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>>> "Buffett’s Likely Successor Owns Little Stock in Berkshire Hathaway"
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=169749440
https://www.barrons.com/articles/u-s-stocks-poised-for-lower-open-on-monday-51661121916
"Ownership of Berkshire Hathaway BRK.B –2.30% stock is a big part of the culture at the sprawling conglomerate, but Greg Abel, the likely successor to Warren Buffett as CEO, appears not to have bought into that.
In a surprise to some Berkshire Hathaway (BRK/A, BRK/B) watchers, Abel sold a 1% stake in the company’s big utility unit, Berkshire Hathaway Energy, back to the subsidiary for $870 million in cash, rather than getting Berkshire stock. That June sale was disclosed in Berkshire’s recently filed 10-Q for the second quarter.
Abel, a Berkshire Hathaway (ticker: BRK/A, BRK/B) vice chairman and head of the company’s vast noninsurance operations, could have sold the stake for Berkshire stock, based on the language of the Berkshire proxy. A sale for Berkshire shares likely would have been tax efficient and aligned him in a major way with Berkshire shareholders."
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Occidental - >>> Warren Buffett Not Expected to Bid for Control of Occidental Following Stake Boost
Green light to buy up to 50% of oil company enables Berkshire to avoid bumping up against FERC-imposed limit
Occidental shares are up 146% for the year, boosted by a rally in the price of oil.
The Wall Street Journal
By Akane Otani, Christopher M. Matthews and Cara Lombardo
Aug. 21, 2022
https://www.wsj.com/articles/warren-buffett-not-expected-to-bid-for-control-of-occidental-following-stake-boost-11661099924?siteid=yhoof2
Warren Buffett’s bid to boost his big stake in Occidental Petroleum Corp. OXY even further isn’t expected to serve as a prelude to a full takeover of the resurgent energy company by the widely watched billionaire, at least for now.
In a regulatory filing Friday, the Federal Energy Regulatory Commission said that Mr. Buffett’s Berkshire Hathaway Inc. BRK.B had received permission to buy up to 50% of the driller’s shares. The news stoked speculation that Berkshire could be gearing up to acquire Occidental.
Analysts have said Occidental’s oil business would complement Berkshire’s existing energy holdings, which include utilities, natural gas and renewables. Mr. Buffett has a warm relationship with Chief Executive Vicki Hollub and has publicly praised her efforts to turn the company around after its acquisition of Anadarko Petroleum Corp. and her plans to pay down debt and increase dividend payouts.
But Mr. Buffett hasn’t informed Occidental of any plans to acquire a controlling stake in the company, according to people close to the matter. Given Mr. Buffett’s well-known aversion to hostile deal making, it would be out of character for him to make a bid without sounding out the company’s executives and directors first.
Owning such a big stake—Berkshire is Occidental’s largest shareholder—gives him major influence over the company already, and acquiring control could cost him a hefty premium to the current share price. The stock closed Friday at $71.29, up nearly 10% on the news, giving the company a market capitalization of about $66 billion.
Why would Berkshire seek out permission to buy more of Occidental, then?
For one, it was close to running up against FERC-imposed investing limits.
Filings show Berkshire currently has a 20% stake in Occidental. It also has warrants to purchase another 83.9 million common shares and 100,000 shares of preferred stock that pay a hefty dividend—both of which it acquired after helping Occidental finance its 2019 acquisition of Anadarko.
If Berkshire were to exercise the warrants, its stake would rise to roughly 27%. That would have exceeded the 25% limit FERC allowed for before Friday’s ruling.
“This is not a company that’s going to raise regulators’ hackles,” said Cathy Seifert, an analyst for CFRA Research.
It should also give Berkshire breathing room in case share buybacks or other company moves decrease the amount of shares outstanding, thus increasing its percentage stake.
There are other reasons to doubt a Berkshire takeover of Occidental is imminent.
One of them is price, said David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business.
So far, Berkshire has bought virtually all of its Occidental shares at a price in the range of $50 to $60, Mr. Kass said. The highest price Berkshire paid was $60.37 in July, according to filings.
Mr. Buffett is a well-known bargain-hunter, so it is difficult to imagine Berkshire rushing to buy more Occidental shares at the current price, Mr. Kass said. The shares are up 146% for the year, boosted by a rally in the price of oil, compared with an 11% decline for the S&P 500.
People familiar with deliberations at Occidental said the company’s leadership believes Mr. Buffett might consider making an offer if oil prices fall, bringing down Occidental’s stock price. If Mr. Buffett made an offer the company viewed as fair, a majority of the Occidental’s board would likely approve presenting it to shareholders, one of the people said.
Mr. Buffett didn’t respond to a request for comment. An Occidental spokesman declined to comment.
Mr. Buffett is currently represented as a passive shareholder in Occidental, based on the so-called 13G filing he has on record with the U.S. Securities and Exchange Commission. If he were to change his intentions and hold meaningful discussions with the company about a full-on takeover, he would likely need to change his filing to a 13D, which is required by large shareholders who intend to get actively involved in the running of a company.
Taxes could also play a role in Mr. Buffett’s bid for a bigger minority stake in Occidental. Corporations with a stake of at least 20% in another company are eligible to deduct 65% of dividends received, up from the standard 50%.
Berkshire’s 20% stake also allows it to include a proportionate share of Occidental’s earnings in its own results. That could give its earnings a multibillion-dollar boost annually, based on analyst estimates of Occidental’s earnings. Before the most recent purchases, disclosed this month, Occidental fell below the 20% threshold for both benefits.
Since Berkshire started buying Occidental shares in February, Mr. Buffett has had a friendly and collaborative relationship with Ms. Hollub, and the pair speak regularly, according to people familiar with the matter.
When Mr. Buffett bought another slug of Occidental shares this spring, he called Ms. Hollub to let her know about the transaction, according to one of the people. Ms. Hollub was driving at the time and pulled over to take the call, the person said.
Mr. Buffett’s message was simple: “Keep doing what you’re doing,” he told Ms. Hollub.
Berkshire’s growing ties with Occidental have an unexpected link to Mr. Buffett’s earliest days of investing.
At age 11 in 1942, Mr. Buffett made his first investment: three shares of Cities Service’s preferred stock. Forty years later, Occidental went on to acquire the oil company, which Ms. Hollub had just joined the year before.
Mr. Buffett’s investment in Occidental this year shows his first stock purchases “coming full circle 80 years later,” Mr. Kass said.
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>>> Why Warren Buffett Showed His Hand in Pursuit of 50% Stake in OXY
The Wall Street Journal
By Ryan Dezember
https://www.wsj.com/livecoverage/stock-market-news-today-08-19-2022/card/g6oQqfG2ShLVh8davJhk
Occidental Petroleum owns a power plant in Taft, La., that feeds an OXY chemical plant next door. Leftover power is sold on the local grid, which Berkshire Hathaway Energy plants also feed.
The Federal Energy Regulatory Commission ruled that since OXY's plant accounts for just 0.48% of the capacity connected to the region's grid, a combination with Berkshire "will not have an adverse effect on competition" in the local electricity market.
Warren Buffett's Berkshire had to ask, though, before beefing up its 20% stake to as much as half of OXY's shares. Now the market has gotten a rare glimpse of what the famous investor has up his sleeve.
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>>> Buffett’s Berkshire Hathaway Seeks to Buy as Much as 50% of Occidental
Bloomberg
by Kevin Crowley and Katherine Chiglinsky
August 19, 2022
https://news.yahoo.com/buffett-berkshire-hathaway-seeks-buy-181317719.html
(Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. won approval from US regulators to buy as much as 50% of Occidental Petroleum Corp. after spending months snapping up its shares. Occidental’s stock had its biggest gain in five months.
The Federal Energy Regulatory Commission said in a filing published Friday that Berkshire’s proposed stock purchases are “consistent with the public interest.” Berkshire applied for the authorization on July 11, FERC said.
Berkshire has spent this year wagering more on Occidental after first making a bet on the Houston-based oil company three years ago. Earlier this month, Berkshire reported that it now holds 188 million shares of Occidental’s common stock, a little more than 20% of its 931 million shares outstanding.
“No question Buffett goes to 50% from here,” said Bill Smead, who manages $4.8 billion at Smead Capital Management Inc. and is a top 20 shareholder in Occidental and also owns Berkshire stock. “This is looking more and more like the Burlington transaction where he ended up buying the whole shooting match.”
Buffett built up a significant stake in railroad Burlington Northern Santa Fe Corp., now known as BNSF, before agreeing in late 2009 to buy the railroad.
Berkshire, based in Omaha, Nebraska, didn’t immediately respond to requests for comment on the FERC application.
“The approval of this filing allows Berkshire from a FERC perspective to accumulate up to 50% ownership of Oxy’s common shares, which is necessary because we own assets subject to FERC regulation,” Occidental spokesman Eric Moses said in an emailed statement. “The prior FERC approval threshold was at 25%.”
In 2019, Buffett aided Occidental Chief Executive Officer Vicki Hollub’s pursuit of Anadarko Petroleum Corp. by agreeing to invest $10 billion in Occidental, a pact that included both preferred shares and warrants. Those warrants allow Berkshire to buy as many as 83.86 million shares in Occidental at a price of $59.62. At today’s stock price, the billionaire investor would turn a profit of more than $900 million by exercising the warrants.
This year, Buffett praised Hollub’s leadership, a sign that the billionaire investor was all-in on Occidental. That stirred up speculation that Berkshire, with more than $105 billion in cash on hand at the end of June, could seek to buy more stock.
On March 7, CNBC’s Becky Quick said on “Squawk Box” that Buffett told her that Berkshire started buying on Feb. 28 “and we bought all we could.” Buffett decided to start making the purchases after reading a transcript of Occidental’s Feb. 25 earnings conference call.
“I read every word, and said this is exactly what I would be doing,” Buffett told Quick. “She’s running the company the right way.”
Occidental is the best-performing stock in the S&P 500 this year by some margin, rising 146% as the index declined 11%, driven by Buffett’s steady buying and high oil prices. The company’s shares climbed 9.9% in New York trading, their biggest one-day increase since March 4.
Hollub has made aggressive moves to boost returns to shareholders this year by reigning in capital-intensive production growth in favor of dividends and share buybacks for investors. She’s also eliminated much of the $30 billion of debt the company took on buying Anadarko.
Occidental received a further boost this month with the passing of the Inflation Reduction Act, which increased tax credits for carbon capture, a technology in which the company is a leading player. Hollub hailed the bill as “very positive.”
Occidental plans to make capturing carbon from the air a key part of meeting its ambition to be net zero by mid-century, one of the most aggressive plans of any US major oil company.
The Occidental stake that Berkshire reported earlier this month surpassed a key level that could entail new quarterly disclosures and a boost to the company’s earnings. According to auditor PricewaterhouseCoopers, a company with a stake in another firm as large as Berkshire has in Occidental exercises “significant influence” over that business, and may have to include earnings from that investment in its own results under the so-called equity method of accounting.
Occidental wouldn’t be Berkshire’s first bet large enough to merit the accounting approach. The company does it for its roughly 27% stake in Kraft Heinz Co., for example. But while Berkshire does hold 20.2% of American Express Co., it’s struck agreements with the company and the Federal Reserve that limit the influence it can exercise over the stock. Because of that, Berkshire doesn’t follow the equity method in that case.
“Now that Berkshire has clearance to buy more Occidental shares, I believe that the company will buy more shares and adopt equity method accounting,” Jim Shanahan, an analyst at Edward Jones, said in an email.
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>>> Buffett's Berkshire Hathaway wins OK to buy 50% Occidental stake
Reuters
August 19, 2022
By Jonathan Stempel
https://finance.yahoo.com/news/u-regulator-says-berkshire-hathaway-175201681.html
(Reuters) - A U.S. energy regulator on Friday gave Berkshire Hathaway Inc, the company controlled by billionaire Warren Buffett, permission to buy up to 50% of oil company Occidental Petroleum Corp's common stock.
The Federal Energy Regulatory Commission (FERC) said its authorization was "consistent with the public interest," after Berkshire said a larger stake would not hurt competition, undermine regulatory authority, or boost costs for consumers.
Occidental shares soared as much as 11.7%, and in midafternoon trading were up $6.06, or 9.3%, at $70.94.
Berkshire did not immediately respond to a request for comment sent to Buffett's assistant. Occidental declined to comment.
Houston-based Occidental's share price has more than doubled this year, benefiting from rising oil prices following Russia's Feb. 24 invasion of Ukraine.
Berkshire began buying Occidental shares four days later, and by Aug. 8 had accumulated a 20.2% stake worth $11.3 billion.
Buffett's Omaha, Nebraska-based conglomerate also owns $10 billion of Occidental preferred stock, which helped finance the 2019 purchase of Anadarko Petroleum Corp, and has warrants to buy another 83.9 million common shares for $5 billion.
Berkshire also ended June with a $23.7 billion stake in a larger oil company, Chevron Corp.
"Buffett is taking advantage of stock market participants who are foolish about the oil and gas industry and consider it a dead business," said Cole Smead, president of Smead Capital Management Inc in Phoenix, which owns Occidental and Berkshire shares. "Buffett thinks it can make him wealthy."
The FERC authorization does not require Berkshire to amass a 50% Occidental stake, or even buy any shares.
TAKEOVER?
Some investors and analysts have said Berkshire could eventually buy Occidental, diversifying an energy portfolio that includes several utilities, electricity distributors, and renewable power projects including wind.
One of Buffett's biggest acquisitions, the $26.5 billion purchase of the BNSF railroad, was completed in 2010 after Berkshire had amassed a 22.6% stake.
"I can see him taking the whole thing private," said independent oil analyst Paul Sankey.
He added that Occidental could benefit from the expanded tax credit for carbon-capture projects included in the Inflation Reduction Act signed into law this month by President Joe Biden.
Smead, in contrast, said Buffett is unlikely to engineer a full takeover soon.
"In the long run, he may, but you don't file something like this with FERC if you're planning it in the next six months," he said. "If you bought shares at up to $75 or $80 (each), and ended up buying the whole company for $95 or 100, you save yourself a lot of money."
Berkshire ended June with $105.4 billion of cash and equivalents, and Buffett has pledged to keep $30 billion on hand. Occidental's market value exceeded $60 billion before Friday's run-up.
Buffett's company also owns more than 90 companies outright, including Geico car insurance, See's Candies, Dairy Queen ice cream, and several manufacturing businesses.
At Berkshire's annual meeting on April 30, Buffett said he began buying Occidental shares after reviewing an analyst presentation.
He also expressed confidence in Chief Executive Vicki Hollub, who has been reducing Occidental's debt.
"She says she doesn't know the price of oil next year. Nobody does," Buffett said. "But we decided it made sense."
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>>> Warren Buffett Finally Throws In The Towel On 4 Lousy Stocks
Investor's Business Daily
by MATT KRANTZ
08/17/2022
https://www.investors.com/etfs-and-funds/sectors/sp500-warren-buffett-finally-throws-in-the-towel-on-four-lousy-stocks/?src=A00220
Warren Buffett likes to say his favorite holding period for an S&P 500 stock is forever. But that's definitely not the case as he unloads some of his worst dogs.
Buffett's Berkshire Hathaway (BRKB) sold off a least a portion of its four worst performers this year: Verizon (VZ), Store Capital (STOR), General Motors (GM) and U.S. Bancorp (USB). That's according to an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Berkshire Hathaway retains a portion of the stocks (except Verizon), but now all the positions are below 10% of the companies' shares outstanding.
When you see Buffett dump a stock, that's about the closest thing to him ringing a sell bell. "There is very low portfolio turnover. Buffett didn't buy a single new stock in the second quarter," said Whitney Tilson of Empire Financial Research. "Almost all of his trading is generally among his existing positions."
Remember: Buffett is an avowed value investor. When stocks he believes in fall in price, he often buys more. So if you see him dumping them instead, that should tell you something.
Berkshire Hathaway itself is having a decent year. Shares of Buffett's conglomerate are up 2.4% this year. That's a solid showing in a year that the S&P 500 is down nearly 10%.
But make no mistake, the Oracle of Omaha is struggling too with his investments. Just look at the massive $40 billion loss the company took in the second quarter. And 36 out of Berkshire Hathaway's 49 U.S.-listed positions, or nearly three-quarters, are down for the year.
And some of the losses are enormous. Apple (AAPL), Berkshire Hathaway's largest position, is down 2.7% this year, erasing more than $4 billion in value for Berkshire Hathaway's portfolio. Berkshire Hathaway owns nearly 6% of the smartphone maker.
Buffett, though, isn't giving up on Apple. Berkshire Hathaway actually boosted its position in the smartphone maker's shares by nearly 1% to 894 million shares in the second quarter. And yet, as with other losers, he's willing to part ways.
Hanging Up On Verizon
Given how T-Mobile US (TMUS) is running circles around Verizon, it's not surprising Buffett's had enough.
With shares of Verizon down nearly 12% this year, Berkshire Hathaway completely unloaded its remaining 1.4 million shares of the company in the second quarter. The great Verizon sell-off started in the first quarter, when Berkshire Hathaway dumped roughly 99% of its 158 million shares. So much for forever.
Another dog Berkshire Hathaway is selling off is Store Capital. With shares of the consumer discretionary stock still down nearly 15% this year, Berkshire Hathaway didn't buy more. Just the opposite: It dumped more than half its position. Now it only owns 2.5% of the company.
No Love For GM
Fans of General Motors hold out hope that the U.S. automaker will take on Tesla (TSLA) in electric vehicles. But GM stock isn't behaving that way, and Buffett isn't buying it.
Shares of GM lost more than a third of their value this year. But rather than buying more, as is Buffett's typical style, he sold off nearly 15% of it. Now Berkshire Hathaway owns just 3.6% of the company. Meanwhile, Buffett also took 5% off the table in his U.S. Bancorp position. Shares of the bank are down more than 12% this year. It's important to note, though, that Buffett still owns 8% of the bank.
Is it possible Buffett will change his mind on some of these stocks later? Absolutely. Berkshire Hathaway has been adding to its Occidental Petroleum (OXY) position and now owns 20% of the company. But keep in mind, it dumped the position to zero as of the end of 2021.
So when you see Buffett running from a falling S&P 500 stock, that's not a signal you should ignore.
Losing Stocks Buffett Is Dumping This Year
Berkshire Hathaway reduced its position in these stocks that are down this year
Company Symbol YTD price change Cut in Berkshire position in Q2 Sector
Verizon Communications (VZ) -11.9% -100% Communication Services
Store Capital (STOR) -14.9 -53.0 Real Estate
General Motors (GM) -33.4 -14.8 Consumer Discretionary
U.S. Bancorp (USB) -12.3 -5.2 Financials
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>>> Warren Buffett explains why Berkshire Hathaway isn't a typical conglomerate
Yahoo Finance
by Julia La Roche
February 27, 2021
https://www.yahoo.com/video/warren-buffett-on-berkshire-hathaway-and-conglomerates-140913426.html
Famed investor Warren Buffett says Berkshire Hathaway (BRK-A, BRK-B), the sprawling investment conglomerate, differs from the typical conglomerates that have earned terrible reputations.
“Berkshire is often labeled a conglomerate, a negative term applied to holding companies that own a hodge-podge of unrelated businesses. And, yes, that describes Berkshire – but only in part,” Buffett wrote in his widely-read annual letter.
The 90-year-old investor pointed out that historically conglomerates limited themselves to buying businesses in their entirety, a strategy with “two major problems.”
“One was unsolvable: Most of the truly great businesses had no interest in having anyone take them over. Consequently, deal-hungry conglomerateurs had to focus on so-so companies that lacked important and durable competitive strengths. That was not a great pond in which to fish. Beyond that, as conglomerateurs dipped into this universe of mediocre businesses, they often found themselves required to pay staggering ‘control’ premiums to snare their quarry,” Buffett wrote.
What's more, to fund these overpriced deals, conglomerates would use “promotional techniques and ‘imaginative’ accounting maneuvers that were, at best, deceptive and that sometimes crossed the line into fraud” to boost their own overvalued stock for the transaction.
Buffett added that this “investing illusion” could continue for a long time as Wall Street banks collected fees and the press shared stories of the “colorful promoters” and the soaring stock price that reinforced the narrative.
“Eventually, of course, the party ends, and many business ‘emperors’ are found to have no clothes," he said. "Financial history is replete with the names of famous conglomerateurs who were initially lionized as business geniuses by journalists, analysts and investment bankers, but whose creations ended up as business junkyards. Conglomerates earned their terrible reputation.”
Buffett and Munger's vision for Berkshire is to "own all or part of a diverse group of businesses with good economic characteristics and good managers."
"Whether Berkshire controls these businesses, however, is unimportant to us,” Buffett added.
More enjoyable and profitable, but with far less work
Berkshire Hathaway today looks vastly different from the New England textile company Buffett took over in May 1965. In fact, Berkshire Hathaway (BRK-B, BRK-A) was built on Munger's blueprint of moving beyond so-called "cigar-butt" investing to buying "wonderful businesses" at fair prices, both controlling and non-controlling stakes.
“It took me a while to wise up. But Charlie – and also my 20-year struggle with the textile operation I inherited at Berkshire – finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and far less work than struggling with 100% of a marginal enterprise. For those reasons, our conglomerate will remain a collection of controlled and non-controlled businesses," Buffett wrote.
Buffett said the pair will put capital to work where it makes the most sense “based on a company’s durable competitive strengths, the capabilities and character of its management, and price.”
“If that strategy requires little or no effort on our part, so much the better. In contrast to the scoring system utilized in diving competitions, you are awarded no points in business endeavors for ‘degree of difficulty.’ Furthermore, as Ronald Reagan cautioned: ‘It’s said that hard work never killed anyone, but I say why take the chance?’”
