mid-December on hopes that the global travel industry could be poised to rebound.

The Omicron variant has proved less severe than many first feared. And this has led to travel restrictions being eased in many regions, prompting a wave of traveller bookings. Fellow travel firm TUI said last week that strong demand since the start of 2022 has pushed summer holiday bookings 19% above pre-pandemic levels.

Can this FTSE 100 share keep rising?

Can airlines and holiday operators expect this demand surge to continue as inflation destroys consumer confidence? Fortunately IAG, through its Vueling and Aer Lingus brands, has exposure to the low-cost travel segment. Sales here could thrive as holidaymakers and business travellers switch down from more expensive operators.

Unfortunately IAG’s other brands like British Airways and Iberia could directly suffer if budget airlines snap up their customers. This is particular worrying as fuel prices increase for airlines, a problem that Air France-KLM chief Fahmi Mahjoub said would likely result in higher ticket prices. Increasing passenger duty on long-haul flights in the UK, on top of hikes to passenger charges at Heathrow, also pose a threat to the recovering travel industry.

I’m also concerned by the huge amount of net debt that IAG has on its books (€12.4bn worth of it as of September). This may significantly cap the company’s long-term growth ambitions. It also threatens to squeeze the level of dividends at IAG when it eventually resumes paying them out to shareholders.

Is BP’s share price too cheap to miss?

Would the cheap BP (LSE: BP) share price be a better option for me today? At the current price of 397p, the oil major trades on a forward P/E ratio of just 6.9 times. It also carries a 3.9% dividend yield, which beats the 3.5% FTSE 100 average.

Fans of BP will argue that oil prices look set to keep rising sharply. Brent crude just hit seven-year highs around $96.50 per barrel and commentators are tipping oil prices to keep rising as supply shortages continue. Ukraine-Russia tensions could push them through the critical $100 barrel before long too.

Long-term risks

But as a long-term investor I’m happy to ignore BP’s low share price. I worry about the company’s future as the world transitions from fossil fuels towards cleaner sources of energy. I’m also concerned about the huge investment BP is finally making in renewables and what these huge bills could mean for shareholder dividends now and in the future.

On top of this, the long-term outlook for oil prices is clouded by the huge investment major producers like Canada, Brazil and Norway are making in their fossil fuel industries. Supply is scarce today but a glut of unwanted oil threatens to weigh on crude prices in the years ahead. So I’m happy to look past BP and also IAG for that matter. I’d rather buy other FTSE 100 shares right now.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.

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As I write, the best performing FTSE 100 stock today is AstraZeneca (LSE:AZN). It currently trades at 8,808p, up just over 5% on the day. The bump comes after the company released successful Phase 3 trial results for a treatment for prostrate cancer. With AstraZeneca shares up 12% over the past year and recent full-year results showing good growth, I think more upside is on the horizon.

Drug and full-year financial results

The short-term rally comes following news that the combination of the Lynparza drug with hormone therapy can delay disease progression by several months. This could have a large commercial use for prostrate cancer going forward. 

Any new drug that solves for or can help lessen the impact of a disease is going to be a positive for a large pharmaceutical company. Some banking analysts think that this particular breakthrough could have revenue implications of several billion pounds. 

This good news comes only a week or so after the release of full-year results for 2021. In it, total revenue increased 41% year-on-year when including Covid-19 vaccine revenue. Even excluding this, revenue rose by 26%. 

Some of this growth was driven by the acquisition and integration of Alexion, but even so, it’s a strong performance. The report noted “double digit growth across all regions”.

Earnings per share (EPS) was down heavily versus last year, but there were valid reasons for this. For example, higher expenses due to investment in its R&D pipeline, along with one-off integration costs with Alexion.

AstraZeneca shares can move higher from here

The results might be in the recent past, but I think the AstraZeneca shares have the impetus to keep going from current levels. One major reason for this is the positive outlook. For the full-year 2022, the business expects “core EPS… to increase by a mid-to-high twenties percentage”. Part of the driver behind this is new Phase 3 rollouts of new medicines, such as the one in the news today.

I do acknowledge that the revenue benefit from Covid-19 vaccines is likely to diminish in 2022 and beyond. Yet there are two aspects to consider here.

