Investing
Warren Buffett Makes Monumental Changes in Bank, Pharma, Tech Stock Holdings
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One longstanding strategy of investors looking for new stock ideas is to go “whale hunting” by chasing the ideas and stock purchases of their favorite investors and fund managers. Warren Buffett would be at the top of the list or very close for investors to follow for their ideas on what stocks to buy and which to sell.
Berkshire Hathaway Inc. (NYSE: BRK-B) has now released its full list of investment holdings as of September 30, 2020. Some rather significant changes were made in the Berkshire Hathaway equity portfolio during the third quarter, with Buffett a big seller of banks and a new buyer of Big Pharma stocks. There were also some other significant buys and sells in the portfolio.
While some investors feel that the 45-day look-back period may make the new information less valuable, Buffett and the portfolio managers in Berkshire Hathaway generally look for very long-term investments rather than making short-term trading bets for short-term gains and losses. And while Buffett was known for taking the long-term views even when Berkshire Hathaway was a much smaller company, now the conglomerate is worth more than $540 billion by market capitalization and that means it requires larger investments to move the needle.
While the 13F filing with the Securities and Exchange Commission do not always reflect the full value of the investment holdings, the June 30, 2020 filing showed some $202.4 billion in securities listed and those are generally short because of asset classifications or due to confidential treatment allowances.
Warren Buffett and Charlie Munger had already loosened up the restrictions that would allow it to repurchase its own shares. Berkshire Hathaway was already shown to have spent about $9 billion to buy its own shares back in the third quarter alone, and that took the year-to-date total amount spent on stock buybacks at $15.7 billion.
24/7 Wall St. has tracked the various changes with the Berkshire Hathaway portfolio for many years now. Despite the core holdings seeing only gradual changes over time, there are always some key surprises in the public stocks that Buffett himself and his portfolio managers make.
Berkshire Hathaway’s investment gains listed on its previously released earnings report were $22.4 billion in the third quarter of 2020, but that also included after-tax realized gains of $3.1 billion from stocks sold during the third quarter. The conglomerate was a net buyer of close to $5 billion of stocks, selling nearly $13 billion worth of stock and buying close to $17.6 billion in stocks.
We have first looked at Berkshire Hathaway’s core holdings that made up the bulk of the portfolio. Thereafter, we have addressed the changes seen within groups in the conglomerate’s portfolio with the sale of other banking stocks and the purchase of the wide degree of pharmaceutical stocks broken out in groups. Other key changes were then grouped together as seen fit (with the Liberty stakes not tallied).
The new tally of all public U.S. equities came to $228.89 billion in Berkshire Hathaway’s 13F filing. This filing did have a special note, something that has been seen before, that confidential information was omitted from the public 13F report and that it was filed separately with the SEC.
If Buffett was looking too conservative and cautious in prior quarters, this last quarter involved some very significant changes in the Berkshire Hathaway stock holdings.
Largest Holdings and Key Holdings
Amazon.com Inc. (NASDAQ: AMZN) had still been a relatively new stake in recent quarters, but this was the same size stake of 533,300 shares worth about $1.68 billion as of September 30.
Apple Inc. (NASDAQ: AAPL) looked as though Buffett added 699.14 million shares for a total of 944.296 million shares, but we have to account for the stock split that took effect at the start of September in that change. That actually takes the tally a tad lower by about 36.3 million shares. Either way, that would have been some $109.36 billion or so in market value on September 30.
Bank of America Corp. (NYSE: BAC) looks as though Buffett added 85.09 million shares for a total of 1.01 billion shares on the surface. After looking at more subsequent filings, Buffett actually trimmed his BofA stake very slightly from the peak. Buffett’s stake had been 925 million shares at the end of June, but his beneficial ownership was more than 1.03 billion shares in early August. So while the total BofA stake rose from the second quarter, this should be considered to be down from the peak.
Coca-Cola Co. (NYSE: KO) was the same 400 million shares and American Express Co. (NYSE: AXP) was the same 151.61 million shares that they have been for years and years. These may be down from their highs, but Berkshire Hathaway’s cost basis is so low that Buffett might not sell them for any reason simply due to the tax consequences of the billions of dollars in capital gains that would be due.
Kraft-Heinz Co. (NASDAQ: KHC) may be doing better during the pandemic than it had been when pre-packaged foods had to be healthy, organic or natural. Still, this 325.634 million shares stake was the same size and was worth about $9.75 billion as of September 30.
Wells Fargo & Co. (NYSE: WFC) may have continued to act as an overhang on Berkshire Hathaway despite being Buffett’s favorite bank in the past, but Buffett managed to trim more Wells Fargo shares over the course of the third quarter of 2020. The trends have shown this stake of 323.212 million shares on March 30 (7.88% of the outstanding shares) was down to 237.58 million shares as of June 30. In early September there was an intra-quarter filing showing that Buffett’s stake was taken down by nearly 100 million to a stake of 137.6 million shares. That total Wells Fargo stake had been taken down to 127.38 million shares by June 30.