In its stock portfolio, Berkshire owns large stakes in companies like Apple (AAPL), Bank of America (BAC), Coca-Cola (KO), American Express (AXP), Kraft-Heinz (KHC), Verizon (VZ), Moodys Corp (MCO), U.S. Bancorp (USB), Chevron (CVX), and DaVita (DVA). In addition to the equity portfolio, Berkshire Hathaway owns businesses across industries and sectors, including railroads, insurance, energy, services, retail, food, and manufacturing. Among the businesses Berkshire owns include See’s Candies, BNSF Railway, Fruit of The Loom, GEICO, and Benjamin Moore Paints, to name a few.
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>>> Charlie Munger says Costco 'has one thing that Amazon does not'
Yahoo Finance
Emily McCormick
February 24, 2021
https://finance.yahoo.com/news/this-the-the-one-thing-costco-has-that-amazon-lacks-according-to-charlie-munger-200739515.html
Costco (COST) has a leg up on e-commerce behemoth Amazon (AMZN) on at least one measure, according to Charlie Munger, vice chairman of Berkshire Hathaway.
"Costco, I do think, has one thing that Amazon does not," the billionaire investor said during the Annual Meeting of Shareholders of the Daily Journal Corporation (DJCO) in Los Angeles on Wednesday. "People really trust Costco to be delivering enormous values."
"That is why Costco presents some danger to Amazon — because they've got a better reputation for providing value than practically anybody including Amazon," he added.
Munger's comments came shortly after Berkshire Hathaway revealed in November that it had exited its stake in Costco, with the move taking place during a year when Costco's stock price soared to record levels as consumers stocked their pantries during the COVID-19 pandemic. Previously, Berkshire Hathaway had invested in Costco for two decades. The firm sold 4.33 million shares valued at $1.31 billion.
However, Munger has maintained ongoing ties to Costco. Munger has served as a director at Costco since 1997, and has praised the company for its corporate culture over the years. And a filing showed he personally owned more than 186,000 shares of the company as of December.
"It's quite important," Munger said in response to a later inquiry over the importance of evaluating a company's culture in making investment decisions. "Part of the success of a company like Costco — and it's been amazing that one little company, starting up not all that many decades ago could become as big as Costco did as fast as Costco did. And part of the reason for that was cultural. They have created a strong culture of fanaticism about cost and quality and so forth, and efficiency and honor, all the good things. And of course, it's all worked. And so, of course culture is very important."
Munger still had plaudits for Amazon's CEO Jeff Bezos, who is set to depart from the company he founded later this year. However, Munger added that he was not planning on investing in any of Bezos's new, post-Amazon endeavors.
"I'm a great admirer of Jeff Bezos, whom I consider one of the smartest businessmen who ever lived," Munger said. "But I won't be following him. We have our crotchets. And I just don't know enough about it to want to go into that activity."
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>>> Follow Warren Buffett’s Lead. Park Your Cash in This Ultra-Safe Investment.
Barron's
By Andrew Bary
Aug. 16, 2022
https://www.barrons.com/articles/warren-buffett-t-bills-ultra-safe-investment-51660580408?siteid=yhoof2
Warren Buffett, chairman and CEO of Berkshire Hathaway, has $75 billion in Treasury bills.
Warren Buffett parks most of Berkshire Hathaway’s cash in ultra-safe U.S. Treasury bills, and individual investors may want to consider following Buffett’s lead now that they are yielding as much as 3%.
Treasury bills, which are U.S. government securities maturing in less than a year, are a good alternative to money market funds and bank certificates of deposits. Interest is exempt from state and local taxes, a contrast with bank CDs.
Investors can buy them directly from the Treasury through the TreasuryDirect program or through banks and brokers.
Buffett, the long-time Berkshire Hathaway BRK.A (ticker: BRK.A , BRK.B) CEO, prefers T-bills to such other short-term debt as commercial paper (a corporate IOU) because he never wants to worry about the safety of Berkshire’s cash trove, which totaled $105 billion on June 30. About $75 billion of that total is held in Treasury bills. Buffett regularly refers to the T-Bill holdings in his annual shareholder letter.
T-Bills are sold with maturities of three, six and 12 months as well as four and eight weeks. The three-month bill now yields 2.5%; the six-month bill, 3.05%; and the one-year bill, 3.2%, according to Bloomberg. Yields have risen from just above zero a year ago as the Federal Reserve has lifted short rates, with the key Federal fund rate now at 2.25% to 2.5%.
The three- and six-month bills are auctioned weekly by the Treasury and the one-year bills every four weeks.
Another way to get exposure to T-bills is through exchange-traded funds like the $20 billion iShares Short Treasury Bond ETF (SHV), now yielding 2.1%. It has an average maturity of about four months and holds U.S. Treasuries maturing in a year or less.
Those who want more yield—and a little rate risk—can buy the iShares 1-3 Treasury Bond ETF (SHY) now yielding close to 3% with an average maturity of about two years.
Money-market fund yields also have risen with short rates. The $250 billion Vanguard Federal Money Market Fund (VMFXX) now yields 2.1%.
T-Bills are sold at a discount from their face value of $1,000 with the discount representing the interest payable to holders. Investors get the face value of $1,000 at maturity. The minimum investment is $100.
T-Bills are liquid and can readily be sold through banks and brokerage firms. Many investors hold them until maturity.
While T-bill yields aren’t close to the inflation rate of 8.5% in the past year, they look good versus other short-term investments—and offer a tax benefit in the state and local exemption.
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>>> Buffett's firm buys more Apple, Amazon while betting on oil
Associated Press
By JOSH FUNK
8-15-22
https://www.msn.com/en-us/money/companies/buffetts-firm-buys-more-apple-amazon-while-betting-on-oil/ar-AA10H7t7?li=BBnb7Kz
OMAHA, Neb. (AP) — Warren Buffett's company bet more on high-tech darling Apple and e-commerce giant Amazon during the second quarter, while also investing billions in old-school oil producers Occidental Petroleum and Chevron.
Berkshire Hathaway detailed all its second-quarter investments Monday in a new filing with the Securities and Exchange Commission. Wall Street follows Berkshire’s investments closely because of Buffett’s remarkably successful track record over the decades.
Berkshire had already disclosed its biggest move in the quarter — investing $1.4 billion in oil producer Occidental Petroleum — because that investment's size required more immediate updates. Berkshire now owns more than $11 billion worth of Occidental stock, and it controls more than 20% of the company after making several more purchases since the quarter ended on June 30.
But Monday’s filing revealed a number of smaller moves Berkshire made during the second quarter, including adding to its stakes in Apple, Amazon, Chevron, Ally Financial, Activision Blizzard, Paramount Global and several other stocks. Berkshire also trimmed its holdings in General Motors, US Bancorp and Kroger stocks while eliminating a stake in Verizon Communications.
Although Berkshire was active during the second quarter, it didn't do nearly as much as it did in the first three months of the year when it invested $51 billion in an assortment of stocks.
Berkshire's biggest single investment got a bit bigger during the quarter because it bought nearly 4 million more Apple shares, giving it 894.8 million shares of the iPhone maker.
The famously tech-averse investor's conglomerate also picked up more than 10 million Amazon shares, giving it nearly 10.7 million shares.
Monday’s filing doesn’t make clear which investments Buffett handled and which ones were made by the two other investment managers at Berkshire, but Buffett typically handles all the larger investments worth more than $1 billion, such as the company’s major stakes in Apple, Bank of America, American Express and Coca-Cola stocks. Berkshire officials don’t typically comment on these quarterly filings.
Berkshire now owns 68.4 million Activision Blizzard shares after picking up more than 4 million more during the quarter. Buffett has said that investment is a bet that Microsoft's acquisition of the video game maker will go through.
Besides investments, the Omaha, Nebraska-based Berkshire also owns more than 90 companies outright, including Geico insurance, BNSF railroad, several major utilities and an eclectic collection of manufacturing and retail companies, such as Dairy Queen and Precision Castparts.
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>>> Occidental Petroleum Corporation: An Often Overlooked Oil Company
Motley Fool
By Matthew DiLallo
Sep 8, 2015
https://www.fool.com/investing/general/2015/09/08/occidental-petroleum-corporation-an-often-overlook.aspx
Occidental Petroleum Corporation has the safety of an integrated oil company with the growth of an independent, yet investors continue to overlook it.
Occidental Petroleum (OXY) is a rather unique oil company. In a lot of ways it's similar to the larger integrated oil companies like Royal Dutch Shell (RDS.A) (RDS.B) or BP (BP) as it not only produces oil and gas but also has midstream and downstream assets like pipelines and petrochemical plants. However, it's a lot smaller than those big oil giants and it is growing much faster, which are similar characteristics to an independent oil company like Anadarko Petroleum (APC). Unfortunately, because it is more of a hybrid, investors tend to overlook Occidental when instead it offers them the best of both worlds.
The perfect combination?
In a lot of ways Occidental Petroleum is an ideal long-term core energy holding for investors. As the company points out on the slide below, it combines the positive elements from both sides of the energy spectrum.
As that slide notes, it has the stronger balance sheet, lower risk, and solid dividend that investors would find in a major integrated oil company. In fact, Occidental Petroleum currently maintains a single A credit rating, which puts it in the same league as the top integrated oil companies as that credit rating is the same as BP's while being just below Royal Dutch Shell and other major integrated companies.
One of the reasons why its credit rating is so strong is because it generates strong cash flow. This is where its integrated model comes into play as its OxyChem business generates a lot of free cash flow for the company while its midstream business helps the company maximize the price it receives for its oil and gas, which really helps to keep its margins up in a downturn. Much like BP and Royal Dutch Shell, Occidental's cash flow during a downturn holds up a bit better because its downstream and midstream assets provide a natural hedge helping it to offset some of the oil price decline.
One other area of strength for the company is the fact that it is a leader in producing oil via enhanced oil recovery, or EOR, which generates gobs and gobs of cash flow for the company. In fact, it can break even on its EOR production at a price as low as $22 per barrel.
Because of its much more stable cash flow, Occidental Petroleum estimates that at a $60 oil price it can fund its dividend and growth capital expenditure without having to borrow any money. This is a much different path from a lot of independents that haven't been shy in using debt to fund growth.
Lots of growth
Speaking of growth, Occidental Petroleum believes that it can still grow its oil and gas production by 5%-8% per year over the long term in a low oil price environment. That's a much higher rate than the low single digit growth rates of companies like BP or Royal Dutch Shell. Instead, its growth is more in line with a company like Anadarko, which has grown its production by 8% per year over the past five years after adjusting for asset sales. Having said that, Anadarko has eliminated much of its short-cycle growth spending in light of the downturn, which will lead to roughly flat production in the near term.
That's not the case at Occidental, which has a lot of short-term growth potential due to its strong position in the Permian Basin. The company has grown its production out of the basin by a 20% compound annual rate over the past few years and sees that upward growth trajectory continuing despite lower oil prices as the slide below shows.
One of the reasons why it's continuing to grow at a healthy clip despite the downturn is because of its rapidly falling costs. As the slide above notes, it is seeing step changes in well productivity and costs, which is enabling it to drill more wells with less money so that it can still grow in the current environment.
Investor takeaway
There's a lot to like at Occidental Petroleum. Not only does it have all the safety features an investor would want as it has a strong balance sheet, generates strong cash flow, and pays a very solid dividend just like its integrated peers BP and Royal Dutch Shell, but it also offers the faster growth rate of an independent like Anadarko Petroleum. So, for investors looking for the best of both worlds, Occidental Petroleum is worth a closer look.
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>>> Buffett’s Berkshire Pounces on Market Slump to Buy Equities
Bloomberg
By Max Reyes
August 6, 2022
https://www.bloomberg.com/news/articles/2022-08-06/berkshire-takes-advantage-of-market-swoon-to-buy-up-equities?srnd=premium
Conglomerate snapped up net $3.8 billion in the second quarter
Geico insurance unit reports underwriting loss of $487 million
Warren Buffett’s Berkshire Hathaway Inc. is following an age-old adage: Buy the dip.
The conglomerate was a net buyer of equities in the quarter, reporting $3.8 billion in purchases, according to results released Saturday. It was a net seller in the second quarter of last year.
Berkshire stepped in as the S&P 500 shed 16% in the latest quarter. The Omaha, Nebraska-based company also reported an operating profit of $9.2 billion as the insurance and railroad businesses posted gains.
Cathy Seifert, an analyst with CFRA Research, said one business flashing potential warning signs is Geico, the company’s personal auto-insurance unit. It reported an underwriting loss of $487 million, even as the conglomerate’s other insurance lines gained alongside the division’s investment income.
But Seifert said the report as a whole reflected “decent top-line growth, still decent demand for various goods and services, offset by higher input costs and volatility in equity markets.”
‘Tough Spot’
Berkshire said losses at Geico were the result of higher claims due to rising used-car prices and auto parts shortages. The company said policies-in-force declined even as it increased premiums, a potential sign that the business is losing market share as customers hunt for better rates elsewhere.
“They’re in a little bit of a tough spot right now,” Seifert said, adding that the same trends are playing out at other auto insurers but appear to be hitting Geico particularly hard. “It’s probably a good idea to watch for further deterioration.”
The same market weakness increasing Buffett’s buying power is weighing on his company’s results, at least on paper. The company reported a net loss of $43.8 billion due to a $53 billion loss in the company’s investment portfolio. Berkshire downplays those results as a function of accounting rules, saying they provide a misleading picture of the company’s actual performance.
What Bloomberg Intelligence Says:
“Berkshire was a net buyer of equities in 2Q by $3.8 billion, or $45.2 billion in 2022, vs. a $16 billion net seller in 2020-21. We think this may continue and doesn’t necessarily signal Buffett is bearish on his own shares; buybacks have historically been a lower priority use of capital. Repurchases of $1 billion in 2Q declined from the 2021 pace of about $7 billion a quarter.”
-- Matthew Palazola, BI senior insurance industry analyst
Bloomberg calculated the net purchases by subtracting first-quarter numbers from the first-half total.
Buffett’s appetite for his own stock declined even as he piled into shares elsewhere. Stock buybacks clocked in at $1 billion for the second quarter, lagging the $3.2 billion in repurchases made at the start of the year. Insurance-investment income clocked in at $1.91 billion.
The company also reported that Berkshire Hathaway Energy had acquired $870 million in common stock from Vice Chairman Greg Abel in June. The transaction wasn’t previously disclosed.
Despite the spending spree, Berkshire made only a measly dent in its cash pile. The company reported $105.4 billion at the end of June, barely budging from the $106 billion at the end of the first quarter.
The aggressive pace at which Berkshire picked up shares of Occidental Petroleum Corp. has raised questions as to whether Berkshire is looking to make an acquisition of the energy giant. But the company didn’t provide insight into its strategy in this quarter’s regulatory filing.
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>>> 15 Stocks Warren Buffett Has Held for at Least 10 Years
Motley Fool
By Sean Williams
Jul 25, 2022
https://www.fool.com/investing/2022/07/25/15-stocks-warren-buffett-has-held-for-10-years/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
KEY POINTS
Nearly 3 out of 10 Warren Buffett stocks have been held for at least a decade.
Financial stocks, mature businesses, and companies that provide superior dividends, all have an above-average chance of staying in Berkshire Hathaway's portfolio for a long time.
Patience plays a big role in the Oracle of Omaha's investing philosophy.
Among successful money managers, Berkshire Hathaway
CEO Warren Buffett is, arguably, in a class of his own.
Since becoming CEO of Berkshire in 1965, the Oracle of Omaha has led his company's shares to an average annual return of 20.1%, through Dec. 31, 2021. In total, we're talking about an aggregate return of greater than 3,600,000% in 57 years, as well as the creation of around $600 billion in value for Berkshire Hathaway's faithful shareholders.
Buffett's success is a reflection of a long list of factors, including his portfolio concentration, narrow investment focus, and love of dividend stocks. But among the many factors responsible for the Oracle of Omaha's success, patience has to be at or near the top of the list. Of the 52 securities currently held by Berkshire Hathaway, 15 have been continuous holdings for at least 10 years. Here's a look at the companies that have formed the foundation of Warren Buffett's portfolio for a decade, if not longer:
Coca-Cola (KO -0.46%): 34 years as a continuous holding
American Express (AXP 0.41%): 29 years
Moody's (MCO -0.71%): 22 years
Globe Life (GL 0.16%): 21 years
Procter & Gamble (PG 0.05%): 17 years
Johnson & Johnson (JNJ -0.40%): 16 years
U.S. Bancorp (USB 0.68%): 16 years
United Parcel Service (UPS 1.15%): 16 years
Mondelez International (MDLZ -0.75%): 15 years
BYD (BYDD.F -3.54%): 13 years
Bank of New York Mellon (BK 1.02%): 12 years
Mastercard (MA 0.40%): 11 years
Visa (V 1.12%): 11 years
DaVita (DVA 0.43%): 10 years
General Motors (GM -0.47%): 10 years
Aside from the generalization that Warren Buffett prefers to see his investing thesis play out over multiple years or decades, there are certainly some trends that stand out from this list of Berkshire Hathaway's longest continuous holdings.
Warren Buffett prefers to hold financial stocks for an extensive period of time
Among the 15 stocks Warren Buffett and his investing team have been holding for between 10 and 34 years, seven are financial stocks: American Express, Moody's, Globe Life, U.S. Bancorp, Bank of NY Mellon, Mastercard, and Visa. This really shouldn't come a surprise given that Buffett knows the financial sector inside and out, and it's probably his favorite place to put his company's cash to work.
Perhaps the best thing about financial stocks is their cyclical ties. Even though Warren Buffett is well aware that recessions are an inevitability, he also knows that periods of economic expansion last considerably longer than contractions. By purchasing an assortment of banks, insurance stocks, and payment processors, Buffett is playing a simple numbers game that, over long periods of time, allows Berkshire to take advantage of the natural expansion of the U.S. and global economy.
In many instances, he's also chosen best-of-breed-type financial stocks. For example, Visa and Mastercard are the clear-cut No's 1 and 2 in U.S. credit card network purchasing volume. As of 2020, Visa and Mastercard respectively accounted for 54% and 23% of credit card network purchase volume in the largest market for consumption in the world. With payments steadily moving away from cash and toward plastic or digital formats, both Visa and Mastercard have sustained double-digit annual growth runways.
Mature businesses that can be set on autopilot tend to stick around in Buffett's portfolio
Another thing you'll notice about many of the 15 stocks held by Buffett for a decade or longer is that they're mature business which can effectively be set on autopilot over long periods of time.
A perfect example would be healthcare conglomerate Johnson & Johnson. Healthcare stocks are highly defensive in the sense that, no matter how well or poorly the U.S. economy and stock market perform, there's always demand for prescription drugs, medical devices, and healthcare services.
In addition to being defensive, J&J's operating model has all of the puzzle pieces necessary to grow in virtually any economic environment. Johnson & Johnson generates the bulk of its growth and operating margin from selling brand-name drugs. However, pharmaceuticals offer a finite period of sales exclusivity. To counter this, J&J can lean on its leading medical device segment, which is perfectly positioned to take advantage of an aging domestic population and an international community whose access to medical care is improving.
Consumer goods behemoth Procter & Gamble is yet another example of a set-it-and-forget-it investment. P&G provides a wide assortment of nondiscretionary items, which is its key to generating highly predictable and transparent operating cash flow. Even if recessions occur, consumers are still going to buy detergent, toothpaste, paper towels, diapers, toilet paper, and an array of household and health items.
To add, J&J and P&G have some of the longest active streaks among publicly traded stocks of increasing their base annual dividend each year.
A superior dividend could be a golden ticket to a lengthy stay in Berkshire's portfolio
The third and final trend to note about Warren Buffett's longest-held stocks is that he loves companies that provide a market-topping dividend. This is especially true with the U.S. inflation rate hitting a four-decade high of 9.1% in June.
Dividend stocks offer a number of benefits to shareholders. They're usually profitable on a recurring basis, time-tested, and their outlooks are typically transparent. It also doesn't hurt that income stocks have, over long periods of time, vastly outperformed their non-dividend-paying peers.
You might not realize it, but Coca-Cola, American Express, and Moody's are three ideal examples of superior dividend stocks within Berkshire Hathaway's portfolio. Even though these three companies have yields that aren't eye-popping, the extensive length of time Buffett has held these stocks, coupled with the base annual payout growth in each company, has sent their yield relative to Berkshire's cost basis skyrocketing higher.
After 34 years, Coca-Cola's base annual payout has grown to $1.76/share. With Buffett's company holding Coke at an average share price of approximately $3.25, we're talking about an annual yield on cost of 54%! There's absolutely no reason to sell Coca-Cola when Buffett is more than doubling his initial investment in the company every two years.
It's a similar story with American Express and Moody's. AmEx is parsing out $2.08/share annually, while Moody's is doling out $2.80/share each year. Considering that Berkshire Hathaway has respective cost bases of $8.49 on American Express and $10.05 on Moody's, the result is a yield relative to cost of nearly 25% with AmEx and close to 28% with Moody's. These are stocks that may never be sold by Buffett or his investing team.
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$RGC’s Company Ownership Insight
Understanding and looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders.
A high insider ownership often makes company leadership more mindful of shareholder interests. Small Cap stock, **Regencell Bioscience Holdings** (RGC) insiders own 81% of the company, currently worth about US$260m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders. (A positive indication)
We also take confidence from the longer term picture of insider transactions. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Regencell Bioscience Holdings.
This counter is worth to put on your watchlist, at least! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Regencell Bioscience Holdings.
Yat-Gai Au, Founder of the company, who spent a stonking US$1.2m on stock at an average price of US$25.23.
As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Yat-Gai Au was the only individual insider to buy shares in the last twelve months.
Yat-Gai Au purchased 68.34k shares over the year. The average price per share was US$26.03.
[https://finance.yahoo.com/news/founder-regencell-bioscience-holdings-limited-101443485.html](https://finance.yahoo.com/news/founder-regencell-bioscience-holdings-limited-101443485.html)
>>> The simple and complicated story behind Buffett's massive oil buy:
Yahoo Finance
by Andy Serwer with Dylan Croll
July 23, 2022
https://finance.yahoo.com/news/warren-buffett-morning-brief-july-23-110012203.html
As the old E.F. Hutton commercial said: When Warren Buffett talks, they say people listen.