Firstly, the virus mutates. Therefore I imagine that several booster jabs will be required, or even an updated general vaccine in the future. Secondly, as shown by the 2021 numbers, the vaccine revenue isn’t make-or-break on the financials for AstraZeneca. It was a profitable business before the pandemic and I think will continue that way going forward.

I think one of the risks for AstraZeneca shares going forward is the comprehensive review that is expected to run through to 2025. In the long term, I think this is good, but over the next year or so it could be tough. This could include high restructuring costs, potential redundancies, and other headlines that could sting in the short term.

Personally, I’m thinking of buying AstraZeneca shares now despite the risks. A strong financial outlook and a good pipeline of medicines should help support an upward move in the share price.

Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Sometimes in life, a lump sum of cash suddenly comes our way. Whether it was a bonus at work, a refund for cancelled holiday plans, or a Premium Bonds win, if I suddenly received £1,000 right now I would happily invest it in the stock market. Here is how I would find UK shares to buy now with my £1,000.

Focus on hunting for shares

With thousands of companies offering their shares to investors, I would need to spend some time hunting for the ones that felt right for me. A good business does not always make for a rewarding investment. If the shares are overpriced, for example, I could end up losing money even if the company increases its profits in coming years.

So I would look for two things. First, I would hunt for a business that I felt had a sustainable competitive advantage. That could be anything from the sort of proprietary manufacturing technology used at Victrex to a unique distribution network like the sort owned by Jersey Electricity.

Next, I would look at the company’s current valuation. After all, like Warren Buffett, I am looking for a great company – but at a good price. So while I like the competitive advantage of medical robotics maker Intuitive Surgical, its share price of 60 times earnings does not seem like good value to me. I feel the same way about animal supplement maker Dechra Pharmaceuticals and its price-to-earnings ratio of 76.

UK shares to buy now with £1,000

Fortunately, I do think some companies with competitive moats are currently available for me to buy at an attractive valuation.

For example, in the past few months I have bought shares in consumer goods giant Unilever, leisurewear retailer JD Sports, and online commerce specialist boohoo.

I see all three as having strong business prospects and consider their current share prices attractive for my portfolio. But what if I am wrong? Cost inflation could hurt profits at both Unilever and boohoo, for example. Any fall in consumer spending in the US could reduce sales at JD.

Anyone can make a mistake, especially when trying to know how well a company will do in future – even company management. To reduce the impact of a misstep on my investment returns, I diversify my portfolio across different companies and business areas. With £1,000, I would be tempted to split the lump sum across four or five different shares. That might push up my trading costs. But I also think it would help reduce my risk.

Making a move

With a lump sum of £1,000 I could make some investments which hopefully offer me attractive returns for years to come.

My success will largely depend on me taking the effort to find the right sorts of companies and valuations to put my money to work. With the amount of information available to private investors now, I think doing that research to find appealing shares can be easier than ever. Based on that, I could choose some UK shares to buy now with my £1,000.

Christopher Ruane owns shares in JD Sports, Unilever and boohoo group. The Motley Fool UK has recommended Unilever, Victrex, and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As a veteran value investor, I’m always looking out for cheap shares. Indeed, I often go mining for deep value in the blue-chip FTSE 100 index. What I look for are ‘boring’ companies — those with easily understood business models. Also, I prefer stocks trading on low multiples of earnings and paying market-leading cash dividends. Today, my search threw up three cheap shares that combine both ‘boring’ and ‘mining’. I don’t own these three stocks at present, but would buy them today for their current income and potential for future growth.

Cheap shares: 1) Evraz

The first of my cheap shares is Evraz (LSE: EVR). Founded in Moscow in 1992, Evraz is a global steelmaker and miner with operations in Russia, Ukraine, and North America. Its main products include steel, iron ore, coal, and vanadium. The group’s biggest shareholder is billionaire Roman Abramovich, owner of Chelsea FC. At the current share price of 326.6p, Evraz is valued at £4.6bn. Its shares trade on a price-to-earnings ratio of 4.1 and an earnings yield of 24.6%. Furthermore, its dividend yield of 26% is the FTSE 100’s highest by far. But this sky-high yield is extremely risky and most likely unsustainable (dividends are not guaranteed, so can be cut at any time). Also, with tensions reaching fever pitch between Russia and Ukraine, Evraz shares collapsed to a low of 232.64p on Friday, 11 February, before rebounding. Thus, shares in this Russia-based business are extremely risky and likely to remain highly volatile for some time. I’d buy as a speculative punt, not a core holding.