More Bank Exposure Was Sold Off
JPMorgan Chase & Co. (NYSE: JPM) is a stake that is now small enough it’s almost like Buffett doesn’t even own it or just didn’t execute sales in quick enough before the end of the quarter. JPMorgan Chase was a stake that had been cut down to 22,208,427 shares as of June 30, down more than 35.5 million shares from just the prior quarter. As of September 30, 2020, Buffett’s stake was down to just 967,267 shares with a value at the time of $93.11 million. That’s a large stake for the rest of us, but that’s too small for Team Buffett to even count as a real stake any more.
M&T Bank Corp. (NYSE: MTB) was taken lower again. Buffett sold off 1.62 million M&T shares and that stake is down to a total of 2.92 million shares worth about $269 million at the end of the third quarter.
PNC Financial Services Group Inc. (NYSE: PNC) stake was lowered again. The PNC was cut by about 3.8 million shares to 5,350,586 shares as of June 30. Now the PNC stake was last seen cut to 1,919,827 shares, worth about $211 million.
Buffett Takes Big Stakes in Big Pharma Stocks
Team Buffett has been an investor in Big Pharma stocks and even biotech before, but this may be the single largest grab in a quarter of pharma stocks on record for Berkshire Hathaway. They had previously owned Johnson & Johnson (NYSE: JNJ) shares for years, and Buffett’s portfolio managers had even taken a stake in Biogen Inc. (NASDAQ: BIIB) in prior quarters. Now it appears that Buffett is wanting exposure to COVID-19 vaccines and other long-term pharma gains. These were listed as held under the accounts of Buffett himself and under National Indemnity Co.
AbbVie Inc. (NYSE: ABBV) was a new stake of 21,264,316 shares worth more than $1.86 billion.
Bristol-Myers Squibb Co. (NYSE: BMY) was a new stake of 29.97 million shares worth about $1.806 billion.
Merck & Co. Inc. (NYSE: MRK) was a new stake of 22.40 million shares worth about $1.86 billion.
Pfizer Inc. (NYSE: PFE) was a new stake of 3.71 million shares worth about $3.71 billion at the end of the quarter.
New Stakes Taken and Stakes Raised
General Motors Co. (NYSE: GM) was a stake where some 5.32 million shares were added for a total of 80 million shares at the end of September.
Kroger Co. (NYSE: KR) was a stake where 3.04 million shares were added for a total of 24.98 million shares. That was worth nearly $850 million total as of September 30.
Snowflake Inc. (NYSE: SNOW) was a new investment for Berkshire Hathaway, but the shares came as a $250 million investment made in September at the IPO. The stock priced at $120 for its official pricing at that time, but it was last seen trading above $235 and its post-IPO trading range has been $208.55 to $319.00. The filing made in September showed that Berkshire Hathaway’s stake of 6,125,376 shares represented 15.2% of the class of shares.
T-Mobile US Inc. (NASDAQ: TMUS) appears to have been a new stake of 2.41 million shares worth a combined $276 million as of June 30.
Other Stocks Sold Down or Closed Out
Axalta Coating Systems Ltd. (NYSE: AXTA) was a stake where Berkshire Hathaway sold 650,000 shares. It now holds a total of 23.42 million shares, but this keeps it the largest holder and its entire stake in June had been 10.22% of the total outstanding shares.
Barrick Gold Corp. (NYSE: GOLD) had been a new position for Team Buffett at the end of the second quarter of 2020. While Buffett and his team are not known for talking about the endless value of gold, the balance went from 20.918 million shares at the end of June down by more than 8.9 million shares to 12 million shares by the end of September.
Costco Wholesale Corp. (NASDAQ: COST) has seen its shares rise and rise, but Buffett’s portfolio managers used it to lock in some gains. The prior 4.3 million share stake had been entirely eliminated by the September 30 date.
DaVita Inc. (NYSE: DVA) is a stake that is coming down gradually. Berkshire Hathaway sold 2.00 million shares for a new total of 36.096 million shares. Just keep in mind that this was 34% of the total shares outstanding the prior quarter.
One key issue also seen in the third quarter of 2020, which is not accounted for in this 13F filing, is that Berkshire Hathaway’s National Indemnity Company had acquired slightly more than 5% of the outstanding shares in five of the leading Japanese trading companies. These were listed as Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo.
Those Japanese holdings were acquired over a period of approximately a year through regular share purchases on the Tokyo Stock Exchange. The conglomerate also noted in its release that the intention is to hold its Japanese investments for the long term and that it may, depending on prices, increase its holdings up to a maximum of 9.9% in any of the five investments.
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