But when Buffett talked about Occidental Petroleum (OXY) at Berkshire Hathaway's (BRK-A) annual meeting on April 30th, how many really heard what the Oracle of Omaha was saying?
If anyone skipped that part, investors aren't tuning out now, as Berkshire owns nearly 20% of the company.
Buffett’s investment in Occidental Petroleum is both simple and complicated.
Simple: “What [Occidental CEO] Vicki Hollub was saying made nothing but sense,” Buffett told shareholders earlier this year. “And I decided that it was a good place to put Berkshire’s money.”
Elementary, my dear Buffett. Walking his talk, Buffett has been buying Occidental shares seemingly every day.
Buffett's Berkshire Hathaway has purchased shares of Occidental Petroleum at a rapid pace over the last several months. There’s a more complex tale though, with head-spinning backstory that goes back years for Buffett and decades for Occidental.
Oxy Pete, as the company is known, was founded 102 years ago in California. Smaller than the fully-integrated Seven Sisters — BP, Shell, Chevron, Gulf, Texaco, Exxon, and Mobil — Oxy enjoyed an outsized reputation in large part because of the company’s patriarch, Armand Hammer, company CEO from 1957 until 1990.
Colorful does not begin to describe Hammer.
Friends with myriad global leaders, Hammer was called “Lenin’s chosen capitalist,” due to his deep relationship with Russia. Hammer opened up Libya and locked horns with Qaddafi. He tried to buy Church & Dwight, owner of Arm & Hammer baking soda, because the name of that product was almost eponymous. Hammer was a great collector of art, made illegal campaign contributions to Richard Nixon, and actor, Armie Hammer, is his great-grandson.
"Occidental made its name in the late 1950s as an international, independent looking for opportunities drilling and producing oil," says University of Iowa professor Tyler Priest. "Hammer was a huge risk taker not only in doing deals with foreign governments, but in mergers and acquisitions."
Oxy today, though, is a far cry from what it was during Hammer's time.
CEO Vicki Hollub is a mineral engineer who worked her way up through the company after coming on board when Oxy bought Cities Service in 1982. Domestic oil and gas production now accounts for 83% of its business and with $29 billion in annual revenue, Oxy is by this count the 43rd largest oil producer in the world and the 11th biggest in the U.S.
Oxy has a significant stake in the Permian basin, in part due to its acquisition of Anadarko in 2019, which is when Buffett entered the picture.
That year, Oxy made a hostile bid for Anadarko, which had already agreed to be bought by Chevron (CVX).
Oxy went on the prowl for funding and the story Buffett told CNBC goes as follows: “I got a call in the middle of the afternoon from Brian Moynihan, the CEO of Bank of America. And he said that they were involved in financing the Occidental deal, and that the Occidental people would like to talk to me.”
Buffett agreed to give Hollub $10 billion in cash in exchange for preferred stock and warrants giving Berkshire a 10% stake in Oxy. Buffett said at the time the bet was essentially a bet on a rising price of oil. A wager that would be interrupted by the pandemic.
After the COVID-19 pandemic swept the globe, crude oil prices crashed. (And famously went negative in the spring of 2020.) Occidental’s stock fell to $10, no doubt paining Buffett.
As part of his preferred stock investment, Buffett was receiving dividends of common stock in Occidental. Which, in the second quarter of 2020, Buffett sold in full.
Buffett’s sale only made matters worse for Hollub, and by the fall of 2020 the stock had dropped below $9. But as the global economy and oil market recovered, so too did Oxy’s stock, which climbed all the way back up to around $40 by early this year. And Buffett’s take on Oxy appeared to shift again.
As Buffett told shareholders at this year's annual meeting, things changed when Buffett read Oxy's earnings call for the fourth quarter of 2021 along with its annual report.
"Vicki Hollub was saying what the company had been through, and where it was now, and what they planned to do with the money," Buffett told shareholders earlier this year. As noted at the start of this piece, these were the comments that made "nothing but sense."
So Buffett instructed Mark Millard, who executes Buffett's stock trades at Berkshire Hathaway, to start buying. "And in two weeks," Buffett said, "he buys 14% out of 60% [of Occidental's shares that were outstanding."
This spring and summer, Buffett added to his position and now owns 19.4% of Oxy, just below the 20% threshold that would require Occidental's results to be consolidated within Berkshire's quarterly numbers.
According to data from the folks at Business Insider, Buffett's weighted average cost comes out to around $53 per share. On Friday, Occidental closed at $61.06.
So: What’s Buffett’s endgame? Will he buy all of Oxy? Who knows.
Berkshire and Occidental declined comment.
It could be that Buffett, who always appreciates a company with a robust return on equity (ROE), likes the job Hollub has done at Oxy, which returned 16% on its equity last year and is tracking towards 30% this year, according to data from Value Line.
Should you buy Oxy? Again, who knows.
Your take on climate change might inform your decision. Sure Oxy is taking steps to offset carbon, but you don’t buy an ice cream shop if you believe strongly in dieting.
“If you're negative on carbon based fuels, Oxy is probably not the one,” says market analyst and trader Bob Iaccino, who owns the stock.
As for buying it just because Buffett owns, Iaccino has a take there too.
"I wouldn't buy something because Warren Buffett did," Iaccino says. "And I would not buy something because Warren Buffett didn't."
Again: simple and complicated.
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>>> 2 Warren Buffett Stocks That Are Absolutely Trouncing the Stock Market
Motley Fool
By Keith Noonan
Jul 5, 2022
https://www.fool.com/investing/2022/07/05/2-warren-buffett-stocks-that-are-absolutely-trounc/
The market has been brutal in 2022, but these Buffett-backed stocks are up big.
Berkshire Hathaway has returned to trouncing the market in 2022. Roughly halfway through the year, CEO Warren Buffett's company is down roughly 9%, while the S&P 500 index has slid roughly 21% across the stretch.
The investment conglomerate's year-to-date performance might not sound like cause for celebration, but it looks pretty good in context, and the company has some holdings putting up very strong performance amid the challenging backdrop. Read on for a look at two companies in the Berkshire Hathaway portfolio that are posting eye-catching performance despite the tough market conditions in 2022.
1. Occidental Petroleum
Berkshire Hathaway helped finance oil company Occidental Petroleum's (OXY -1.30%) acquisition of Anadarko Petroleum in 2019 through a roughly $10 billion investment. With the oil and gas market having rebounded from pandemic-related headwinds and now benefiting from record pricing levels, Buffett and Berkshire have ramped up their investment in Occidental.
Despite the tough backdrop for the market at large, Occidental's share price has more than doubled this year. It's not hard to see why investors are excited. With energy prices surging, expectations for this year's earnings have soared, and the jump in expected profits for next year is even more eye-catching.
The Oracle of Omaha seems to be betting that oil prices will remain high in the near future. Buffett loaded up on more Occidental Petroleum shares in the first quarter and, as disclosed in recent filings, has continued to add to its position in the company. Occidental currently accounts for roughly 3.6% of Berkshire's stock portfolio and stands as Berkshire's sixth-largest stock holding.
Buffett's company currently owns roughly 16.4% of the energy company's outstanding shares, and some investors think that Berkshire may be on track to acquire Occidental outright. In addition to its stock position, Berkshire also holds Occidental warrants, giving it the ability to purchase more stock at a price of roughly $59.62 per share. If Buffett opts to exercise those warrants, Berkshire would own a roughly 25% stake in the oil company.
With signs suggesting that gas prices are likely to remain high and a potential buyout on the table, Occidental could continue to significantly outperform the broader market in the near term.
2. Activision Blizzard
Berkshire Hathaway initiated a position in Activision Blizzard (ATVI -0.61%) shortly before Microsoft announced in January that it had signed a deal to acquire the video game publisher for $68.7 billion. Provided the deal goes through, it will become Microsoft's largest-ever acquisition.
As of Friday's close, Activision Blizzard is up 18% year to date and 20% since the announcement of the deal with Microsoft. However, with Activision's stock currently priced around $78 per share and Microsoft set to buy the publisher for $95 per share in an all-cash deal, the stock still has 21% upside at current prices. The deal is expected to close in the first half of 2023.
At its annual shareholder meeting, Berkshire revealed it had purchased even more of the game company's stock -- signaling high conviction in the likelihood of the deal going through. With its ample cash reserves and dependable management team, Microsoft is a reliable purchaser, and the all-cash nature of the deal means that investors won't be exposed to potential fluctuations of the tech giant's share price in the event of ongoing market volatility.
On the other hand, the acquisition still needs regulatory approval, and some investors are betting that antitrust issues will ultimately cause it to fall apart. While Microsoft has plenty of strong competition in both the gaming industry and broader technology space, the fact that Activision Blizzard can be purchased at such a significant discount compared to the buyout price makes it clear the market believes there is still significant risk here.
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RGC share buyback by Company CEO & Philanthropist
RGC a healthcare company which has been on the target of shortsellers in Q2 22’ is taking on the full might of the company CEO.
Based on the the CEO’s Schedule 13D fillings with the SEC (US Security and Exchange Commission), CEO (Mr Au) has used an aggregate of $5.03 mil of his personal funds to purcahse ordinary shares on open market between July 2021 and May 2022. A total of 10,539,159 ordinary shares are now owned by the Mr Au, which represents approximately 81% of company’s total issued and outstanding ordinary shrares.
The company’s mission is to develop a natural threatment method for eurocognitive disorders and degenerations, specifically ADHD and ASD, and infectious diseases affecting people’s immune system such as COVID-19.
Aside from RGC’s approach in developing succesful treatments for ADHD and ASD, Mr Au is also been involved in his own philanthropic project (within his own means) and aims to provided care to over 10,000 affected children with ADHD, ASD and Covid-19 and also those affected by financial difficulties. As of today, Mr Au’s project has personally helped over 150 children since the launch of this project on April 16, 22.
https://www.morningstar.com/news/business-wire/20220516005531/regencell-bioscience-holdings-limited-announces-over-5-million-ordinary-share-purchases-by-ceo
>>> Warren Buffett broke up with most of his beloved banks — why is he still swooning over this one?
MoneyWise
by Vishesh Raisinghani
June 18, 2022
https://finance.yahoo.com/news/warren-buffett-broke-most-beloved-130000046.html
The Oracle of Omaha has had a busy quarter.
According to his latest 13F filing, Warren Buffett has deployed roughly one-third of his cash into new investments during the first three months of the year.
As always, Buffett’s biggest swings are noteworthy. However, his decision to sell most bank stocks while adding Citigroup (C) to Berkshire Hathaway’s (BRK) portfolio is puzzling Wall Street.
Here’s why this contradiction has caught so much attention.
Buffett loves banks
Buffett is deeply familiar with banking and financial services. He believes the business is relatively straightforward and can be extremely lucrative if managed well.
“If you can just stay away from following the fads, and really making a lot of bad loans, banking has been a remarkably good business in this country,” he told Berkshire Hathaway investors in 2003.
What about the 2008 Global Financial Crisis? Buffett went on a shopping spree during that time, picking up stakes in JP Morgan (JPM) and Goldman Sachs (GS).
For several years, major banks have been the biggest holdings in the Berkshire portfolio. In 2009, he even said Wells Fargo (WFC) was his highest-conviction investment.
“If I had to put all my net worth in one stock, that would’ve been the stock,” he told Berkshire shareholders.
This year, Buffett has completely exited all these investments. Only a few banks remain in the portfolio.
That doesn’t mean the love affair with financial services is over.
In fact, Buffett added a new bank to his collection this year: Citigroup. During the first quarter of 2022, he added 55 million shares of Citigroup to the Berkshire portfolio.
The stake is now worth $2.5 billion, making it the 16th largest holding in the basket.
The bet seems to be predicated on a turnaround story.
Citigroup’s transformation
Citigroup has lagged behind its peers. Over the past five years, the stock is down over 28%.
Compare that to Bank of America’s 37% return over the same period. Even the SPDR S&P Bank ETF (KBE) is up 1.9%.
The company is now attempting a turnaround to catch up. Last year, Citigroup’s board appointed Jane Fraser as the new CEO — making her the first female leader of a major U.S. bank.
Fraser's strategy involves focusing on the more profitable segments of the business. Citigroup is selling or shutting down operations in Mexico, Australia, Philippines, South Korea and elsewhere.
Citi stock hasn’t fully reflected this new strategy.
An undervalued opportunity?
Citigroup stock currently trades at a price-to-earnings ratio of 5.6. Its price-to-book ratio is 0.52. That’s significantly lower than the industry average of 9.45 and 1.12 respectively.
Put simply, the stock is cheap.
If the new management team can streamline operations and boost profitability, the bank’s valuation could catch up with peers.
Meanwhile, a rising interest rate environment should provide another tailwind.
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>>> Here Are All 16 Stocks Warren Buffett Has Bought Since 2022 Began
Motley Fool
By Sean Williams
Jun 15, 2022
https://www.fool.com/investing/2022/06/15/16-stocks-warren-buffett-bought-since-2022-began/
KEY POINTS
Warren Buffett has created over $645 billion in value for shareholders since becoming CEO of Berkshire in 1965.
Big declines in the stock market have encouraged Buffett to pick up shares of these 16 companies.
The Oracle of Omaha has put more than $50 billion to work this year.
When Berkshire Hathaway (BRK.A 0.75%) (BRK.B 0.47%) CEO Warren Buffett buys a stock, Wall Street and investors wisely pay close attention. That's because riding the Oracle of Omaha's coattails has been a very profitable strategy for decades.
Since taking the reins as CEO in 1965, Buffett has overseen the creation of more than $645 billion in value for shareholders, as well as delivered an aggregate return on the company's Class A shares (BRK.A) of 3,641,613%. This works out to a 20.1% average annual return over 57 years, and is effectively double the annualized total return of the benchmark S&P 500, including dividends, over the same stretch.
Here's the full rundown of what Buffett has been buying
Aside from Berkshire Hathaway's annual shareholder meeting and the letter Buffett writes to shareholders each year, the most-anticipated event is the company's quarterly 13F filing with the Securities and Exchange Commission (SEC). A 13F gives investors an under-the-hood look at what the most successful money managers bought, sold, and held in the most-recent quarter. It's a required filing by money managers with at least $100 million in assets under management.
With all three of the major U.S. stock indexes entering correction territory or a bear market in the first quarter, Buffett and his investment team were quite busy. More than $50 billion in Berkshire's available capital has been put to work since the year began. Based on the company's mid-May 13F filing, as well as other SEC filings, Buffett has overseen the purchase of the following 16 stocks since 2022 began:
HP (HPQ 1.96%): 120,952,818 shares
Chevron (CVX -1.96%): 120,933,081
Paramount Global (PARA 0.95%): 68,947,760
Citigroup (C 3.52%): 55,155,797
Activision Blizzard (ATVI 0.95%): 49,657,101
Ally Financial (ALLY 2.20%): 8,969,420
Celanese (CE -1.34%): 7,880,998
Occidental Petroleum (OXY -2.92%): 5,887,618
Formula One Group (FWON.K 5.20%): 5,603,705
Floor & Décor (FND 1.65%): 3,936,291
Apple (AAPL 2.01%): 3,787,856
McKesson (MCK 0.38%): 2,921,975
General Motors (GM 2.95%): 2,045,847
Markel (MKL 0.20%): 420,293
RH (RH 2.04%): 353,453
Berkshire Hathaway: 2,005 BRK.A shares and 6,824,671 BRK.B shares
Value stocks are a Buffett specialty
If there's one prevailing theme with the vast majority of Buffett's buying activity through the first five months and change of 2022, it's that value is paramount (no pun intended given the purchase of shares of Paramount). Buying highly profitable, time-tested businesses at a discount has been the Oracle of Omaha's priority.
For instance, Berkshire Hathaway took a greater-than-11% stake in personal computing and printing solutions company HP. The growth heyday for HP has long since passed. But it remains exceptionally profitable and is valued at roughly eight times forecast earnings for this year and 2023. Consumer and enterprise demand for PCs doesn't vacillate much, which makes HP a relatively safe bet in a volatile market.
The same can be said for auto giant General Motors, which is trading at just five times Wall Street's forecast earnings for this year. Despite numerous headwinds, such as supply chain disruptions caused by the COVID-19 pandemic, General Motors looks to have a sizable growth runway thanks to the industry's ongoing shift to electric vehicles (EVs). GM plans to invest $35 billion in EVs, autonomous vehicles, and batteries through the midpoint of the decade.
Banks and energy stocks are back in focus
It's no secret that the Buffett aligns Berkshire Hathaway's portfolio to take advantage of cyclical upswings in the U.S. and global economy. After all, economic expansions last disproportionately longer than recessions. This is why banks and energy stocks have been popular buys for Buffett in 2022.
Although it's possibly the least-loved money-center bank, Buffett and his team piled into Citigroup during the first quarter. While Citi does have international headwinds and has faced its fair share of litigation, the company also happens to be one of the cheapest relative to book value among big-bank stocks. With higher interest rates on the horizon, banks are set to enjoy a windfall of added net interest income from outstanding variable-rate loans.
As for energy stocks, Buffett's enormous bets on Chevron and Occidental Petroleum likely signify his expectation that oil and natural gas prices will remain elevated for some time. A lack of upstream investment during the pandemic, coupled with supply disruption tied to Russia's invasion of Ukraine, should allow integrated oil and gas companies like Chevron and Occidental to reap the rewards of multidecade highs for oil and natural gas.
There can never be enough Apple
Buffett's buying activity to begin 2022 also included adding more Apple shares. As of the end of last week, Apple made up a whopping 38.2% of Berkshire's invested assets.
Buffett views Apple as one of Berkshire's pillars and value determinants. It's also a company that checks all the appropriate boxes in his eyes. It has an extremely well-known brand, as well as highly loyal customer base, and its innovation has driven the company to successively higher sales and profits. As of the first quarter, Counterpoint Research notes that the iPhone accounted for half of all smartphone share in the United States.
But Apple is also a company in transition. CEO Tim Cook is overseeing an operating shift that places added emphasis on subscription services. As subscription revenue grows into a larger percentage of total sales, Apple should benefit from higher margins, an even more loyal customer base, and less revenue lumpiness associated with product replacement cycles.
I'd also be remiss if I didn't point out that Apple has repurchased nearly $500 billion worth of its common stock since the beginning of 2013. Having a sizable capital return program is an easy way to get on Buffett's good side.
Buffett's favorite company is, arguably, his own
But perhaps the least surprising Buffett buy of all -- and one you won't find in the 13F filing -- is that of his own company. Berkshire Hathaway's first-quarter results show that Buffett and his right-hand man, Charlie Munger, oversaw the repurchase of 2,005 Class A shares and more than 6.8 million Class B shares.
Following more than a half-decade without any stock buybacks, Buffett and Munger have had a field day since Berkshire's board of directors changed the necessary parameters for share repurchases. Since mid-July 2018, over $61 billion worth of Berkshire Hathaway stock has been bought back.
As a reminder, repurchasing stock often has a positive impact on the value of a company's remaining shares. If a company's net income is steady or growing over time, having fewer shares outstanding should result in higher earnings per share. Thus, share buybacks can make a company appear more attractive on a valuation basis.
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>>> Berkshire's $11.6B Alleghany deal expands insurance business
The Washington Post
By Michelle Chapman and Josh Funk?|
March 21, 2022
https://www.washingtonpost.com/business/berkshire-hathaway-buying-alleghany-in-116b-deal/2022/03/21/188a802c-a905-11ec-8a8e-9c6e9fc7a0de_story.html
Warren Buffett, who started the year bemoaning the lack of potential acquisitions for his conglomerate, Berkshire Hathaway, announced Monday that it would acquire the insurance company Alleghany for $11.6 billion.
The scarcity of investment targets over the past several years turned into a cash pile of $146.7 billion at Berkshire by the end of 2021, but the company appears to have found a suitable place for some of that cash in recent days.
The Omaha, Nebraska, company revealed last week that it had compiled a 14.6% stake in Occidental Petroleum, snapping up an additional $1 billion worth of shares just between Monday and Wednesday. That was on top of the more than $6 billion Berkshire spent acquiring shares of the oil producer over the past month.
The all-cash acquisition of Alleghany will expand Berkshire’s already considerable insurance holdings, including brands like Geico auto insurance.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Buffett said in a prepared statement Monday. “Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway.”
Alleghany’s core businesses are in property and casualty reinsurance and insurance, but like Berkshire, it also owns several other businesses, including a steel fabricator and a toy company, and manages an investment portfolio. Edward Jones analyst Jim Shanahan said nearly one-third of Alleghany’s revenue came from those operating companies and its investments last year.
“This is a highly complimentary and very similar franchise,” Shanahan said. “I’m really pleased to see Berkshire putting capital to work in the market.”
Berkshire will pay $848.02 in cash for each outstanding share of Alleghany Corp., the company said Monday.
“Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.” Alleghany Chair Jefferson Kirby said.
CFRA Research analyst Cathy Seifert said this deal makes sense for both companies because it will provide Alleghany access to Berkshire’s massive capital reserves while expanding insurance and reinsurance operations at Buffett’s company at time when the growth prospects for those companies are good.
Alleghany, based in New York City, will operate as an independent subsidiary of Berkshire Hathaway after the transaction’s closing. It has 25 days to actively solicit and consider alternative acquisition proposals under a “go-shop” provision. If another suitor does offer a higher price for Alleghany, Berkshire could lose out on the deal because Buffett avoids bidding wars and rarely increases what he offers for acquisitions.
The analysts said it likely helped this deal come together that Buffett is familiar Alleghany’s CEO, Joe Brandon, who previously led one of Berkshire’s reinsurance companies for seven years.
The deal announcement comes after Buffett said last month in his annual letter to company investors that he was having difficulty finding worthwhile acquisitions at prices he likes with the valuations on companies soaring.