Mining shares: 2) Polymetal International

The second of my cheap shares is Polymetal International (LSE: POLY). This is an unusual business: an Anglo-Russian miner of gold and silver, registered in Jersey and with headquarters in Cyprus. At its current share price of 1,124.5p, Polymetal is valued at £5.3bn. However, these shares recently slumped towards the bottom of their 52-week range of 1,039.71p (on 28 January 2022) and 1,737p (on 3 June 2021). After recent falls, this mining stock may be too cheap. Its shares trade on a multiple of just 6.5 times earnings and an earnings yield of 15.4%. Also, at 8.6% a year, Polymetal’s dividend is among the FTSE 100’s highest. Polymetal stock is down 35% since early June 2021, partly because gold and silver prices declined last year. If precious-metals prices fall again in 2022, this would spell bad news for Polymetal. Despite these risks, I’d still buy it today.

Boring shares: 3) Rio Tinto

The third of my cheap shares is global mining giant Rio Tinto (LSE: RIO). Rio Tinto is a behemoth, digging up iron ore, aluminium, copper, and lithium around the world. With 60 mining projects across 35 countries, this Anglo-Australian business generates huge cash flows, profits, and earnings. At the current share price of 5,599p, Rio Tinto is valued at £93.3bn, making it a FTSE 100 super-heavyweight. Today, Rio shares trade on a price-to-earnings ratio of 6.6 and an earnings yield of 15.2%. Also, its dividend yield is 8.8% a year — around 2.2 times the FTSE 100’s cash yield. As an income-seeking value investor, I regard Rio Tinto as a dividend dynamo trading on rather tempting fundamentals. However, my experience of investing in mining stocks has taught me that they can often be volatile — even with mega-cap firms like Rio. Nevertheless, I’d buy Rio today on hopes of another commodities super-cycle!

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

On average, the FTSE 100‘s dividend yield, is 3.2% right now. So, it follows that any of the index’s constituent stocks with a higher yield would be more desirable to the income investor, yes? Maybe, maybe not. In my opinion that would be so only if the dividend is sustainable and the stock’s price is not falling fast. If the latter is the case, I may make no net gains or worse, end up with a net loss on the investment. 

British American Tobacco’s strengths

It is from this perspective that I am now considering whether or not to buy the tobacco stock British American Tobacco (LSE: BATS). It has a dividend yield of 6.4%, which is far above the FTSE 100 average. It is also above the inflation rate, which is pretty high at 5% right now. This in itself makes the stock worth considering. 

Is it sustainable, though? Well, I have no reason to doubt it considering that the company has consistently paid dividends over the years. And going by its outlook for 2022, it is quite likely to continue paying them in the future too. I am basing this on the fact that it expects earnings per share to grow. It also mentions “maintaining growing dividends” elsewhere in its latest update.  

Competitive price for the FTSE 100 stock

The next question is, what is the outlook for its share price? The British American Tobacco share price is up some 22% in the past year, which sounds positive. As per its latest results for 2021, its earnings are up from the year before. Also, as I mentioned earlier, it expects them to grow next year too. This could continue to push its share price up, particularly because its market valuation is still cheap. It has a price-to-earnings (P/E) ratio of around 11.7 times, which is lower than that for the FTSE 100 at around 18 times.

The long-term challenge

The one big challenge with tobacco stocks, though, is the long-term future. As the company itself points out in its update, global tobacco industry growth is expected to decline by 2.5% in 2022. It expects its own revenue and earnings to grow, but it is hard not to consider how long it can grow in a shrinking industry. Its tobacco alternatives’ division, called new categories, is growing fast, to be sure. But it is still quite small. Even with a 50%+ growth last year, it is less than 10% of the company’s total revenue. At this rate, it might be decades before this market matures, in my view. And what becomes of British American Tobacco in the interim? I am not sure. 