Yet Berkshire has made sizeable investments in Occidental since late February just as the price of oil began to spike, bringing along the shares of oil producers with it. Benchmark U.S. crude had jumped more than 40% this year with its rise accelerated by Russia’s invasion of Ukraine.
Shares of Occidental have jumped nearly 150% in the same period. That price increase has brought Occidental shares to a point just over where Berkshire holds warrants to buy another 83.9 million shares for just over $59.62 apiece. Berkshire picked up those warrants when it agreed to help finance Occidental’s acquisition of Anadarko
The boards of both Allegheny and Berkshire have approved the deal and it’s expected to close in the fourth quarter. It still needs approval from Alleghany shareholders.
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>>> Here's the secret message from Warren Buffett's newest big deals
Yahoo Finance
by Brian Sozzi
March 21, 2022
https://finance.yahoo.com/news/heres-the-secret-message-from-warren-buffetts-newest-big-deals-155340753.html
Warren Buffett has come out of hibernation in March to make some eye-popping deals, sending a clear sign to investors more broadly, says Baird strategist Michael Antonelli.
"Buffett [is] doing Buffett things. I think it reminds me and should remind [everyone] that the world is still spinning. Companies are still planning for the future, and they are still doing the things that make them great companies," Antonelli said on Yahoo Finance Live.
Indeed, Buffett's brain appears to be spinning overtime right now.
The 91-year-old billionaire investor revealed Monday that his Berkshire Hathaway will spend $11.6 billion to buy insurance company Alleghany. The deal will expand Buffett's insurance empire further beyond auto insurance player Geico and reinsurance beast Gen Re (General Reinsurance Corporation).
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years," Buffett said in a statement.
Alleghany hauled in more than $12 billion in sales last year and $1.1 billion in net earnings.
Shares of Alleghany skyrocketed 25% on the news. The stock was among the top three trending tickers on Yahoo Finance.
While dipping into the insurance space, Buffett has also gone shopping for energy names amid soaring crude oil prices in the wake of the Russia-Ukraine crisis.
Buffett scooped up another 18.1 million shares of Occidental for close to $1 billion last week. The latest purchases come hot on the heels of Berkshire spending $6 billion or so in the prior two weeks to buy up Occidental shares.
Berkshire now owns nearly 14.6% of Occidental Petroleum through his roughly 140 million shares.
"What these deals tell me is that animal spirits are still alive," Antonelli adds.
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>>> Here's what Warren Buffett's favorite stock market indicator is saying now
Yahoo Finance
by Brian Sozzi
March 17, 2022
https://finance.yahoo.com/news/heres-what-warren-buffetts-favorite-stock-market-indicator-is-saying-now-174656238.html
Stocks have endured a terrible start to the year as investors fret about soaring inflation and the Russia-Ukraine war — but the pullback still doesn't look like a great buying opportunity per a tried and true measure used by legendary investor Warren Buffett.
The “Buffett Indicator” as it’s called by legions of devotees — which takes the Wilshire 5000 Index (viewed as the total stock market) and divides it by the annual U.S. GDP — is still hovering around a record high even as stock prices are well off their record levels.
In looking at the numbers, the Buffett Indicator stands at about 168.1% — down sharply from highs above 202% in August 2021, per data from GuruFocus.
“The stock market is significantly overvalued according to the Buffett Indicator,” said researchers at GuruFocus. “Based on the historical ratio of total market cap over GDP (currently at 168.1%), it is likely to return 0% a year from this level of valuation, including dividends.”
The Buffett Indicator rose to fame after a 2001 Fortune Magazine article written by Buffett and long-time Fortune writer and Buffett insider Carol Loomis.
“The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment,” explained Buffett in the article.
Seeing the Buffett Indicator still in significantly overvalued territory is interesting for a few reasons.
First, stocks have been walloped in 2022.
The S&P 500 entered Thursday's session down 10.6% for the year. That is the sixth worst start to a year for the S&P 500 ever, says strategists at LPL Financial. Further, household names such as Meta (down 39%) and Netflix (down 40%) have been pummeled.
And secondarily, Buffett himself is out there buying shares during this potential period of overvaluation.
The billionaire investor has been adding to his stake in oil giant Occidental Petroleum this month ahead of a key analyst day next week. Buffett just scooped up 18.1 million additional shares of Occidental, giving him a 14.6% stake in the company.
Shares of Occidental are up 98% year-to-date in part fueled by Buffett's involvement.
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Buffett Indicator - >>> Warren Buffett On The Stock Market
What's in the future for investors--another roaring bull market or more upset stomach? Amazingly, the answer may come down to three simple factors. Here, the world's most celebrated investor talks about what really makes the market tick--and whether that ticking should make you nervous.
Fortune Magazine
By Warren Buffett; Carol Loomis
December 10, 2001
https://archive.fortune.com/magazines/fortune/fortune_archive/2001/12/10/314691/index.htm
(FORTUNE Magazine) – Two years ago, following a July 1999 speech by Warren Buffett, chairman of Berkshire Hathaway, on the stock market--a rare subject for him to discuss publicly--FORTUNE ran what he had to say under the title "Mr. Buffett on the Stock Market" (Nov. 22, 1999). His main points then concerned two consecutive and amazing periods that American investors had experienced, and his belief that returns from stocks were due to fall dramatically. Since the Dow Jones Industrial Average was 11194 when he gave his speech and recently was about 9900, no one yet has the goods to argue with him.
So where do we stand now--with the stock market seeming to reflect a dismal profit outlook, an unfamiliar war, and rattled consumer confidence? Who better to supply perspective on that question than Buffett?
The thoughts that follow come from a second Buffett speech, given last July at the site of the first talk, Allen & Co.'s annual Sun Valley bash for corporate executives. There, the renowned stockpicker returned to the themes he'd discussed before, bringing new data and insights to the subject. Working with FORTUNE's Carol Loomis, Buffett distilled that speech into this essay, a fitting opening for this year's Investor's Guide. Here again is Mr. Buffett on the Stock Market.
The last time I tackled this subject, in 1999, I broke down the previous 34 years into two 17-year periods, which in the sense of lean years and fat were astonishingly symmetrical. Here's the first period. As you can see, over 17 years the Dow gained exactly one-tenth of one percent.
Dow Jones Industrial Average
ï Dec. 31, 1964: 874.12
ï Dec. 31, 1981: 875.00
And here's the second, marked by an incredible bull market that, as I laid out my thoughts, was about to end (though I didn't know that).
Dow Jones Industrial Average
ï Dec. 31, 1981: 875.00
ï Dec. 31, 1998: 9181.43
Now, you couldn't explain this remarkable divergence in markets by, say, differences in the growth of gross national product. In the first period--that dismal time for the market--GNP actually grew more than twice as fast as it did in the second period.
Gain in Gross National Product
ï 1964-1981: 373%
ï 1981-1988: 177%
So what was the explanation? I concluded that the market's contrasting moves were caused by extraordinary changes in two critical economic variables--and by a related psychological force that eventually came into play.
Here I need to remind you about the definition of "investing," which though simple is often forgotten. Investing is laying out money today to receive more money tomorrow.
That gets to the first of the economic variables that affected stock prices in the two periods--interest rates. In economics, interest rates act as gravity behaves in the physical world. At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset. You see that clearly with the fluctuating prices of bonds. But the rule applies as well to farmland, oil reserves, stocks, and every other financial asset. And the effects can be huge on values. If interest rates are, say, 13%, the present value of a dollar that you're going to receive in the future from an investment is not nearly as high as the present value of a dollar if rates are 4%.
So here's the record on interest rates at key dates in our 34-year span. They moved dramatically up--that was bad for investors--in the first half of that period and dramatically down--a boon for investors--in the second half.
Interest rates, Long-term government bonds
ï Dec. 31, 1964: 4.20%
ï Dec. 31, 1981: 13.65%
ï Dec. 31, 1998: 5.09%
The other critical variable here is how many dollars investors expected to get from the companies in which they invested. During the first period expectations fell significantly because corporate profits weren't looking good. By the early 1980s Fed Chairman Paul Volcker's economic sledgehammer had, in fact, driven corporate profitability to a level that people hadn't seen since the 1930s.
The upshot is that investors lost their confidence in the American economy: They were looking at a future they believed would be plagued by two negatives. First, they didn't see much good coming in the way of corporate profits. Second, the sky-high interest rates prevailing caused them to discount those meager profits further. These two factors, working together, caused stagnation in the stock market from 1964 to 1981, even though those years featured huge improvements in GNP. The business of the country grew while investors' valuation of that business shrank!
And then the reversal of those factors created a period during which much lower GNP gains were accompanied by a bonanza for the market. First, you got a major increase in the rate of profitability. Second, you got an enormous drop in interest rates, which made a dollar of future profit that much more valuable. Both phenomena were real and powerful fuels for a major bull market. And in time the psychological factor I mentioned was added to the equation: Speculative trading exploded, simply because of the market action that people had seen. Later, we'll look at the pathology of this dangerous and oft-recurring malady.
Two years ago I believed the favorable fundamental trends had largely run their course. For the market to go dramatically up from where it was then would have required long-term interest rates to drop much further (which is always possible) or for there to be a major improvement in corporate profitability (which seemed, at the time, considerably less possible). If you take a look at a 50-year chart of after-tax profits as a percent of gross domestic product, you find that the rate normally falls between 4%--that was its neighborhood in the bad year of 1981, for example--and 6.5%. For the rate to go above 6.5% is rare. In the very good profit years of 1999 and 2000, the rate was under 6% and this year it may well fall below 5%.
So there you have my explanation of those two wildly different 17-year periods. The question is, How much do those periods of the past for the market say about its future?
To suggest an answer, I'd like to look back over the 20th century. As you know, this was really the American century. We had the advent of autos, we had aircraft, we had radio, TV, and computers. It was an incredible period. Indeed, the per capita growth in U.S. output, measured in real dollars (that is, with no impact from inflation), was a breathtaking 702%.
The century included some very tough years, of course--like the Depression years of 1929 to 1933. But a decade-by-decade look at per capita GNP shows something remarkable: As a nation, we made relatively consistent progress throughout the century. So you might think that the economic value of the U.S.--at least as measured by its securities markets--would have grown at a reasonably consistent pace as well.
That's not what happened. We know from our earlier examination of the 1964-98 period that parallelism broke down completely in that era. But the whole century makes this point as well. At its beginning, for example, between 1900 and 1920, the country was chugging ahead, explosively expanding its use of electricity, autos, and the telephone. Yet the market barely moved, recording a 0.4% annual increase that was roughly analogous to the slim pickings between 1964 and 1981.
Dow Industrials
ï Dec. 31, 1899: 66.08
ï Dec. 31, 1920: 71.95
In the next period, we had the market boom of the '20s, when the Dow jumped 430% to 381 in September 1929. Then we go 19 years--19 years--and there is the Dow at 177, half the level where it began. That's true even though the 1940s displayed by far the largest gain in per capita GDP (50%) of any 20th-century decade. Following that came a 17-year period when stocks finally took off--making a great five-to-one gain. And then the two periods discussed at the start: stagnation until 1981, and the roaring boom that wrapped up this amazing century.
To break things down another way, we had three huge, secular bull markets that covered about 44 years, during which the Dow gained more than 11,000 points. And we had three periods of stagnation, covering some 56 years. During those 56 years the country made major economic progress and yet the Dow actually lost 292 points.
How could this have happened? In a flourishing country in which people are focused on making money, how could you have had three extended and anguishing periods of stagnation that in aggregate--leaving aside dividends--would have lost you money? The answer lies in the mistake that investors repeatedly make--that psychological force I mentioned above: People are habitually guided by the rear-view mirror and, for the most part, by the vistas immediately behind them.
The first part of the century offers a vivid illustration of that myopia. In the century's first 20 years, stocks normally yielded more than high-grade bonds. That relationship now seems quaint, but it was then almost axiomatic. Stocks were known to be riskier, so why buy them unless you were paid a premium?
And then came along a 1924 book--slim and initially unheralded, but destined to move markets as never before--written by a man named Edgar Lawrence Smith. The book, called Common Stocks as Long Term Investments, chronicled a study Smith had done of security price movements in the 56 years ended in 1922. Smith had started off his study with a hypothesis: Stocks would do better in times of inflation, and bonds would do better in times of deflation. It was a perfectly reasonable hypothesis.
But consider the first words in the book: "These studies are the record of a failure--the failure of facts to sustain a preconceived theory." Smith went on: "The facts assembled, however, seemed worthy of further examination. If they would not prove what we had hoped to have them prove, it seemed desirable to turn them loose and to follow them to whatever end they might lead."
Now, there was a smart man, who did just about the hardest thing in the world to do. Charles Darwin used to say that whenever he ran into something that contradicted a conclusion he cherished, he was obliged to write the new finding down within 30 minutes. Otherwise his mind would work to reject the discordant information, much as the body rejects transplants. Man's natural inclination is to cling to his beliefs, particularly if they are reinforced by recent experience--a flaw in our makeup that bears on what happens during secular bull markets and extended periods of stagnation.
To report what Edgar Lawrence Smith discovered, I will quote a legendary thinker--John Maynard Keynes, who in 1925 reviewed the book, thereby putting it on the map. In his review, Keynes described "perhaps Mr. Smith's most important point ... and certainly his most novel point. Well-managed industrial companies do not, as a rule, distribute to the shareholders the whole of their earned profits. In good years, if not in all years, they retain a part of their profits and put them back in the business. Thus there is an element of compound interest (Keynes' italics) operating in favor of a sound industrial investment."
It was that simple. It wasn't even news. People certainly knew that companies were not paying out 100% of their earnings. But investors hadn't thought through the implications of the point. Here, though, was this guy Smith saying, "Why do stocks typically outperform bonds? A major reason is that businesses retain earnings, with these going on to generate still more earnings--and dividends, too."
That finding ignited an unprecedented bull market. Galvanized by Smith's insight, investors piled into stocks, anticipating a double dip: their higher initial yield over bonds, and growth to boot. For the American public, this new understanding was like the discovery of fire.
But before long that same public was burned. Stocks were driven to prices that first pushed down their yield to that on bonds and ultimately drove their yield far lower. What happened then should strike readers as eerily familiar: The mere fact that share prices were rising so quickly became the main impetus for people to rush into stocks. What the few bought for the right reason in 1925, the many bought for the wrong reason in 1929.
Astutely, Keynes anticipated a perversity of this kind in his 1925 review. He wrote: "It is dangerous...to apply to the future inductive arguments based on past experience, unless one can distinguish the broad reasons why past experience was what it was." If you can't do that, he said, you may fall into the trap of expecting results in the future that will materialize only if conditions are exactly the same as they were in the past. The special conditions he had in mind, of course, stemmed from the fact that Smith's study covered a half century during which stocks generally yielded more than high-grade bonds.
The colossal miscalculation that investors made in the 1920s has recurred in one form or another several times since. The public's monumental hangover from its stock binge of the 1920s lasted, as we have seen, through 1948. The country was then intrinsically far more valuable than it had been 20 years before; dividend yields were more than double the yield on bonds; and yet stock prices were at less than half their 1929 peak. The conditions that had produced Smith's wondrous results had reappeared--in spades. But rather than seeing what was in plain sight in the late 1940s, investors were transfixed by the frightening market of the early 1930s and were avoiding re-exposure to pain.
Don't think for a moment that small investors are the only ones guilty of too much attention to the rear-view mirror. Let's look at the behavior of professionally managed pension funds in recent decades. In 1971--this was Nifty Fifty time--pension managers, feeling great about the market, put more than 90% of their net cash flow into stocks, a record commitment at the time. And then, in a couple of years, the roof fell in and stocks got way cheaper. So what did the pension fund managers do? They quit buying because stocks got cheaper!
Private Pension Funds % of cash flow put into equities
ï 1971: 91% (record high)
ï 1974: 13%
This is the one thing I can never understand. To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the "Hallelujah Chorus" in the Buffett household. When hamburgers go up, we weep. For most people, it's the same way with everything in life they will be buying--except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
That sort of behavior is especially puzzling when engaged in by pension fund managers, who by all rights should have the longest time horizon of any investors. These managers are not going to need the money in their funds tomorrow, not next year, nor even next decade. So they have total freedom to sit back and relax. Since they are not operating with their own funds, moreover, raw greed should not distort their decisions. They should simply think about what makes the most sense. Yet they behave just like rank amateurs (getting paid, though, as if they had special expertise).
In 1979, when I felt stocks were a screaming buy, I wrote in an article, "Pension fund managers continue to make investment decisions with their eyes firmly fixed on the rear-view mirror. This generals-fighting-the-last-war approach has proved costly in the past and will likely prove equally costly this time around." That's true, I said, because "stocks now sell at levels that should produce long-term returns far superior to bonds."
Consider the circumstances in 1972, when pension fund managers were still loading up on stocks: The Dow ended the year at 1020, had an average book value of 625, and earned 11% on book. Six years later, the Dow was 20% cheaper, its book value had gained nearly 40%, and it had earned 13% on book. Or as I wrote then, "Stocks were demonstrably cheaper in 1978 when pension fund managers wouldn't buy them than they were in 1972, when they bought them at record rates."
At the time of the article, long-term corporate bonds were yielding about 9.5%. So I asked this seemingly obvious question: "Can better results be obtained, over 20 years, from a group of 9.5% bonds of leading American companies maturing in 1999 than from a group of Dow-type equities purchased, in aggregate, around book value and likely to earn, in aggregate, about 13% on that book value?" The question answered itself.
Now, if you had read that article in 1979, you would have suffered--oh, how you would have suffered!--for about three years. I was no good then at forecasting the near-term movements of stock prices, and I'm no good now. I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two.
But I think it is very easy to see what is likely to happen over the long term. Ben Graham told us why: "Though the stock market functions as a voting machine in the short run, it acts as a weighing machine in the long run." Fear and greed play important roles when votes are being cast, but they don't register on the scale.
By my thinking, it was not hard to say that, over a 20-year period, a 9.5% bond wasn't going to do as well as this disguised bond called the Dow that you could buy below par--that's book value--and that was earning 13% on par.
Let me explain what I mean by that term I slipped in there, "disguised bond." A bond, as most of you know, comes with a certain maturity and with a string of little coupons. A 6% bond, for example, pays a 3% coupon every six months.
A stock, in contrast, is a financial instrument that has a claim on future distributions made by a given business, whether they are paid out as dividends or to repurchase stock or to settle up after sale or liquidation. These payments are in effect "coupons." The set of owners getting them will change as shareholders come and go. But the financial outcome for the business' owners as a whole will be determined by the size and timing of these coupons. Estimating those particulars is what investment analysis is all about.
Now, gauging the size of those "coupons" gets very difficult for individual stocks. It's easier, though, for groups of stocks. Back in 1978, as I mentioned, we had the Dow earning 13% on its average book value of $850. The 13% could only be a benchmark, not a guarantee. Still, if you'd been willing then to invest for a period of time in stocks, you were in effect buying a bond--at prices that in 1979 seldom inched above par--with a principal value of $891 and a quite possible 13% coupon on the principal.
How could that not be better than a 9.5% bond? From that starting point, stocks had to outperform bonds over the long term. That, incidentally, has been true during most of my business lifetime. But as Keynes would remind us, the superiority of stocks isn't inevitable. They own the advantage only when certain conditions prevail.
Let me show you another point about the herd mentality among pension funds--a point perhaps accentuated by a little self-interest on the part of those who oversee the funds. In the table below are four well-known companies--typical of many others I could have selected--and the expected returns on their pension fund assets that they used in calculating what charge (or credit) they should make annually for pensions.
Now, the higher the expectation rate that a company uses for pensions, the higher its reported earnings will be. That's just the way that pension accounting works--and I hope, for the sake of relative brevity, that you'll just take my word for it.
As the table shows, expectations in 1975 were modest: 7% for Exxon, 6% for GE and GM, and under 5% for IBM. The oddity of these assumptions is that investors could then buy long-term government noncallable bonds that paid 8%. In other words, these companies could have loaded up their entire portfolio with 8% no-risk bonds, but they nevertheless used lower assumptions. By 1982, as you can see, they had moved up their assumptions a little bit, most to around 7%. But now you could buy long-term governments at 10.4%. You could in fact have locked in that yield for decades by buying so-called strips that guaranteed you a 10.4% reinvestment rate. In effect, your idiot nephew could have managed the fund and achieved returns far higher than the investment assumptions corporations were using.
Why in the world would a company be assuming 7.5% when it could get nearly 10.5% on government bonds? The answer is that rear-view mirror again: Investors who'd been through the collapse of the Nifty Fifty in the early 1970s were still feeling the pain of the period and were out of date in their thinking about returns. They couldn't make the necessary mental adjustment.
Now fast-forward to 2000, when we had long-term governments at 5.4%. And what were the four companies saying in their 2000 annual reports about expectations for their pension funds? They were using assumptions of 9.5% and even 10%.
I'm a sporting type, and I would love to make a large bet with the chief financial officer of any one of those four companies, or with their actuaries or auditors, that over the next 15 years they will not average the rates they've postulated. Just look at the math, for one thing. A fund's portfolio is very likely to be one-third bonds, on which--assuming a conservative mix of issues with an appropriate range of maturities--the fund cannot today expect to earn much more than 5%. It's simple to see then that the fund will need to average more than 11% on the two-thirds that's in stocks to earn about 9.5% overall. That's a pretty heroic assumption, particularly given the substantial investment expenses that a typical fund incurs.
Heroic assumptions do wonders, however, for the bottom line. By embracing those expectation rates shown in the far right column, these companies report much higher earnings--much higher--than if they were using lower rates. And that's certainly not lost on the people who set the rates. The actuaries who have roles in this game know nothing special about future investment returns. What they do know, however, is that their clients desire rates that are high. And a happy client is a continuing client.
Are we talking big numbers here? Let's take a look at General Electric, the country's most valuable and most admired company. I'm a huge admirer myself. GE has run its pension fund extraordinarily well for decades, and its assumptions about returns are typical of the crowd. I use the company as an example simply because of its prominence.
If we may retreat to 1982 again, GE recorded a pension charge of $570 million. That amount cost the company 20% of its pretax earnings. Last year GE recorded a $1.74 billion pension credit. That was 9% of the company's pretax earnings. And it was 2 1/2 times the appliance division's profit of $684 million. A $1.74 billion credit is simply a lot of money. Reduce that pension assumption enough and you wipe out most of the credit.
GE's pension credit, and that of many another corporation, owes its existence to a rule of the Financial Accounting Standards Board that went into effect in 1987. From that point on, companies equipped with the right assumptions and getting the fund performance they needed could start crediting pension income to their income statements. Last year, according to Goldman Sachs, 35 companies in the S&P 500 got more than 10% of their earnings from pension credits, even as, in many cases, the value of their pension investments shrank.
Unfortunately, the subject of pension assumptions, critically important though it is, almost never comes up in corporate board meetings. (I myself have been on 19 boards, and I've never heard a serious discussion of this subject.) And now, of course, the need for discussion is paramount because these assumptions that are being made, with all eyes looking backward at the glories of the 1990s, are so extreme. I invite you to ask the CFO of a company having a large defined-benefit pension fund what adjustment would need to be made to the company's earnings if its pension assumption was lowered to 6.5%. And then, if you want to be mean, ask what the company's assumptions were back in 1975 when both stocks and bonds had far higher prospective returns than they do now.
With 2001 annual reports soon to arrive, it will be interesting to see whether companies have reduced their assumptions about future pension returns. Considering how poor returns have been recently and the reprises that probably lie ahead, I think that anyone choosing not to lower assumptions--CEOs, auditors, and actuaries all--is risking litigation for misleading investors. And directors who don't question the optimism thus displayed simply won't be doing their job.
The tour we've taken through the last century proves that market irrationality of an extreme kind periodically erupts--and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak. What's needed is an antidote, and in my opinion that's quantification. If you quantify, you won't necessarily rise to brilliance, but neither will you sink into craziness.
On a macro basis, quantification doesn't have to be complicated at all. Below is a chart, starting almost 80 years ago and really quite fundamental in what it says. The chart shows the market value of all publicly traded securities as a percentage of the country's business--that is, as a percentage of GNP. The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment. And as you can see, nearly two years ago the ratio rose to an unprecedented level. That should have been a very strong warning signal.
For investors to gain wealth at a rate that exceeds the growth of U.S. business, the percentage relationship line on the chart must keep going up and up. If GNP is going to grow 5% a year and you want market values to go up 10%, then you need to have the line go straight off the top of the chart. That won't happen.
For me, the message of that chart is this: If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200%--as it did in 1999 and a part of 2000--you are playing with fire. As you can see, the ratio was recently 133%.
Even so, that is a good-sized drop from when I was talking about the market in 1999. I ventured then that the American public should expect equity returns over the next decade or two (with dividends included and 2% inflation assumed) of perhaps 7%. That was a gross figure, not counting frictional costs, such as commissions and fees. Net, I thought returns might be 6%.
Today stock market "hamburgers," so to speak, are cheaper. The country's economy has grown and stocks are lower, which means that investors are getting more for their money. I would expect now to see long-term returns run somewhat higher, in the neighborhood of 7% after costs. Not bad at all--that is, unless you're still deriving your expectations from the 1990s.
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>>> Warren Buffett’s advice for a volatile market: patience pays
MarketWatch
Jan. 28, 2022
By Mitch Tuchman
https://www.marketwatch.com/story/warren-buffetts-advice-for-a-volatile-market-patience-pays-11643223497?siteid=yhoof2
There are two participants in each and every transaction — a seller and a buyer
Certainly you’ve been watching the stock market over the past few days. It would be hard not to.
Even the most hands-off investor has likely noticed the scare headlines popping up on the evening news, counting out thousand-point drops and flashing downward-sloping charts in bright red. There’s nothing the media likes more than a disaster, after all.
The recent stock market volatility, following years of up markets, is nevertheless the most widely forecast financial reversal in recent history.
Nothing about what we’re seeing now should be surprising — or particularly dangerous to the prepared. But what about the unprepared?
For them I offer a fundamental insight, one which can escape even seasoned investors. When you see a stock market sell off, always remember there are two participants in each and every transaction — a seller and a buyer.
Yes, stocks can go down in value, particularly when a few have been bid up out of proportion to their ultimate long-term profitability. A stock price is, after all, a number today that tells a story about tomorrow.
Remember, though, that as some investors exit the market, others enter. As Warren Buffett put it: “The stock market is a device which transfers money from the impatient to the patient.”
The unprepared are, by definition, impatient. They have overinvested in a small number of companies. They have bet big on unproven names. They have bought what Wall Street is selling, which is action over intelligence, buying over owning, and blind greed over diligence.
For perspective when stock market volatility creeps up, I refer clients to what we call our “Wall of Worry” table.
The table lists market returns back to 1934 and events in the news during those years of gains, as well as losses.
If you take a few minutes to read through it, year-by-year, it’s hard to avoid a simple truth about investing: Wars, bubbles, credit defaults, pandemics, currency devaluations, inflation — none of it stops the upward climb of stock values in most years.
Consider these three data points:
For over 100 years stocks have roughly doubled every eight years.
A dollar invested 50 years ago in the S&P 500 is worth well over $100 today.
Finally, there is no five-year period where the S&P did not register a positive return.
Can you wait up to five years for the stock market to find its footing and give you the return you seek? Great, you’re an investor.
No? Then you shouldn’t be investing at all. To quote Buffett again, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
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Two small/mid caps that Berkshire recently started positions in -
https://www.kiplinger.com/investing/stocks/603760/stocks-warren-buffett-buying-selling-q3-2021
>>> Floor & Decor Holdings (FND)
Action: New stake
Shares held: 816,863
Value of stake: $98.7 million
Warren Buffett initiated a stake in Floor & Decor Holdings (FND, $130.00) in Q3, which is very much in keeping with some of his other investments in home retail. Floor & Decor sells hard surface flooring and related accessories primarily through 133 company-operated warehouse store formats.
Buffett bought more than 816,000 shares in the company worth almost $99 million as of Sept. 30. It's a small position, to be sure, accounting for a meager 0.03% of Berkshire Hathaway's total portfolio value. But it still fits nicely with some of Buffett's other holdings and investments.
Berkshire Hathaway, for example, has been building a position in home goods retailer RH (RH) – formerly known as Restoration Hardware – since the third quarter of 2019. And he's made no secret of his love for Berkshire Hathaway's wholly-owned subsidiary Nebraska Furniture Mart.
Floor & Decor thus appears to be a way to play the housing market, albeit with a somewhat oblique, Buffett-style angle.
Royalty Pharma (RPRX)
Action: New stake
Shares held: 13,145,902
Value of stake: $475.0 million
Healthcare typically hasn't represented a large percentage of Berkshire Hathaway's assets, but the holding company usually maintains positions in several of the sector's names. That's still the case following BRK.B's exits in Merck and Organon, as Buffett & Co. have decided to add Royalty Pharma (RPRX, $41.70) into the fold.
That said, RPRX isn't your usual pharmaceutical play.
Royalty Pharma, as the name might indicate, is focused on acquiring biopharmaceutical royalties. It doesn't research or develop drugs – it helps provide capital for the companies that do. As the company explains:
"We fund innovation in the biopharmaceutical industry both directly and indirectly – directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators."
Through that model, RPRX has gotten a piece of blockbuster drugs such as AbbVie's Imbruvica, Biogen's (BIIB) Tysabri and Pfizer's (PFE) Xtandi.
Buffett spent $475 million to initiate a stake in RPRX during the third quarter, immediately making him a top-10 shareholder with 3.1% of all shares held. But it's still a relatively meager position within the Berkshire Hathaway portfolio, at less than 0.2% of equity assets.
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>>> Berkshire Hathaway’s profit drops by two-thirds
Reuters
November 6, 2021
https://news.yahoo.com/berkshire-hathaway-profit-drops-two-182154675.html
Damage from Hurricane Ida hurt quarterly results at Berkshire Hathaway, creating big underwriting losses at its insurance businesses such as Geico.
Net income at billionaire Warren Buffett’s company fell by two thirds, reflecting lower investment gains from its holding of stocks in companies such as Apple and Bank of America.
Berkshire said Saturday its operating profit rose 18% but missed analysts’ forecasts, hurt by Ida as well as flooding in Europe, crimped consumer spending, and global supply chain disruptions caused by the Delta variant.
Berkshire’s varied businesses run the gamut from insurance to a railroad, consumer goods like Duracell batteries and an auto dealership. It’s run by CEO Warren Buffett, who’s known as the “Oracle of Omaha” for his investing savvy.
Many investors want Berkshire to buy more companies but rising stock markets are making acquisitions more expensive. Berkshire is actively dipping into its huge cash pile to buy back its own shares.
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>>> These are the types of companies Warren Buffett says you should invest in during times of inflation
MarketWatch
Oct. 12, 2021
By Alisa Wolfson
https://www.marketwatch.com/story/these-are-the-types-of-companies-warren-buffett-says-you-should-invest-in-during-times-of-inflation-01633548517?siteid=yhoof2
Investing during inflation can be unnerving. Here’s what the Chairman and CEO of Berkshire Hathaway has said on how to handle it.
The latest report from the Commerce Department revealed that inflation, which rose in August, has hit a 30-year high. “Supply bottlenecks have developed that have caused inflation,” explained Treasury Secretary Janet Yellen on CNBC this month. For some investors, this news begs the question: How can I protect myself against inflation?
In general, many experts recommend investing smartly to hedge against inflation. Suze Orman recently wrote on her site that you should “keep investing in stocks” to hedge against rising costs, and Ramit Sethi noted that: “Investing is the single most effective way to get rich. Inflation can be bad for individuals when you just keep your money sitting in a bank account and do nothing else with it.” But what kinds of companies should you be investing in? Here’s what Warren Buffett has said over the decades.
The Chairman and CEO of Berkshire Hathaway, during a 2015 shareholder meeting, noted that: “The best businesses during inflation are the businesses that you buy once and then you don’t have to keep making capital investments subsequently,” while you should avoid “any business with heavy capital investment.” He highlights real estate as good during inflation, which you may buy once and then also get the rise in value as well; meanwhile he calls out businesses like utilities and railroads as not good investments during inflation.
And at a 2009 shareholder meeting, Buffett noted that the first best thing you can do to protect against inflation is to invest in yourself and your skills: “If you’re the best teacher, if you’re the best surgeon, if you’re the best lawyer, you will get your share of the national economic pie regardless of the value of whatever the currency may be,” he said. After that, he says, “the second best protection is a wonderful business,” which means a company in which the products are in demand even if the company does have to raise prices.
And in a 1981 letter to shareholders, Buffett possibly spelled this all out as clearly as ever, writing that companies that tend to withstand an inflationary environment “must have two characteristics: (1) an ability to increase prices rather easily (even when product demand is flat and capacity is not fully utilized) without fear of significant loss of either market share or unit volume, and (2) an ability to accommodate large dollar volume increases in business (often produced more by inflation than by real growth) with only minor additional investment of capital.”
All that said, perhaps the best thing many individual investors can remember from Buffett is that rather than trying to pick individual stocks, whether we’re in an inflationary period or not, you should go with this tried-and-true method: the index fund, to have and to hold. In 2021, at a shareholder meeting, Buffett declared that “I do not think the average person can pick stocks,” and noted that he recommends the S&P 500 index fund to “have for a long, long time to people.”
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>>> Warren Buffett is hanging on to these stocks for stable income — you could too
MoneyWise
Brian Pacampara, CFA
August 31, 2021
https://finance.yahoo.com/news/warren-buffett-hanging-stocks-stable-190000112.html
In a world of historically low interest rates, investors would be wise to look out for dividend stocks offering attractive — but stable — dividend yields.
High-yield dividend stocks have the potential to -
Offer a plump income stream in both good times and bad times.
Provide much-needed diversification to growth-oriented portfolios.
Outperform the S&P 500 over the long haul.
Of course, there’s no better place for investors to find solid high-yield stock picks than the portfolio of Berkshire Hathaway CEO Warren Buffett.
So with that in mind, let’s take a look at three stocks in Berkshire’s portfolio with an annual dividend yield of at least 3%.
1. Organon
With a solid dividend yield of 3.3%, biosimilars (copies of drugs used to treat diseases) and women’s health drugs specialist Organon leads off our list.
Organon became a part of Berkshire’s portfolio when drug giant Merck spun off the shares in June, but given the company’s competitive advantages and tailwinds in the women’s health space, Organon could easily become a long-term holding for Buffett.
In the most recent quarter, Organon said women’s health and biosimilars revenue increased 19% and 43%, respectively.
“Looking beyond 2021, we remain confident in our ability to organically grow revenue in the low to mid-single digit range, as LOE risk will largely be behind us and Women’s Health and Biosimilars are positioned to deliver double digit growth,” said CEO Kevin Ali.
Organon shares are flat since being spun off and currently trade at a cheapish price-to-earnings ratio of 4.9.
2. Store Capital
Next up, we have retail-oriented REIT Store Capital, which boasts a healthy dividend yield of 4.0%.
It’s no secret that retailers were hit hard during the COVID-19 pandemic, but Store’s dividend continues to be supported by healthy cash flows and a stable roster of large corporate tenants (more than 70% of its tenant base generates annual revenue of over $50 million).
In the most recent quarter, the company’s adjusted funds from operations — a key metric in the real estate space — clocked in at a solid $135.6 million.
“Collectively, our strong portfolio performance, origination activity and financial results have enabled us to raise our 2021 AFFO guidance from $1.90 to $1.96 per share to a range of $1.94 to $1.97,” said President and CEO Mary Fedewa.
Store Capital shares trade at a price-to-book of 1.7 versus 4.4 for the S&P 500.
3. The Kraft Heinz Company
Rounding out our list is packaged food giant Kraft Heinz Company, which currently offers a tasty dividend yield of 4.4%.
Kraft Heinz’s dividend is backed by massive scale advantages and a portfolio of well-known brands — including Heinz ketchup, Jell-O and Philadelphia cream cheese. And with the top-line continuing to benefit from the trend of consumers eating at home, Kraft Heinz looks well-positioned for the next few years.
In Kraft’s latest quarter, the company topped analyst estimates even amid inflationary pressures as demand for its packaged meals remained strong.
“Our second quarter results serve as a strong indicator that our Kraft Heinz team will not only deliver a stronger 2021 than we initially anticipated, but will come out of the global pandemic much stronger than we entered,” said CEO Miguel Patricio.
Kraft shares have fallen 17% over the past three months, making it an especially delicious-looking value opportunity.
Cash is king
There you have it: three attractive high-yield dividend stocks sitting in Berkshire Hathaway’s portfolio.
While growth stocks make most of the financial headlines, generating regular income should be a top priority for risk-averse investors.
Of course, you don’t have to limit yourself to the stock market to do that.
For instance, this investing service makes it possible to lock in a steady rental income stream by investing in premium real estate properties — from commercial developments in LA to residential buildings in NYC.
You’ll gain exposure to high-end properties that big-time real estate moguls usually have access to, and you’ll receive regular payouts in the form of quarterly dividend distributions.
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>>> Warren Buffett Buys More Consumer Stocks, Sells Drug Stocks, GM
Investor's Business Daily
by GILLIAN RICH
08/17/2021
https://www.investors.com/news/warren-buffett-stocks-buys-sells-berkshire-hathaway-q2-2021-13f/?src=A00220
Warren Buffett revealed more exposure to consumer stocks as Berkshire Hathaway (BRKB) posted a key regulatory filing for the second quarter of 2021 late Monday.
The highly anticipated 13-F showed Buffett added to his positions in grocery chain Kroger (KR) by 21% and high-end furniture retailer RH (RH) by 2%.
Berkshire grew its stake in insurance brokerage Aon (AON) by 7% after buying if for the first time in Q1.
Meanwhile, Buffett sold more shares in drug giants, slashing his Merck (MRK) holdings by 49%, Bristol-Myers Squibb (BMY) by 15%, and AbbVie (ABBV) by 10% after opening those positions in Q3 2020. But he did initiate a stake on Merck spinoff Organon (OGN).
Berkshire also exited its position in biotech Biogen (BIIB) and trimmed its stake in top U.S. automaker General Motors (GM) by 10%. Its Chevron (CVX) stake was cut by 2%.
Kroger shares rallied 2.8% on the stock market today, Merck edged up 0.6%, AbbVie added 0.2%, GM fell 2.9%, RH lost 2%, and Organon added 1%.
Berkshire remained a seller of stocks in Q2, according to its earnings report earlier this month.
Its net stock sales of $1.1 billion in Q2 was down from $3.9 billion in Q1, but it marked the third straight quarter of selling.
Still, the value of Berkshire's overall stock portfolio swelled 8.7% to $293.8 billion by the end of Q2. That was up from $270.4 billion in Q1, as the S&P 500 and Nasdaq hit fresh highs to close out the quarter.
Meanwhile, Berkshire bought $6 billion worth of BRKB stock in Q2. That move cam after it repurchased $6.6 billion in Q1 and a record $27.4 billion in 2020.
Buffet's stock portfolio remains highly concentrated in a handful of companies. In Q2, 69% of its aggregate value was in Apple (AAPL) ($124.3 billion) and Bank of America (BAC) ($42.6 billion). Also, American Express (AXP) ($25.1 billion), and Coca-Cola (KO) ($21.6 billion).
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Berkshire initiates position - >>> Organon & Co. (OGN), a science-based pharmaceutical company, develops and delivers health solutions through a portfolio of prescription therapies within women's health, biosimilars, and established brands. Its women's health portfolio comprises contraception and fertility brands, such as Nexplanon/Implanon, a long-acting reversible contraceptive. The company's biosimilars portfolio consists of three immunology products, such as Brenzys, Renflexis, and Hadlima, as well as two oncology products, including Ontruzant and Aybintio in the United States, Canada, Australia, and Ukraine. It also has a portfolio of established brands in cardiovascular, respiratory, dermatology, and non-opioid pain management. The company sells its products primarily to drug wholesalers and retailers, hospitals, government agencies, and managed health care providers, such as health maintenance organizations, pharmacy benefit managers, and other institutions. Organon & Co. was incorporated in 2020 and is based in Jersey City, New Jersey. Organon & Co. operates independently of Merck & Co., Inc. as of June 2, 2021.
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>>> Buffett Slows Buybacks, Sells Stocks With Market at Highs
Bloomberg
By Katherine Chiglinsky
August 7, 2021
https://www.bloomberg.com/news/articles/2021-08-07/buffett-s-berkshire-slows-share-repurchases-to-6-billion?srnd=premium
Berkshire sold $1.1 billion of other stocks on a net basis
Conglomerate’s cash remained stubbornly high at $144 billion
Warren Buffett slowed his roll.
Despite having more than $144 billion of funds at his disposal, the Berkshire Hathaway Inc. chief executive officer ended up taking a step back with his capital deployment during the second quarter. He repurchased just $6 billion of Berkshire stock, the lowest amount of buybacks since the middle of 2020, and was a net seller of other stocks for the third quarter in a row, according to the conglomerate’s second-quarter earnings released Saturday.
Buffett’s been faced with a high-class problem in recent years: Too much cash, and too few opportunities. He’s been under pressure to do a large deal to help supercharge the company’s growth, but has come up short with well-priced and attractive options, leading Berkshire to spend even more funds buying back its stock. But now, he’s in more of a bind. Berkshire stock, already a challenge because of its lack of liquidity, has rallied in recent months and the broader stock market has also become more pricey with the S&P 500 Index climbing to new highs.
“They’re kind of between a rock and a hard place,” Cathy Seifert, an analyst at CFRA Research, said in a phone interview. “Against that backdrop, I think the level of buybacks was prudent and appropriate.”
Still, for an executive who previously shunned buybacks in favor of other ways of deploying capital, Buffett’s $6 billion of repurchases in the second quarter ranks as the fourth-biggest quarter since Berkshire began buying back more stock in 2018.
‘Housekeeping’
Berkshire sold just $1.1 billion of other stocks during the period, on a net basis, the lowest amount of net sales in the past three quarters. Those sales appear to have largely come from a decrease in its group of commercial, industrial and other stocks, according to a regulatory filing Saturday. Berkshire is set to report its specific stock changes in a filing later this month. Berkshire shareholder Tom Russo deemed the move as smart given the overall level of the stock market.
“It’s housekeeping,” Russo, who oversees $10 billion including investments in Berkshire shares at Gardner Russo & Quinn LLC, said in a phone interview. “He’s been willing to do that a lot more. He came in and out of airlines, he’s come in and out of other holdings.”
In the quarterly report, Buffett, who will turn 91 later this month, gave no indications on how he was planning to put his cash pile to work. He also made no mention of any succession plans, after saying in May that Greg Abel was the leading candidate to succeed the chief executive officer.
Meanwhile, the conglomerate kept chugging along, helped in part by a U.S. economy that’s been climbing back from the pandemic’s initial lows last year. Berkshire profit jumped about 21% to $6.7 billion during the period, driven by gains at its manufacturers, service companies and retailers. That group of businesses reported its second-highest quarterly profit in data going back to the middle of 2009.
Berkshire’s railroad, BNSF, reported a record quarterly profit since Berkshire acquired the business. Earnings of $1.5 billion were helped by increased volumes and better productivity, the company said.
Still, the conglomerate wasn’t immune to the effects of inflation. Berkshire was confronted with higher costs for some materials hitting businesses such as its operations that deal with home building.
Berkshire also felt some pain from higher losses at its auto insurer, Geico. Drivers returning to the road as the U.S. opened up in recent months led to more frequent wrecks, causing underwriting profit at Geico to slump nearly 70% during the second quarter. At another unit, it had to shell out $160 million to help contain and respond to a fire at one of chemical maker Lubrizol’s facilities in Rockton, Illinois in June, it said.