My assessment

Perhaps it is for this reason that the FTSE 100 stock has seen quite a steep decline in share price over the past few years. It is down over 30% in the past five years. Also, it compares unfavourably to its FTSE 100 peer Imperial Brands, which trades at a multiple of sub-6 times. And also has a higher dividend yield of 7.8%. Between the two tobacco stocks, I would much prefer it to British American Tobacco and that is why I bought it. Though I am keeping an look out for further developments in the latter, I am not buying it yet. 

Manika Premsingh owns Imperial Brands. The Motley Fool UK has recommended British American Tobacco and Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I believe that the move to green energy is unavoidable and that this opens up investment opportunities that will help to create positive change as well as profit. Warren Buffett’s own Berkshire Hathaway (NYSE: BRK.B) shares seem like a great way for me to participate in the green revolution.

Berkshire Hathaway is a conglomerate that generates money from a variety of sources. Berkshire Hathaway Energy (BHE), the company’s electric utility arm, is one of them. At first glance, it’s easy to dismiss Berkshire Hathaway as a renewable energy investment option. BHE only accounts for around 9% of Berkshire Hathaway’s income, while renewable energy accounts for a little under half of the company’s overall energy output. However, I believe that BHE’s location inside Berkshire Hathaway provides it with a significant competitive edge over other electric utilities. I also believe it reduces some of the big risks that come with investing in the renewable energy transition

A significant advantage

Warren Buffett identified a fundamental advantage that BHE has over other power companies in his 2020 letter to shareholders. The majority of electric utility businesses pay out around 60% of their profits as dividends to income-seeking shareholders. This makes it much harder for them to invest in renewable energy infrastructure. Instead, they must finance their investments through debt or the issuance of stock, diluting the value of current owners’ shares.

BHE, on the other hand, does not pay a dividend. This may make it less appealing to those of us who appreciate passive income. But it means it may use the money it makes to invest in renewable energy projects without taking on debt or issuing stock to do so.

BHE has already been able to make significant renewable energy investments. It has spent more than $35bn on a variety of renewable energy initiatives while cutting back on fossil fuels. Coal-fired energy generation accounted for 74% of BHE’s total energy generation in 2006. By the end of 2020, the percentage had dropped to 33%. BHE was also able to spend $18bn on the transmission infrastructure needed for the renewable energy transition. All because of its access to capital.

Green energy investing risks

Over-optimism is the biggest danger I see with investing in green energy firms. While I believe that the transition to renewable energy is unavoidable, businesses must remain disciplined in their investments in this area. Making investments that don’t pay off can be costly, and it might even lead to bankruptcy. In 2016, SunEdison provided an excellent illustration of this.

However, I believe that BHE’s position inside Berkshire Hathaway mitigates this risk. This is due to two factors. The first is the capacity to invest in renewable energy with its funds rather than borrowing. The second is BHE’s position inside the larger conglomerate, which gives it access to $150bn in capital. Warren Buffett oversees the company’s investments as part of Berkshire Hathaway. When it comes to discovering good value assets, I can’t think of anybody better.

As a result, I believe that owning Berkshire Hathaway stock is a great way to participate in the renewable energy revolution.

James Reynolds owns Berkshire Hathaway (B shares). The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Small-cap stock Raven Property Group (LSE:RAV) is currently on my radar. Could it be one of the best penny shares to buy now for my holdings? Let’s take a closer look.

Property boom

Raven Property was founded in 2005, with a focus on investing in a portfolio of what it calls “Class A” warehouse properties in Russia. At present, it has a portfolio of 1.9m square metres of warehouses throughout the major cities of Russia.

The recent rise in e-commerce has meant many businesses need quality warehousing and distribution spaces to operate from. This is where firms like Raven come in. They buy the space and negotiate lucrative rental agreements with businesses that need such facilities.

I am always on the lookout for the best penny shares to buy at cheap prices with upside potential in the long term. I do understand these types of stocks have increased risks, however. As I write, Raven shares are trading for 28p. At this time last year, the shares were also trading for 28p. The shares were trading for 36p a few months ago, in September. I believe the geopolitical tensions between Russia and Ukraine have contributed to the share price falling 22% since that time to current levels.

For and against investing

FOR: The rise in e-commerce is definitely notable. What I like about Raven in particular is its focus in Russia. According to data compiled by Statista, it is estimated that the e-commerce and shopping sectors in Russia are set to grow rapidly in the next few years. This tells me demand for warehouses should increase, in turn, benefitting firms like Raven.