Berkshire Class A stock was up 8.5% during the second quarter, following a nearly 11% gain in the first three months of the year.
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>>> Warren Buffett reversed plans to buy a $1.3 billion pipeline to avoid antitrust scrutiny - and its shows how the rich and powerful see Washington's growing regulatory threat
Business Insider
by Katie Canales
7-13-21
https://www.msn.com/en-us/money/companies/warren-buffett-reversed-plans-to-buy-a-13-billion-pipeline-to-avoid-antitrust-scrutiny-and-its-shows-how-the-rich-and-powerful-see-washingtons-growing-regulatory-threat/ar-AAM7cz4?ocid=uxbndlbing
Warren Buffett's Berkshire Hathaway abandoned plans to buy a $1.3 billion natural gas pipeline.
Buffett's energy company operates in states where the pipeline runs, which seller said the FTC could have used to block the deal.
The abandoned purchase signals that Buffett sees a growing federal regulatory threat.
Washington's beefing up its antitrust regulatory muscle, and billionaire investor Warren Buffet is seemingly well aware of it.
The Berkshire Hathaway owner's energy subsidiary said Monday it's throwing out plans to buy a $1.3 billion natural gas pipeline that operates in 16 states, including Utah, Wyoming, and Colorado. Those are territories where his subsidiary's energy company also runs, as CNN noted.
Berkshire Hathaway owning two pipelines that serve customers in the same states could have raised eyebrows from the Federal Trade Commission, which the company and the pipeline's seller acknowledged in a Monday press release.
"The decision is a result of ongoing uncertainty associated with achieving clearance from the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976," Dominion, which was set to sell its Questar Pipelines to the company, said.
Dominion said it already sold gas transmission and storage assets to Berkshire in November, a deal that won't be affected by the pipeline purchase termination and that was originally worth $4 billion, plus $5.7 billion that Berkshire Hathaway agreed to take on in debt.
Both Buffett and Dominion backing away from the pipeline deal shows that even the rich and powerful understand the regulatory threat currently posed by the US government - specifically from the FTC.
The agency is now helmed by Lina Khan, a big tech critic whose extensive antitrust law background has reshaped modern-day antitrust discussion. Khan, a Democrat, is joined by two other Democratic commissioners and two Republicans.
Apart from the FTC's new make-up, lawmakers are also zeroing in on reshaping antitrust regulation in the US. Congress unveiled a package of five bills in June that are intended to keep big tech companies from becoming too large and powerful.
And just last week, President Joe Biden signed an executive order to combat corporate consolidation, or mergers, in the US economy, a move the administration said would increase healthy competition.
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>>> Warren Buffett Cuts Stakes In Financial, Energy, Drug Stocks
Investor's Business Daily
APARNA NARAYANAN05
05/17/2021
https://www.investors.com/news/warren-buffett-stock-buys-sells-berkshire-hathaway-q1-2021-13f/?src=A00220
Berkshire Hathaway (BRKB) chief Warren Buffett soured on several financial, energy and drug stocks in Q1, which saw overall net selling.
But the conglomerate picked up more than 4 million shares in insurance brokerage Aon (AON), according to 13F filings tracked by whalewisdom.com. At the same time, Berkshire dumped all its shares in Synchrony Financial (SYF). The company also slashed stakes in Wells Fargo (WFC) by 98% and in Brazilian fintech firm StoneCo (STNE) by 24%.
AON is looking to combine with Willis Towers Watson. Meanwhile, Berkshire opened a position in their mutual rival March & McLennan (MMC) in Q4 2020 and grew it by 23% last quarter.
Also in Q1, Buffett lowered a stake in oil giant Chevron (CVX) by 51% after buying it for the first time in Q4 2020. Berkshire ditched Suncor Energy (SU) entirely after opening a position in Q4 2018.
Among drug stocks, Berkshire cut Merck (MRK) by 37% in Q1, AbbVie (ABBV) by 10% and Bristol-Myers Squibb (BMY) 6%, after buying all three stocks for the first time as recently as Q3 2020.
The company left positions in top holdings Apple (AAPL) and Bank of America (BAC) unchanged last quarter. It also kept Amazon (AMZN) steady in Q1.
Warren Buffett Stocks
Class B shares of Berkshire Hathaway closed down 0.5% at 289.22 on the stock market today. AON stock rose 3% late.
Long seen as investor who buys and holds stocks for years and even decades, Buffett has made several buys and sells lately that took investors by surprise.
For instance, Buffett exited Pfizer (PFE) in Q4 2020, after picking up the coronavirus vaccine stock just the prior quarter.
Similarly, the investing legend dumped his entire stake in several airline stocks such as Delta Air Lines (DAL) last year, after making a surprise bet on the sector in 2016.
In 2020, Berkshire's Buffett also exited bank stocks like JPMorgan Chase (JPM), a holding since 2018, while sinking more than $2 billion into Bank of America (BAC), which was his No. 1 stock by number of shares at the end of Q1.
For many years, Buffett kept clear of tech stocks, saying he didn't understand their business models.
But he began nibbling at Apple (AAPL) in 2016, Amazon (AMZN) in 2019, and Snowflake (SNOW), a new IPO, in 2020.
At the end of Q1, Apple was the No. 2 Warren Buffett stock by number of shares but No. 1 by market value, worth a whopping $108.36 billion. In fact, Buffett now calls Apple stock one of the "family jewels."
In another big investing shift, Buffett poured a record $27.4 billion into repurchasing Berkshire Hathaway stock last year. Berkshire bought back another $6.6 billion of its own shares in Q1, so that the ultimate Warren Buffett stock appears, for now, to be Berkshire Hathaway.
Berkshire had long been leery of splurging on stock buybacks before loosening repurchase rules in 2018.
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The Buffett Indicator at All-Time Highs: Is This Cause for Concern?
Markets
By Carmen Ang
February 17, 2021
https://www.visualcapitalist.com/the-buffett-indicator-at-all-time-highs-is-this-cause-for-concern/#:~:text=The%20Buffett%20Indicator%20is%20a,market%20by%20the%20nation's%20GDP.
The Buffett Indicator - Stock Market Value to GDP
In 2001, Warren Buffett famously described the stock market capitalization-to-GDP ratio as “the best single measure of where valuations stand at any given moment.”
This ratio, now commonly known as the Buffett Indicator, compares the size of the stock market to that of the economy. A high ratio indicates an overvalued market—and as of February 11, 2021, the ratio has reached all-time highs, indicating that the U.S. stock market is currently strongly overvalued.
Today’s graphic by Current Market Valuation (CMV) provides an overview of how the Buffett Indicator has changed since 1950. We’ll also explain how the ratio is calculated, and why things might not be as dire as seem.
The Buffet Indicator, Explained
Before diving into the data, let’s cover the basics—what is the Buffett Indicator, and how is its value calculated?
The Buffett Indicator is a ratio used by investors to gauge whether the market is undervalued, fair valued, or overvalued. The ratio is measured by dividing the collective value of a country’s stock market by the nation’s GDP.
Measuring Total Value
CMV used the Wilshire 5000 index, along with data from the Federal Reserve for the historical component, to measure the collective value of the U.S. stock market. Here’s a look at the nation’s composite market value since 1950:
US Market Value since 1950
As the chart indicates, the market has experienced steady growth since 2010. And as of February 11, 2021, its total value sits at $49.5T.
Measuring GDP
For the data on GDP since 1950, CMV dipped into the archives from the U.S. Government’s Bureau of Economic Analysis:
US GDP since 1950
While the Bureau’s data is published quarterly, it doesn’t provide the latest figures. So to find Q1 2021 GDP, CMV used data from the Federal Reserve Bank of Atlanta, and came up with an annualized GDP of $21.7T.
The Ratio
According to Warren Buffett, “if the ratio approaches 200%…you are playing with fire.”
The Buffett Indicator since 1950
And with the current U.S. ratio sitting at 228%—about 88% higher than historical averages, it certainly looks like things are heating up.
Will History Repeat Itself?
As the popular investing expression goes, the trend is your friend. And historically, the Buffett Indicator has predicted several of America’s most devastating economic downturns.
Here’s a look at some historical moments in the U.S. stock market, and where the Buffett Indicator was valued at the time:
Date Event Buffett Indicator Value (+/- Trendline)
October 1987 Black Monday Fairly Valued -13%
March 2000 Dotcom Bubble Strongly Overvalued +71%
December 2007 Pre-Financial Crisis Fairly Valued +18%
March 2009 Financial Crisis Bottom Undervalued -46%
February 2020 COVID-19 Overvalued +49%
February 2021 Today Strongly Overvalued +88%
As the table shows, the ratio spiked during the Dotcom Bubble, and was relatively high in the months leading up to the 2008 financial crisis. But does that mean we should take the ratio’s current spike as a warning for a market crash in the near future? According to some experts, we might not need to sound the alarms just yet.
Why are some investors so confident in the current market? One main factor is low interest rates, which are expected to stay low for the foreseeable future.
When interest rates are low, borrowing money becomes cheaper, and future real earnings are theoretically worth more, which can have a positive impact on the stock market. And low interest rates mean smaller returns for low-risk assets like bonds, which lowers investor demand and ultimately boosts stock prices further. Meaning that, as long as interest rates are at record lows, the Buffett Indicator will likely stay high.
However, history has been known to repeat itself. So, while we might not need to fasten our seatbelts just yet, this historically high ratio is certainly worth paying attention to.
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>>> Berkshire Hathaway Class A Shares Have Become More Actively Traded. Why That’s Important.
Barron's
By Andrew Bary
March 8, 2021
https://www.barrons.com/articles/warren-buffetts-berkshire-hathaway-has-seen-trading-activity-rise-in-its-class-a-stock-51615219961?siteid=yhoof2
Berkshire Hathaway’s class A shares have had unusually high trading activity of late. And that could mean that an investor is accumulating the high-vote stock, whose dominant holder is CEO Warren Buffett.
The class A shares (ticker BRK.A) normally trade on light volume, reflecting their high price—the stock finished Friday at $381,600—and a preference among institutional and retail investors for the more liquid class B shares (BRK.B), which ended Friday at $253.15. The class B stock is in the S&P 500 index.
In recent weeks, however, trading in the class A shares has been elevated at an average of more than 2,000 shares a day—and 2,500 a day in past five sessions—against an average of fewer than 500 shares daily in 2020. The difference translates into about $800 million of additional daily trades in the class A stock. Trading activity in the class B shares, meanwhile, has not been elevated—an average of about five million shares a day in the past month, against six million in the last 12 months.
Berkshire shares have bested the S&P 500 this year with the class A stock up 9.7% through Friday, against a 2.5% rise in the index after trailing the index by a total of over 40 percentage points in 2019 and 2020. Wall Street has warmed to Berkshire thanks to its relatively low valuation versus book value and as a reopening play given its many economically sensitive businesses.
The shares continued their recent rally on Monday, with the class A shares up 1.6%, to a near record of $387,840, and the class B stock 1.4% higher, at $256.65.
Investors will probably have to wait until mid-May, when institutional holders file their March 31 equity investments, for the identity of the possible buyer of the class A stock to be known, unless the purchaser gets to a 5% stake, which would trigger a quicker regulatory filing.
Berkshire’s class B stock is equal to 1/1500 of a share of the class A shares, but it carries just 1/10,000 of the vote.
This has helped Buffett maintain control of the company as his economic interest declines because of his large annual gifts of Berkshire stock to the Bill & Melinda Gates Foundation and other charitable organizations over the past 15 years. Buffett gave way $2.9 billion to the various foundations last year. The class A is the original Berkshire stock, while the class B was created in 1996.
Buffett holds 248,734 class A shares, a 16% economic interest in the company, but roughly 30% of the vote. Buffett owns 39% of the class A stock. Around 40% of Berkshire’s stock is held in the class A shares, with the rest in the class B. Berkshire’s market value is around $580 billion.
It is notable that when Buffett gives away stock annually, he converts his class A stock to class B stock. The class B stock is more liquid than the A, simplifying subsequent sales by the Gates foundation and others. But in converting the A shares, Buffett ensures that other investors won’t get their hands on the supervoting shares.
That could be important in the post-Buffett era, because it means whoever is overseeing his estate should have a sizable voting interest in Berkshire. Buffett has said that his Berkshire stake would be given away in the 12 years after his death.
Berkshire could face pressure from activists after Buffett’s death to break up the company, something that the CEO opposes. Buffett has said that he doubts any breakup will occur because sufficient stock is likely to be in friendly hands after his death.
The class A stock can be converted into 1,500 shares of the class B stock, but not the other way around. As a result, the class A stock can trade at a premium to the class B. With the recent buying activity in the A stock, it ended Friday at a roughly 0.5% premium to the B shares, against virtual parity at year-end 2020.
There are few sizable holders of the class A stock besides Buffett. Fidelity parent FMR is the only other owner of more than 5%. Much of the Fidelity stake is held by Fidelity Contrafund (FCNTX), whose manager, Will Danoff, is a longtime Berkshire fan and holder.
Buffett discussed the class A and class B stock in a 1999 memo to Berkshire holders that was last updated in 2010.
Here’s what Buffett wrote:
“When there is more demand for the B (relative to supply) than for the A, the B will sell at roughly 1/1,500th of the price of A. When there’s a lesser demand, it will fall to a discount. In my opinion, most of the time, the demand for the B will be such that it will trade at about 1/1,500th of the price of the A,” Buffett wrote.
“However, from time to time, a different supply-demand situation will prevail and the B will sell at some discount. In my opinion, again, when the B is at a discount of more than say, 1%, it offers a better buy than the A. When the two are at parity, however, anyone wishing to buy 1,500 or more B should consider buying A instead.”
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>>> Warren Buffett's Berkshire Cuts Apple Stake And Buys These Drugmaker, Telecom Stocks Instead
Benzinga
by Shivdeep Dhaliwal
February 16, 2021
https://finance.yahoo.com/news/warren-buffetts-berkshire-cuts-apple-034604621.html
Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) cut its positions in Apple Inc (NASDAQ: AAPL) and piled on stocks of drug, telecom, and oil companies in the latest quarter, according to filings made with the U.S. Securities and Exchange Commission.
What Happened: The Warren Buffett-led company shed its Apple stake by 6% to 887 million shares in the quarter, but at the same time has upped its investments in AbbVie Inc (NYSE: ABBV) by 20%, Bristol-Myers Squibb Company (NYSE: BMY) by 11%, and Merck & Co, Inc (NYSE: MRK) by 28%.
The conglomerate increased its exposure to T-Mobile US, Inc (NASDAQ: TMUS) by 1.36% to 5.2 million shares and also added 146.7 million shares of Verizon Communications Inc (NYSE: VZ).
See Also: Warren Buffett's Berkshire Bets On These Four Drugmakers Amid Pandemic
Berkshire picked up a fresh stake of 48.5 million Chevron Corporation (NYSE: CVX) shares and increased its investment in The Kroger Co (NYSE: KR) by 34%.
Other changes include a 59% cut in exposure to Wells Fargo & Co (NYSE: WFC) and a 28% cut in Suncor Energy Inc (NYSE: SU) stake.
Why It Matters: Apple is still the largest single investment in Berkshire’s portfolio, as of the latest 13F filing, and the investment is worth about $120 billion.
See Also: Warren Buffett Called Bitcoin 'Rat Poison' — Now It's Closing In On Berkshire Hathaway's Valuation
Apple shares closed nearly 1.6% lower at $133.19 on Tuesday and fell another 0.41% in the after-hours session.
In the after-hours trading on Tuesday — AbbVie shares were up 0.42% at $104.64. Bristol-Myers shares rose 0.34% to $59.60. T-Mobile shares rose 0.86% to $123.05.
Verizon shares shot up 3.05% to $55.80 in the after-hours trading, while Chevron shares rose 2.54% to $95.50.
Wells Fargo shares were down 0.11% in the after-hours. Kroger and Suncor shares remained largely unchanged.
Price Action: Berkshire Hathaway Class A shares closed 1.23% higher at $369,333. The company’s class B shares closed 1.15% higher at $245.28 and fell 0.11% in the after-hours session.
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>>> 3 Warren Buffett Stocks Worth Buying Now
All of these companies are excellent places for investors to park new money today.
Motley Fool
by Danny Vena
Feb 2, 2021
https://www.nytimes.com/2021/02/02/technology/jeff-bezos-amazon.html
When it comes to investing success, it's hard to top the results of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) CEO Warren Buffett. During a long and distinguished career, the so-called "Oracle of Omaha" has racked up quite a track record of investing success. Since he took the helm of Berkshire Hathaway in 1965, the company has delivered a compound annual growth rate of more than 20%, and by the end of 2019, its return grew to a whopping 2,744,062%.
With results of this caliber, investors could do worse than following Buffett's example, even as the market is setting new benchmarks. Three stocks Buffett invests in or is interested in, in particular, have impressive growth prospects and significant tailwinds, giving them all the makings of market-beating investments going forward.
1. The Apple of Buffett's eye
Warren Buffett has made no secret of his feelings toward Apple (NASDAQ:AAPL). The iPhone maker is by far Berkshire's largest stock holding, at roughly 48% of the company's equity portfolio. Two quotes by Buffett are representative of how he feels about Apple. Earlier this year, the legendary investor said, "It's probably the best business I know in the world." The Oracle of Omaha has also said: "We bought about 5% of the company. I'd love to own 100% of it. ... We like very much the economics of their activities. We like very much the management and the way they think."
With a market cap of $2.33 trillion, Apple is the largest U.S. public company in history, but that hasn't put the brakes on Apple's growth. For the 2021 fiscal first quarter (ended Dec. 26, 2020), the company reported revenue that grew 21% year over year, while earnings per share climbed 35% -- both to new all-time records. Those weren't the only new benchmarks. Apple set new revenue records for iPhone, wearables, and services.
That could be just the beginning. Wedbush analyst Dan Ives wrote a note to clients Wednesday titled Cook & Co. Proving iPhone Supercycle Thesis was Not Just Hype, But a Reality. Ives called the quarterly results a "jaw dropper," suggesting that the services segment, which grew 24% year over year, will be a $1 trillion business for Apple over the coming years. He also believes the company is firmly on track to hit a $3 trillion market cap in the coming year, suggesting gains of 27% over the coming 12 months. That's not bad considering Apple gained more than 80% in 2020.
2. Buffett's head is in the clouds
"Better late than never," or so the old saying goes.
Amazon (NASDAQ:AMZN) is a company that has long been on the Oracle of Omaha's radar, but one he viewed as the one that got away. "I'm a fan [of Amazon], and I've been an idiot for not buying," Buffett famously said in an interview. It was one of Buffett's money managers, Todd Combs or Ted Weschler, who eventually put things right and bought a stake in the company.
It's also fair to say that Amazon may not tick all the boxes of your typical Buffett stock, but that doesn't mean Buffett doesn't think it's a phenomenal business. Amazon has "far surpassed anything I would have dreamt could have been done. Because if I really felt it could have been done, I should have bought it," Buffett said. "I had no idea that it had the potential. I blew it."
At roughly $1.6 trillion, Amazon is the third-largest publicly traded company in the U.S., and it's the industry leader in both e-commerce and cloud computing.
Estimates vary, but Amazon controlled nearly 39% of digital sales in the U.S. last year, according to data compiled by eMarketer. That lead is expected to expand even further in 2021, edging to nearly 40%. It's the company's best-in-class fulfillment and delivery network that keeps customers coming back for more.
Total sales climbed 35% year over year during the first nine months of 2020, while earnings per share jumped 62%.
As impressive as its e-commerce operations are, it's cloud computing that pays the bills. Amazon Web Services (AWS) is still the undisputed leader in cloud computing, with a 33% share of the market -- more than its next three competitors combined, according to estimates by Synergy Research Group.
The cloud is also Amazon's most profitable business. While AWS brought in 12% of Amazon's revenue during the first nine months of 2020, it generated 62% of the company's operating income. The business also continued its impressive growth, up 30% year over year.
Given its market-leading position in two growth industries, it's little wonder that Amazon ended up in Buffett's portfolio.
3. Show me the money
The third in our trifecta of companies that dominate their industry is Visa (NYSE:V). The payments giant was responsible for more than half of U.S. credit card network purchase volume, totaling $2 trillion in payments processed in 2019 -- more than all three of its biggest competitors combined.
Given the economic uncertainty that prevailed over the past year, investors were secure in the knowledge that while Visa is the undisputed leader in payment processing, it isn't a money lender. With the increasing likelihood of a prolonged pandemic-related recovery on the horizon, that gives Visa a massive advantage.
There's little doubt that Visa's business underwent a temporary setback in the face of the pandemic. During its fiscal first quarter (ended Dec. 31, 2020), net revenue slipped 6% year over year, but it was much improved from the 17% decline it suffered in the fourth quarter. Visa's net income edged 4% lower in the first quarter, but that was a vast improvement from the 25% decline it experienced in Q4. This shows that once economic growth returns in earnest, Visa will be leading the charge with revenue and profit growth.
Looking further out, the road ahead is long for the company, particularly as it penetrates further into developing markets around the globe. Visa estimates that there are still cash purchases amounting to $21 trillion annually and nearly 2 billion adults around the world without payment accounts. That's low-hanging fruit ripe for the picking.
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>>> 3 Value Stocks Warren Buffett Owns That You Should Consider Buying Too
The Oracle of Omaha knows a good bargain when he sees one.
Motley Fool
Keith Speights
Dec 6, 2020
https://www.fool.com/investing/2020/12/06/3-value-stocks-warren-buffett-owns-that-you-should/
As a young man, Warren Buffett learned from Benjamin Graham, a man who would come to be known as "the father of value investing." Graham wrote the classic book on value investing, The Intelligent Investor. Buffett has called it "the best book about investing ever written."