AGAINST: Unfortunately, Raven’s location in Russia is also one of its biggest risks. Current geopolitical tensions between Russia and Ukraine could derail any progress for the e-commerce market, as well as warehousing demand. There is a chance that a war breaks out and the region suffers economically. This would hurt Raven’s business and could cause issues with performance and any returns I hope to make. I believe it has already impacted the share price in recent months.

FOR: Helping make my case that Raven could be one of the best penny shares to buy now is its juicy dividend yield of over 5%. Not many small caps offer such an enticing yield. These dividend payments could help me make a passive income. I do understand that dividends can be cancelled at any time, however.

AGAINST: The growing e-commerce and shopping market in Russia has attracted many property firms to try and capitalise. Raven itself notes a viable threat from a “serious competitor in Moscow,” in one of its recent updates. Moscow is said to be one of the most lucrative areas in Russia from a warehousing and e-commerce perspective. This competition could hurt Raven’s progress and performance.

One of the best penny shares to buy now

Overall, I would add Raven shares to my holdings, although I understand there are credible risks involved, especially the current geopolitical tensions in the region. Raven’s current dividend yield, as well as its rock-bottom price, with a price-to-earnings ratio of just 4, is extremely attractive. I’d add the shares to my holdings and hold on to them for a long time.

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Warren Buffett’s company, Berkshire Hathaway (NYSE:BRK-B), filed its 13F last night. This is a report of a company’s investment portfolio as of the end of the previous quarter. I think that it can also help me get an insight into how someone is thinking about stocks, markets, and investing. So what has Warren Buffett been buying? And what does this tell me about his thoughts on investing?

Overview

Between October and December 2021, Berkshire Hathaway added to its investments in oil major Chevron, hard flooring retailer Floor & Decor Holdings, high-end furnishing company RH, and media conglomerate Liberty Sirius XM. It also made new investments in computer game developer Activision Blizzard, Brazilian bank Nu Holdings, and media conglomerate Liberty Media Formula One. 

I view some of these as more significant than others. Berkshire’s investment in Nu Holdings was known before, so it is not a surprise that it now appears on Berkshire’s 13F following the company’s IPO. I also don’t think that the company’s investment into Liberty Sirius XM is particularly significant, since it effectively replaces a position in Sirius XM Holdings. I see the investments into Chevron and Activision Blizzard as the most significant.

Chevron

Warren Buffett added 33% to Berkshire’s investment in Chevron, making the oil major Berkshire’s ninth-largest holding. I think this is significant because Chevron’s share price performed well towards the end of 2021. Nonetheless, Buffett continued to view Chevron stock as a buy even as the price increased. This is interesting to me. I think this indicates that Buffett is clearly optimistic on the long-term future for oil and gas.

Watching Buffett building Berkshire’s stake in Chevron has been interesting to me. Buffett began buying Chevron shares (along with shares in Verizon) at the end of 2020. At the time, he sought permission to keep Berkshire’s interest in the company private, to avoid drawing attention to the investment. I think this indicates that Buffett views Chevron as one of the more important investments in Berkshire Hathaway’s portfolio.

Activision Blizzard

I also find Berkshire’s investment in game developer Activision Blizzard interesting. Unlike Chevron, I don’t think that Buffett personally made the investment into Activision. I take the view that it is more likely that the investment was made by Todd Combs, one of the capital allocators at Berkshire, with Buffett’s support. I therefore don’t believe that the Activision investment tells me much about Buffett’s thinking specifically.

The reason I see the Activision Blizzard investment as interesting is that it was made before Activision’s deal to be acquired by Microsoft was announced in January. While I doubt that the possibility of Microsoft acquiring the company was part of Berkshire’s investment thesis, I do think it likely that Berkshire will have benefited significantly from the resulting jump.

Conclusion

Berkshire’s 13F tells me a lot about what the company has been buying. But what stands out to me the most is that Warren Buffett is still highly selective about his investments. With around $160bn in cash available, Buffett decided to keep most of it on the sidelines. I view this as a clear indication that Buffett does not see substantial opportunities in the stock market right now. And this, I think, makes the investments that he did make at the end of last year all the more significant.

Stephen Wright owns Berkshire Hathaway (B Shares) and Verizon shares. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.