Thanks in large part to the influence of Benjamin Graham, Buffett became a value investor himself. Through the years, he became more open to buying stocks that didn't totally adhere to Graham's principles. However, Buffett still likes a bargain when he can find one for Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) portfolio.
Are there some value stocks in Berkshire's holdings right now? Absolutely. Here are three value stocks Buffett owns that you should consider buying too.
1. AbbVie
Berkshire recently loaded up on big pharma stocks, including the purchase of nearly 21.3 million shares of AbbVie (NYSE:ABBV). Buffett probably liked the idea of buying a cash cow that trades well below nine times expected earnings.
AbbVie's bargain-bin valuation stems primarily from the looming headwinds for its top-selling drug, Humira. The autoimmune disease drug already has lost market share in Europe because of biosimilar competition. Humira faces biosimilar rivals in the U.S. beginning in 2023.
However, AbbVie has known for a long time that the day would come when it couldn't rely on Humira's huge sales. The company has built a solid lineup of other winners, notably including blood cancer drugs Imbruvica and Venclexta. It has also developed worthy successors to Humira with Rinvoq and Skyrizi now on the market and gaining major momentum.
The upcoming challenges for Humira will likely constrain AbbVie's growth prospects for a while. Buffett is a patient investor, though, and usually doesn't mind waiting when he knows he invested at an attractive price. In this case, he'll be paid handsomely to wait: AbbVie's dividend yields nearly 5%.
2. Bristol Myers Squibb
Bristol Myers Squibb (NYSE:BMY) is another big pharma stock recently added to Berkshire's portfolio. And like AbbVie, BMS is a bargain. Its shares currently trade at a little over eight times expected earnings.
With its acquisition of Celgene last year, BMS picked up Revlimid, a megablockbuster blood cancer drug. The bad news is that Revlimid will begin to face limited-volume generic competition in 2022. The good news is that the Celgene deal gave BMS plenty of other rising stars, including another blood cancer drug, Pomalyst, and multiple sclerosis drug Zeposia.
BMS already had some big winners of its own. Sales continue to climb for blood thinner Eliquis, autoimmune disease drug Orencia, and cancer immunotherapy Yervoy. The company has gained new indications for its other top cancer immunotherapy, Opdivo, that should fuel additional growth.
These products along with a robust pipeline should enable BMS to generate average annual earnings growth of more than 20% over the next few years. BMS also pays a dividend that yields a little under 3%. This stock looks like a great pick for Buffett and for ordinary investors.
3. Pfizer
Continuing with the pharma theme, Berkshire also scooped up shares of Pfizer (NYSE:PFE) in the third quarter of 2020. Although Pfizer isn't as cheap as AbbVie and Bristol Myers Squibb, its shares trade at only 12 times expected earnings. That's a lot lower than the S&P 500's forward price-to-earnings multiple of 22.
Pfizer's discount valuation is directly connected with its abysmal revenue and earnings growth in recent years. Sales for a basket of the company's older drugs have plunged as they lost patent exclusivity. However, that's in the past.
It's a whole new ballgame for Pfizer now. The company recently completed the merger of its Upjohn unit (home to those older drugs with declining sales) with Mylan to form a new company, Viatris. This paves the way for Pfizer to return to much stronger growth. And that growth could be accelerated thanks to Pfizer's promising COVID-19 vaccine.
Pfizer's dividend will be a little lower going forward after the Upjohn-Mylan transaction. However, the yield will still be attractive. There's a good chance that Pfizer will deliver market-beating total returns over the next decade. Buffett probably won't regret buying the big pharma stock. Investors who aren't famous billionaires probably won't, either.
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Berkshire portfolio tracker -
https://www.cnbc.com/berkshire-hathaway-portfolio/
>>> Symbol Holdings Mkt. price Value Stake
AbbVie Inc ABBV 21,264,316 $104.89 $2,230,414,105 1.2%
Amazon.com, Inc. AMZN 533,300 $3,195.34 $1,704,074,822 0.1%
American Express Company AXP 151,610,700 $120.59 $18,282,734,313 18.8%
Apple Inc AAPL 964,719,761 $116.59 $112,476,676,935 5.7%
Axalta Coating Systems Ltd AXTA 23,420,000 $28.91 $677,072,200 9.9%
Bank of America Corp BAC 1,032,852,006 $28.99 $29,942,379,654 11.9%
Bank of New York Mellon Corp BK 74,346,864 $39.95 $2,970,157,217 8.4%
Barrick Gold Corp GOLD 12,000,000 $22.69 $272,280,000 0.7%
Biogen Inc BIIB 643,022 $243.78 $156,755,903 0.4%
Bristol-Myers Squibb Co BMY 29,971,194 $63.05 $1,889,683,782 1.3%
Charter Communications Inc CHTR 5,213,461 $642.80 $3,351,212,731 2.6%
Coca-Cola Co KO 400,000,000 $52.70 $21,080,000,000 9.3%
DaVita Inc DVA 36,095,570 $109.88 $3,966,181,232 32.2%
General Motors Company GM 80,000,000 $45.06 $3,604,800,000 5.6%
Globe Life Inc GL 6,353,727 $96.02 $610,084,867 6.1%
Johnson & Johnson JNJ 327,100 $144.00 $47,102,400 0.0%
JPMorgan Chase & Co. JPM 967,267 $121.22 $117,252,106 0.0%
Kraft Heinz Co KHC 325,634,818 $32.84 $10,693,847,423 26.6%
Kroger Co KR 24,978,439 $32.43 $810,050,777 3.2%
Liberty Global PLC Class A LBTYA 18,010,000 $22.68 $408,466,800 9.9%
Liberty Global PLC Class C LBTYK 7,346,968 $21.82 $160,310,842 1.9%
Liberty Latin America Ltd Class A LILA 2,630,792 $11.79 $31,017,038 5.2%
Liberty Latin America Ltd Class C LILAK 1,430,197 $11.72 $16,761,909 0.8%
Liberty Sirius XM Group Series A LSXMA 14,860,360 $42.06 $625,026,742 14.8%
Liberty Sirius XM Group Series C LSXMK 43,208,291 $42.23 $1,824,686,129 18.8%
M&T Bank Corporation MTB 2,919,613 $120.98 $353,214,781 2.3%
Mastercard Inc MA 4,564,756 $339.07 $1,547,771,817 0.5%
Merck & Co., Inc. MRK 22,403,102 $79.86 $1,789,111,726 0.9%
MONDELEZ INTERNATIONAL INC Common Stock MDLZ 578,000 $57.46
$33,211,880 0.0%
Moody’s Corporation MCO 24,669,778 $277.22 $6,838,955,857 13.1%
Pfizer Inc. PFE 3,711,780 $37.23 $138,189,569 0.1%
PNC Financial Services Group Inc PNC 1,919,827 $139.79 $268,372,616 0.5%
Procter & Gamble Co PG 315,400 $138.61 $43,717,594 0.0%
Restoration Hardware Holdings, Inc common stock RH 1,708,348 $462.92 $790,828,456 8.8%
Sirius XM Holdings Inc SIRI 50,000,000 $6.55 $327,500,000 1.2%
Snowflake Inc SNOW 6,125,376 $328.79 $2,013,962,375 2.2%
SPDR S&P 500 ETF Trust SPY 39,400 $363.67 $14,328,598 0.0%
StoneCo Ltd STNE 14,166,748 $73.28 $1,038,139,293 4.6%
Store Capital Corp STOR 24,415,168 $33.33 $813,757,549 9.3%
Suncor Energy Inc. SU 19,201,525 $17.25 $331,226,306 1.3%
Synchrony Financial SYF 20,128,000 $31.09 $625,779,520 3.4%
Teva Pharmaceutical Industries Ltd TEVA 42,789,295 $9.82 $420,190,877 3.9%
T-Mobile Us Inc TMUS 2,413,156 $131.90 $318,295,276 0.2%
U.S. Bancorp USB 149,590,275 $44.21 $6,613,386,058 9.9%
United Parcel Service, Inc. UPS 59,400 $168.89 $10,032,066 0.0%
Vanguard 500 Index Fund ETF VOO 43,000 $334.14 $14,368,020 0.0%
Verisign, Inc. VRSN 12,815,613 $200.52 $2,569,786,719 11.2%
Visa Inc V 9,987,460 $211.00 $2,107,354,060 0.5%
Wells Fargo & Co WFC 127,380,440 $28.46 $3,625,247,322 3.1%
TOTAL $250,595,758,261
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>>> Tracking Warren Buffett's Berkshire Hathaway Portfolio - Q3 2020 Update
Seeking Alpha
Nov. 17, 2020
by John Vincent
Long Only, Value, Special Situations, Fund Holdings
https://seekingalpha.com/article/4389578-tracking-warren-buffetts-berkshire-hathaway-portfolio-q3-2020-update
About: Berkshire Hathaway Inc. (BRK.A), BRK.B, Includes: AAPL, ABBV, AMZN, AXP, AXTA, BAC, BIIB, BK, BMY, BYDDF, BYDDY, CHTR, COST, DVA, GL, GM, GOLD, JNJ, JPM, KHC, KO, KR, LBTYA, LBTYB, LBTYK, LILA, LILAB, LILAK, LSXMA, LSXMB, LSXMK, MA, MCO, MDLZ, MRK, MTB, PFE, PG, PNC, RH, SIRI, SNOW, SPY, SRG, STNE, STOR, SU, SYF, TEVA, TMUS, UPS, USB, V, VOO, VRSN, WFC
Summary
Berkshire Hathaway's 13F stock portfolio value increased from ~$202B to ~$229B this quarter.
Their largest three holdings are at two-thirds of the entire portfolio.
Berkshire Hathaway reduced financials while adding several positions in the Big Pharma area.
This article is part of a series that provides an ongoing analysis of the changes made to Berkshire Hathaway’s 13F stock portfolio on a quarterly basis. It is based on Warren Buffett’s regulatory 13F Form filed on 11/16/2020. Please visit our Tracking 10 Years Of Berkshire Hathaway's Investment Portfolio article series for an idea on how his holdings have progressed over the years and our previous update for the moves in Q2 2020.
During Q1 2020, Berkshire Hathaway’s (BRK.A, BRK.B) 13F stock portfolio value increased ~13%, from ~$202B to ~$229B. The top five positions account for more than three-quarters of the portfolio: Apple Inc. (AAPL), Bank of America (BAC), Coca-Cola (KO), American Express (AXP), and Kraft Heinz (KHC). There are 46 individual stock positions, many of which are minutely small compared to the overall size of the portfolio.
Warren Buffett’s writings (pdfs) are a treasure trove of information and are a very good source for anyone starting out on individual investing.
Note 1: In Q3 2020, Berkshire Hathaway repurchased ~45M Class B Equivalent Shares, for a total outlay of $9.26B. The average price paid was ~$206. Book Value as of Q3 2020 was ~$174 per share. So, the repurchase happened at ~118% of Book Value. The Class B shares currently trade at ~$233.
Note 2: It was reported in August that Berkshire had invested 5% passive stake each in 5 Japanese trading companies.
New Stakes
AbbVie Inc. (ABBV), Merck & Company (MRK), Bristol-Myers Squibb (BMY), and Pfizer Inc. (PFE): Berkshire added these four picks from the Big Pharma sector this quarter. ABBV, MRK, and BMY received an allocation of ~$1.8B each, while the PFE stake is much smaller at ~$135M. ABBV traded between ~$86 and ~$101 during the quarter, and it currently goes for $98.36. MRK traded between ~$77 and ~$87 during the quarter, and it currently goes for $80.18. BMY traded between ~$57.50 and ~$63.75 during the quarter, and it currently goes for ~$64.50. PFE traded between ~$33.50 and ~$39.25 during the quarter, and it currently goes for $37.33.
Snowflake Inc. (SNOW) and T-Mobile US (TMUS): SNOW had an IPO in September. Shares started trading at ~$229 and currently goes for ~$242. Berkshire acquired the shares at the IPO price of ~$120 per share. TMUS is a very small 0.12% of the portfolio stake purchased at prices between ~$104 and ~$119, and it currently trades at ~$129.
Stake Disposals
Costco Wholesale (COST): COST was a long-term position that was in the portfolio for almost two decades. This quarter saw the 0.65% of the portfolio stake disposed at prices between ~$303 and ~$359. The stock currently trades at ~$380. Berkshire had a ~10x return on the position over the holding period.
Stake Increases
Bank of America: Berkshire established this large (top-three) ~11% of the portfolio position through the exercise of Bank of America warrants. The warrants had a strike price of $7.14 compared to the current price of $27.58. The cost to exercise was $5B, and it was funded using the $5B in 6% preferred stock they held. There was a ~30% stake increase in Q3 2018 at prices between $27.75 and $31.80 and a marginal increase next quarter. Q2 2019 also saw a ~4% stake increase. There was a ~9% stake increase this quarter at prices between ~$23 and ~$27.
Note: Berkshire’s overall cost basis is ~$14 and ownership stake is ~12%.
General Motors (GM): GM is a ~1% of the 13F portfolio position that was first purchased in Q1 2012 at prices between $21 and $30. By Q3 2017, the position size had increased by around six times (10M shares to 60M shares). Q4 2017 saw a reduction: a ~17% selling at prices between $40.50 and $46.50. There was a ~38% stake increase in Q4 2018 at prices between $30.50 and $38.50. This quarter also saw a ~7% stake increase. The stock currently trades at $42.13. Overall, Berkshire’s cost basis on GM is ~$32. Berkshire controls ~5.5% of the business.
Kroger Company (KR): KR is a 0.37% of the portfolio position established in Q4 2019 at prices between $24 and $29. The last two quarters have seen a ~30% stake increase at prices between ~$30 and ~$36.60. The stock currently trades at $32.30.
Liberty LiLAC Group (LILA, LILAK): The minutely small 0.01% of the portfolio stake in LILAK saw a minor increase during the quarter.
Stake Decreases
Apple Inc.: AAPL is currently the largest 13F portfolio stake by far at ~48%. It was built between Q1 2016 and Q1 2018 at a cost basis of ~$35 per share. Since then, the activity has been minor. The stock currently trades at ~$120. This quarter saw a ~4% trimming.
Note: Apple stock split 4-for-1 in August. The prices quoted above are adjusted. Berkshire has a ~5.8% ownership stake in the business.
DaVita Inc. (DVA): DVA is a 1.35% of the portfolio position that was aggressively built over several quarters in the 2012-13 time frame at prices between $30 and $49. The stock currently trades at ~$113, compared to Berkshire’s overall cost basis of ~$45 per share. This quarter saw a ~5% (2M shares) selling at $88 per share.
Note: Berkshire’s ownership stake in DaVita is ~32%.
Wells Fargo & Co. (WFC): WFC is now a 1.31% of the 13F portfolio position. It is a very long-term stake. In recent activity, 2019 saw a ~25% selling at prices between $43 and $55. The last two quarters have seen another ~60% reduction at prices between ~$23 and ~$33. Berkshire’s cost basis is ~$24.50. The stock currently trades at $24.90.
Liberty Global PLC (LBTYA, LBTYK): The position was established in Q4 2013 at prices between $37.50 and $44.50 (adjusted for the 03/2014 stock split) and increased in the following two quarters at prices between $38.50 and $46. The three quarters through Q1 2016 had also seen a combined ~30% increase at prices between $30 and $50. Q2 2016 saw a ~17% further increase at prices between $27 and $39. The stock is now at $21.85, and the stake is at 0.23% of the 13F portfolio. This quarter saw a ~5% trimming at $22.31.
Axalta Coating Systems (AXTA): AXTA is a small 0.23% of the portfolio stake established in Q2 2015 at prices between $28 and $36, and increased by ~16% the following quarter at prices between $24.50 and $33.50. The stock currently trades at $28.30. Berkshire owns ~10% of the business. This quarter saw a ~3% trimming at $22.63.
Barrick Gold (GOLD): The very small 0.15% of the portfolio GOLD stake was purchased last quarter at prices between $18.50 and $28.25, and the stock currently trades at $25.86. There was a ~43% selling this quarter at prices between ~$26 and ~$30.50.
JPMorgan Chase (JPM): A ~1% stake in JPM was established in Q3 2018 at prices between $104 and $119, and increased by ~40% next quarter at prices between $92 and $115. There was another ~20% stake increase in Q1 2019 at prices between $97 and $107. The stock currently trades at ~$117. Last quarter saw a ~60% selling at prices between $84 and $114. The remaining position was almost eliminated this quarter at prices between ~$91 and ~$104.
PNC Financial (PNC): The 0.09% PNC stake was established in Q3 2018 at prices between $134 and $146, and increased by just over one-third next quarter at prices between $110 and $140. There was an ~80% selling over the last two quarters at prices between $85 and $131. The stock is now at ~$126.
M&T Bank (MTB): The very small 0.12% of the portfolio MTB stake was reduced this quarter.
Kept Steady
American Express and Coca-Cola: These two very large stakes were kept steady during the last ~6 years. Buffett has said these positions will be held “permanently”. Berkshire’s cost basis on AXP and KO are at around $8.49 and $3.25 respectively, and the ownership stakes are at ~18% and ~9.5% respectively.
Kraft Heinz Co.: KHC is currently a fairly large position at 4.26% of the portfolio. Kraft Heinz started trading in July 2015, with Berkshire owning just over 325M shares (~27% of the business). The stake came about because of two transactions with 3G Capital as partner: a ~$4B net investment in 2013 for half of Heinz and a ~$5B investment for the acquisition of Kraft Foods Group in early 2015. Berkshire’s cost basis on KHC is ~$30 per share, compared to the current price of $32.15.
Moody’s Inc. (MCO): MCO is a 3.12% of the 13F portfolio stake. It is a very long-term position, and Buffett’s cost basis is $10.05. The stock currently trades at ~$276. Berkshire controls ~13% of the business.
US Bancorp (USB): The ~2% USB stake has been in the portfolio since 2006. The original position was tripled during the 2007-2009 time frame. It was then kept relatively steady till Q2 2013, when ~17M shares were purchased at prices between $32 and $36. H1 2018 saw a ~16% increase at prices between $49 and $58, and that was followed with a ~25% increase in Q3 2018 at prices between $50 and $55. The stock is now at $44.28, and Berkshire’s cost basis is ~$38. They control ~10% of the business. There was marginal selling last quarter.
Charter Communications (CHTR): CHTR is a 1.42% of the portfolio position. It was established during the last three quarters of 2014 at prices between $118 and $170. In Q2 2015, the position was increased by ~42% at prices between $168 and $193, and that was followed with another ~21% increase the following quarter at prices between $167 and $195. The stock currently trades at ~$641, compared to Berkshire’s cost basis of ~$178. The six quarters through Q4 2018 had seen a combined ~25% selling at prices between $250 and $395, and that was followed with a ~20% reduction in Q1 2019 at prices between $285 and $366. Since then, the activity has been minor.
VeriSign Inc. (VRSN): VRSN was first purchased in Q4 2012 at prices between $34 and $49.50. The position was more than doubled in Q1 2013 at prices between $38 and $48. The buying continued till Q2 2014 at prices up to $63. The stock currently trades at ~$195, and the position is at 1.15% of the portfolio (~10% of the business). Q1 2020 saw minor trimming.
Bank of New York Mellon Corp. (BK): BK is a 1.09% of the 13F portfolio stake. The bulk of the original position was purchased in Q2 2012 at prices between $19.50 and $25. In recent activity, 2017 saw a ~180% increase at prices between $43.50 and $55, while 2018 saw another one-third increase at prices between $44.50 and $58.50. The stock currently trades at $39.71. There was a ~10% trimming last quarter. Berkshire’s cost basis on BK is ~$46 per share and ownership stake is ~9%.
Amazon.com (AMZN): AMZN is a 0.73% of the portfolio stake established in Q1 2019 at prices between $1500 and $1820, and increased by ~11% next quarter at prices between $1693 and $1963. The stock currently trades at ~$3131. There was marginal trimming in Q1 2020.
Liberty SiriusXM Group (LSXMA, LSXMK): The tracking stock was acquired as a result of Liberty Media’s recapitalization in April 2016. Shareholders received 1 share of Liberty SiriusXM Group, 0.25 shares of Liberty Media Group, and 0.1 shares of Liberty Braves Group for each share held. Berkshire held 30M shares of Liberty Media for which he received the same amount of Liberty SiriusXM Group shares. There was a ~40% stake increase in Q2 2017 at a cost basis of ~$40 per share. Last quarter saw another ~27% stake increase primarily through the $25.47 per share rights offering the company announced in May. The stock currently trades at $42.80.
Note: LSXMA/LSXMK is trading at a significant NAV discount to the parent’s (Sirius XM Holdings (SIRI)) valuation.
Sirius XM Holdings: The 0.12% SIRI stake was purchased in Q4 2016 at prices between $4.08 and $4.61. Q2 2017 saw selling: a ~20% reduction at prices between $4.70 and $5.50. Last quarter saw a ~60% selling at prices between $4.50 and $6.50. The stock is currently at $6.37.
StoneCo Ltd. (STNE): STNE is a 0.33% position purchased in Q4 2018 at ~$21 per share, compared to the current price of $65.52.
Note: Berkshire has an ~11% ownership stake in StoneCo. In October 2018, WSJ reported that Berkshire had invested ~$300M each in two fintechs: India’s Paytm and Brazil’s StoneCo. The Paytm investment was made in August 2018, while the STNE purchase was following its IPO in October 2018.
STORE Capital (STOR): The 0.29% STOR stake was established in Q2 2017 in a private placement transaction at $20.25 per share. Last quarter saw a ~30% stake increase at prices between $14.50 and $26.50. The stock is now at $32.60.
RH Inc. (RH): The 0.29% of the portfolio RH position was established in Q3 2019 at prices between $119 and $174, and increased by ~40% next quarter at prices between $165 and $242. It is now at ~$408. Berkshire controls ~9% of the business.
Teva Pharmaceutical (TEVA): TEVA is a very small 0.17% of the portfolio stake established in Q4 2017 at prices between $11.20 and $19.33, and more than doubled next quarter at prices between $16.50 and $22. The stock currently trades at $9.63.
Suncor Energy (SU): The 0.10% SU stake was purchased in Q4 2018 at prices between $26 and $40. Q4 2019 saw a ~40% stake increase at prices between $29 and $33. There was another ~30% stake increase last quarter at prices between $14.25 and $21.30. The stock is now at ~$15.
Note: Suncor Energy has had a round-trip in the portfolio. It was a 0.48% position purchased in Q2 2013 at prices between $27 and $32. That stake was disposed during Q2 and Q3 2016 at prices between $25.50 and $29.
Synchrony Financial (SYF): SYF is a 0.23% of the portfolio position purchased in Q2 2017 at prices between $26.50 and $34.50, and increased by ~20% the following quarter at prices between $28.50 and $31.25. The stock is now at $31.11. Q1 2020 saw a ~3% trimming.
Note: Synchrony is the private-label credit card business split-off from GE that started trading in August 2014 at ~$23 per share.
Biogen Inc. (BIIB), Globe Life (GL), Johnson & Johnson (JNJ), Mastercard Inc. (MA), Mondelez International (MDLZ), Procter & Gamble (PG), SPDR S&P 500 Index (SPY), United Parcel Service (UPS), Vanguard S&P 500 Index (VOO), and Visa Inc. (V): These very small positions (less than ~1% of the portfolio each) were kept steady this quarter. Berkshire’s ownership stake in Global Life is ~6%.
Note 1: Since November 2015, Warren Buffett is known to own ~8% of Seritage Growth Properties (SRG) at a cost basis of $36.50 in his personal portfolio. It currently trades at ~$16. SRG is a REIT spin-off from Sears that started trading in July 2015.
Note 2: Berkshire Hathaway also has a 225M share position in BYD Company at a cost basis of ~$1 per share (~$2 per share in terms of ADRs). The ADR (OTCPK:BYDDY) currently trades at $46.79.
The spreadsheet below highlights changes to Berkshire Hathaway’s 13F stock holdings in Q3 2020:
Warren Buffett - Berkshire Hathaway
Disclosure: I am/we are long ABBV, AMZN, KHC, WFC, BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
<<<
>>> Snowflake Inc. (SNOW) provides cloud-based data platform in the United States and internationally. The company's platform enables customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data. Its platform is used by various organizations of various sizes in a range of industries. The company was formerly known as Snowflake Computing, Inc. and changed its name to Snowflake Inc. in April 2019. Snowflake Inc. was founded in 2012 and is headquartered in San Mateo, California.
<<<
>>> What Berkshire Hathaway’s Big Gas Pipeline Buy Tells You
Forbes
by Erik Sherman
July
https://www.forbes.com/sites/eriksherman/2020/07/06/berkshire-hathaway-dominion-energy-natural-gas-pipeline/#329345d7481c
Some big news on the investing front, as the New York Times’ Dealbook newsletter put it: “Warren Buffett Is Back in the Game”. After sitting back, Buffett and his partner at Berkshire Hathaway, Charlie Munger, did their first big deal in a while.
Berkshire Hathaway purchased a gas pipeline network from Dominion Energy for $9.7 billion. The amount might at first seem crazy given current news, but it’s a strategically smart move for the future.
Dominion and Duke Energy announced that they would cancel the Atlantic Coast Pipeline. The construction was supposed to expand a pipeline network hundreds of feet under the Appalachian Trail. Environmental opponents, who point to the regular occurrence of pipeline accidents and their consequences, according to federal government data, tried to block the project in court.
Dominion and Duke managed to move decisively past one legal challenge that went to the Supreme Court, but then faced “new and serious challenges” to a necessary permit. With costs having swelled from the original $4.5 billion to $5 billion estimate, reaching $8 billion, the two companies gave up.
Although the companies specifically referred to a decision out of the United States District Court for the District of Montana and a chilled reception from the Court of Appeals for the Ninth Circuit, they could also been thinking of the shutdown of the Dakota Access Oil Pipeline. Native American tribes reportedly prevailed in court when the pipeline was ordered to shut down by August 5 for a new environmental review that will likely take more than a year.
The more projects get drawn out, the more expensive they become and the less of a chance they can return sufficient profits fast enough to satisfy investors.
Between spiraling costs and an apparent growing skepticism on the part of courts, it would seem clear why Dominion might want to exit this part of the business. But why would Buffett and Munger decide to get involved?
First stop is to check Dominion Energy’s most recent annual report. A combination of “about 10,400 miles of natural gas transmission, gathering, and storage pipelines; and a liquefied natural gas terminal” led to about 24% contribution to the company’s 2019 operating earnings of $3.4 billion, or $800 million.
The $9.7 billion deal includes an assumption of $5.7 billion in existing debt, so the value of the actual pipeline network is about $4 billion. Even at nearly $10 billion, it puts only a small dent into the $137 billion in cash that Berkshire Hathaway had, according to data and analysis from Morningstar. That firm projects about $1 billion in ongoing annual net income.
Then there is also expansion of Berkshire Hathaway’s hold on the transmission of natural gas. The acquisition should increase the portion of national capacity to 18%, according to Dealbook.
The emphasis on transit and not extraction or sale is critical. Markets have seen wildly swinging prices of energy products. Gas never followed oil into negative territory, but last month saw at least a ten-year low.
That’s bad for producers, good for buyers, and fairly immaterial for those that operate distribution. Gas will continue to run electrical generation and both heating and cooling systems. A post-pandemic economic recovery will only increase demand and prices.
Today’s market has weighed in on who seems to have gotten the best of the deal. As of about 3:30 p.m. eastern, Dominion shares are down about 10.5% while Berkshire was up 2.6%.
As true for Buffett and Munger strategies, the full value will become apparent in the long run. In this case, it’s a reminder for investors to consider which companies in a market are absolutely necessary while remaining disconnected from the whims of commodity pricing. A pipeline business is like an electrical grid, gaining its own profits for a service that can’t easily be circumvented.
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>>> Buffett's Surprising New Moves Fit His Core Principle: Have An Edge
Sep. 25, 2020
Seeking Alpha
by Jim Sloan
https://seekingalpha.com/article/4376207-buffetts-surprising-new-moves-fit-core-principle-edge
Two recent Buffett actions may seem out of character: a $6.5 billion investment in stodgy Japanese trading companies and a $500 million investment in hot IPO Snowflake; what's up?
Buffett formed many lifetime principles as a 16-year-old horse handicapper, including the importance of information, sizing bets, and having an edge over the opposition.
This applied in his "cigar butt" years, his blue chip ROIC years, his use of insurance float, his utility/railroad acquisitions, and his deals; in all cases he had an edge.
Despite striking out in new directions his recent actions each involved an edge which improved upon the ordinary odds and applied such racetrack/casino principles as properly sizing bets.
Buffett's greatest edge may be in knowledge stemming from Berkshire itself, both for buybacks and for buying assets such as Dominion's pipelines for which Berkshire Hathaway Energy provided an information advantage.
"Plus ca change, plus c'est la meme chose (the more things change the more they stay the same)" - epigram by Jean-Baptiste Alphonse Karr, 1824
What's up with Buffett? Is he bent on taking Berkshire Hathaway (BRK.A)(BRK.B) down new and radical paths? The short answer is yes. The short answer is also no.
Two recent actions may have struck Buffett watchers as out of character. First he reveals that over the past year he bought a $6.5 billion stake in five relatively stodgy Japanese trading conglomerates known in Japan as sogo shosha. Then within a matter of weeks he announces that Berkshire has taken a small but significant stake in the year's hottest IPO, Snowflake (SNOW), using two different approaches just a few days before the IPO. Buffett had previously made it clear that IPOs were not for him or Berkshire. What's up with all that? Has he taken leave of his... basic principles?
In this article I'll take a hack at the long answer, which starts with a few basic principles he learned as a teenager. The world changes. The markets change. But remember the French proverb cited above. Whether it's algorithmic trading, new forms for companies going public, or merely great generational changes in what's working in the markets, there's a need for both a core of basic principles and a carefully measured flexibility of mind.
But where can you discover the kind of principles that are powerful and general enough to work in many different markets and circumstances? As it turns out, Buffett's first encounter with the most fundamental principles for investing came to him at an unexpected place and a surprising age. He wasn't just the typical nerdy kid who bought a stock or too in a custodial account - he did that too, of course, and made a total of five bucks on three shares of Cities Service Preferred. But hey, lots of kids do that kind of thing, which is fun and makes you feel prematurely grown up. I did a bit of it myself, but I clearly did not grow up to be Buffett. Having an interest in stocks as a kid is probably best described as necessary but not sufficient. Buffett went to a much stranger place to learn the right questions to ask about stocks.
What you really need is an opportunity to discover a few basic principles that will stand the test of time. They should be as relevant at the end of your career as when you are just starting out and make sense whether you are young or old. Buffett had a bit of luck with ideas he bumped into in the course of an unusual teenage experience.
Buffett Learned Core Principles At The Racetrack
The most powerful investment instruction for the sixteen-year-old Buffett took place at the race track. Still back in Nebraska he and a friend started by "stooping" the floor for "place" and "show" tickets discarded by naive bettors disappointed that they didn't have the winner. In their naivete they didn't realize that their tickets paid out modestly for 2d and 3d place as well. There's a value investing metaphor somewhere in this which closely resembles Buffett's original model of picking up "cigar butt" stocks which were discarded but had one more puff in them.
What Buffett did next was more interesting. He and a friend put out a tip sheet called Stable-Boy Selections. To do this he began to study handicapping, and in the process learned such things as the fact that you could handicap by speed or by the class the horse had competed successfully against. They sold their tip sheet for a quarter until the race track shut them down. A year later with a teacher who was also interested in horses, he returned to the racetrack and instead of "stooping" or selling a tip sheet, he bought the best tip sheet, studied, and formulated a plan.
I'd get the Daily Racing Form ahead of time (he told biographer Alice Schroeder) and figure out the probability of each horse winning the race. Then I would compare those percentages to the odds. But I wouldn't look at the odds first, to avoid prejudicing myself. Sometimes you would find a horse where the odds were way, way off from the actual probability. You figure the horse has a ten percent chance of winning but it's going off at 15 to 1 (implying only a 6.7% chance so that the payout probability exceeded the odds by about 50%)."
What Buffett had stumbled upon was the concept of having an edge, in this hypothetical case a 50% edge on what was admittedly a long shot, although betting on a large number of such long shots would likely be highly profitable. The basis of success was that you were betting against people who based their choices on the jockey's colors or the names of the horses. Implicit in this process was the most important principle behind any kind of betting, using edge/odds as a guideline for sizing bets or deciding whether to bet at all.
This simple criterion is actually a version of one of the most sophisticated approaches to any game involving information and played under uncertainty. This principle involving the use of edge/odds for proper sizing of bets (including the decision not to bet) is called the Kelly Criterion after mathematician and information theorist John Kelly. Kelly worked at Bell Labs with Claude Shannon, also a mathematician and the inventor of information theory, who ultimately became a famously successful investor using legal inside information. A system counting the fives to size bets in blackjack was put together by Ed Thorpe, who also knew Shannon at MIT. Thorpe used this approach to beat blackjack dealers, a system he wrote about in Beat the Dealer. Thorpe later ran a successful hedge fund which prefigured today's algorithmic trading.*
Buffett is neither a high-order mathematician nor an information theorist, but he is very quick with basic math and its implications. He didn't miss the main thing. He was a decade ahead of the mathematicians and information theorists thanks to his experiences at the race track. Here are the major principles Buffett took away from his race track experiences, good and bad:
Information is everything. The way to win is to have more information than the other guy.
Opportunity arises whenever other bettors or market participants are naive, lazy, badly informed, under pressure to deal, or simply not very smart.
Always look for an edge.
Size your bets appropriately based on edge/odds.
You don't have to bet every race.
Looking closely, you can see these principles ripple through every major stage of Buffett's career.
The Partnership Years
These simple principles applied with the analytical methods he learned from Ben Graham enabled Buffett's original hedge fund (The Partnership) to return 29.5% before fees (24.5% after) versus 7.4% for the Dow with no down years between 1956 and 1969. The market was simpler in those days, and many players were as badly informed as a bettor playing the jockey's colors or the horse's name. Buffett won by doing his homework and having the information advantage that came with command of detail. He also employed the concept of having a "margin of safety," which amounts to undertaking only bets which have a high probability of success.
In 1969 Buffett closed the partnership on the grounds he was finding it difficult to discover mis-priced stocks. In reality, he had perfectly timed the end of a long bull market and chose to follow the key principle that you don't have to bet every race.
Float, Moat, And ROIC
The trouble with finding "cigar butt" stocks was that as soon as they closed the gap to fair value you had to find another one. There had to be a better way, and Charlie Munger provided one. The trick was to buy stocks with high return on invested capital and a good place to reinvest it. The next thirty years at Berkshire Hathaway were driven by two investment themes:
Property and casualty insurance companies which provided an underwriting profit if managed well and at the same time created a "float" of customer payments which was essentially free if your underwriting was good and became a free source of cash to invest.
Quality companies with outstanding products and brands which served as a "moat" to hold off competitors and also high return on invested capital which they were able to compound internally. They were wonderful if you could purchase the company outright, as with See's Candy, but they were also pretty darn good if you simply bought gobs of the stocks, as Buffett did with Coca-Cola (KO) and American Express (AXP). He holds them still, decades later, and happily receives a rising stream of dividends which annually exceed his purchase price.
Warren and Charlie more or less invented the concepts of "float" and "moat" as investment edges, and while they were not the only people to think about ROIC, they were early in understanding that it was the underlying force behind growth. Put together, the three concepts - moat, float, and ROIC - worked brilliantly and were the main drivers of Berkshire's extraordinary growth in value until Berkshire began to feel the pressure of holding too much cash.
Assured Profitable Reinvestment
In 1999 Buffett's struck out in another new direction by buying a control position in Mid-American Energy. Although utilities had slow user growth and their rates were regulated, they enjoyed an advantage which came with regulation: an assurance of a reasonable return on capital required to maintain their service. Given the low cost of cash from insurance float, companies in a regulated industry were a bond-like sure thing. Berkshire Hathaway Energy - now a large unit of Berkshire overseen by Buffett's likely successor Greg Abel - embarked on two decades of bolt-on acquisitions and purchased any infrastructure assets that became available.
Railroads had similar advantages, and Buffett was able to acquire BNSF by a handshake golf-course deal with CEO Matt Rose. Industrial companies in general shared some but not all of these advantages, and Buffett was the buyer of choice for privately owned Israeli metalworking company Iscar and a cluster of industrial assets which no longer fit the portfolio of the Pritzker family. His edge in these purchases was having capital on hand, and in the case of Iscar providing the individual owner a chance to cash out by selling his lifework to a company which would continue it as he would have.
Deals When The Other Side Is Highly Motivated
Nothing shows the use of an edge better than the deals cut with Dow Chemical (DOW), Harley Davidson (HOG), Goldman Sachs (GS), and GE (GE), all of which were stuck in a tough situation because of the 2008-9 crisis. There's no better edge than the one you have when the other side is desperate. Receiving preferred shares at high interest dates, with early payback penalties and kickers in the form of warrants, made these deals a rare combination of low risk and high return.
The home run of these deals was his $5 billion purchase of preferred shares from Bank of America (BAC) in 2011. The market feared that BAC was about to fail, and Buffett called to make them an offer they couldn't refuse (which had popped into his head while taking a bath). With the preferred shares he received 6% interest along with warrants which were then out of the money but subsequently enabled him to purchase BAC at a price which which has subsequently tripled.
No Edge Works All The Time
It should be noted that the prospects for Buffett's similar deal with Occidental Petroleum (OXY) have been greatly damaged by the COVID lockdown, along with his four airline investments. Several wholly owned Berkshire subsidiaries have also seen a reduction in their immediate prospects, including the relatively large 2015 acquisition of airline-related Precision Castparts. Even with an edge, be it deal structure or general market acumen, not all bets work out.
The long period of low rates has made marginal investments more attractive, but the several problem investments of recent years should be taken in context. Buffett has more often been criticized for not taking action than for actions he actually took. The bets that didn't work out were generally small on Berkshire's scale assuming that Precision Castparts is likely to bounce back over time. What comes in for little positive notice is the virtue of Buffett's relative inaction. A product of overall market conditions that existed before COVID, this clearly represents the principle of not betting at all when the odds are insufficiently favorable.
Using An Edge In Buying Japanese Trading Companies
Many people did not notice at the time - and I did not make it an aspect of my analysis - that Buffett's purchase of equal amounts in five Japanese trading companies had a particularly favorable twist. My own initial thought was that the companies were vital and produced stable dividends, albeit a dividend stream somewhat lumpier than that of most large American companies. These sogo shosha thus fit the longtime Buffett model of stocks as "equity bonds", producing a bond-like return in the form of dividends accompanied by a reasonable prospect of modest price appreciation.
Dividends received within Berkshire are very valuable because more favorably treated under current corporate tax laws than capital gains. Though anything can happen when it comes to taxes, a corporate tax increase is much less likely than a tax increase for affluent individuals because of the argument that American business must be competitive with foreign businesses. The equity bond aspect was reflected in Buffett's buying these company's within National Indemnity, where their regular dividend payment could offset future expected payouts. Every operational aspect, therefore, was well thought out.
There was, however, one factor which has not been prominent in discussions, including my own initial analysis. The $6.5 billion outlay for shares in the five companies - Itochu (OTCPK:ITOCF), Marubeni (OTCPK:MARUF), Mitsubishi (OTCPK:MSBHF), Mitsui (OTCPK:MITSY), and Sumitomo (OTCPK:SSUMF) - was almost exactly offset by borrowings denominated in yen at the hyper-low interest rates in Japan - ranging from .17% to 1.1% in the case of the yen loans. Thus with average dividend rates of the five companies around 4%, the purchase of the five companies involved a carry trade of sorts, or arbitrage if you prefer. In essence Buffett and National Indemnity were receiving very secure payments roughly 3% above the cost of funds, with changes in exchange rates removed from the picture. Much like insurance float, it was essentially free money with a suitable investment available for putting it to use.
It will be interesting to see whether this major foray into international investing also leads to Buffett operating within an expanded universe of potential investments. It could be that Buffett simply sees in Japan, an obvious low risk way to participate in the growing Pacific Rim, a more favorable situation than in most foreign markets. It is also possible that Buffett may expand the size of his bet on the five sogo shosha, where he can double his investment without regulatory objection. He may also branch out into other areas of the Japanese market.
Using An Edge To Buy In Front Of The Snowflake IPO
The purchase of some $500 million of the Snowflake (SNOW) IPO was perhaps the most surprising move Buffett has ever made. In every respect it appears to violate principles explicitly stated and observed in Buffett's past. It is, first of all, a tech company, and it comes with all the difficulties of analyzing tech, especially very young tech startups. Buffett has spoken of the problems that come with Initial Public Offerings and the extreme unlikelihood of his ever buying into one. It is also extraordinarily expensive by all measures, has no profits, and sells on the basis of an enormous multiples of bookings. Buffett has steered clear of all such companies in the past. Why change his approach now?
There are a few positive aspects particular to Snowflake which Buffett must have considered. For one thing, the business model is very well designed as tech startups go, with a clear sense of the ultimate scale of their data cloud storage-and-accessing market and also a reasonable ability to estimate their likelihood of capturing large market share. Current growth matches up well with the IPO price if it is likely to persist for a considerable period, always a big if. Berkshire is in good company, as Salesforce (CRM) equalled their commitment to the IPO. That's an important imprimatur from a company certainly extremely well informed about the opportunity and risks, as well as the process moving from private equity startup to public company.
In an article I wrote on great contemporary market winners I invoked the implied Adam Smith view that such companies might reasonably be viewed in the beginning not by current metrics but by an informed estimate of the market they will eventually serve and the share of it they will attain. This view appears from the initial mission statement to be exactly the way Jeff Bezos formed Amazon (AMZN).
I can't resist thinking that Todd Combs had some role in this, especially considering that he was the instigator of the thus far successful investment in Brazilian payments company StoneCo (STNE) and Indian payments company PayTm, in which Ant Financial has also invested and which is scheduled to go public in 2022. On the other hand,
the second part of Berkshire's investment, a private deal to buy the shares of early private investors - an amount equal to the IPO commitment - has more the feel of a Buffett action.
The edge here? For one thing, it turns out that arranging to buy in both cases at the IPO price had a huge advantage in retrospect. Almost all day one investors ended up paying well over twice the IPO price. Maybe this price is also way off base, but only time will tell. It's also important to be aware of the sizing of the bets. The combined price paid for Snowflake is less than combined investments in StoneCo and PayTm, and is quite small when compared to Berkshire's available cash. It is also just under 10% of the price paid for the four Japanese trading countries, which are less exciting but far more likely to meet the smaller objective of a steady and rising dividend payout.
If you had to sum it up, Berkshire made one very conservative bet in a foreign market and one much smaller bet in a company with high risk but enormous upside and the advantage of getting in at an early point - the sort of bet that recent years has turned out pretty well for informed investors in tech IPOs, especially if executed with some price advantage.
Buffett's Most Important Edge
I would be remiss not to mention the single area in which Buffett has the greatest edge: Berkshire itself. So far in 2020 Buffett has bought back at least $7 billion in combined Berkshire A and B shares, probably more than he invested in the Japanese companies and Snowflake combined. This should come as no surprise. Berkshire has lagged the market and is relatively cheap by many measures, even after reduced earnings including a large write-down of Precision Castparts.
The important fact not to miss is that Buffett knows the risks and the value of his own company better than anyone else possibly could and also better than he could possibly know any other potential investment. It should get the attention of other investors that he has begun to size the buyback bet as having a higher probability of good return than any other investment he currently sees. One should also remember that Buffett has no personal interest in Berkshire buybacks except what he shares with all continuing shareholders (he is careful to buy back at prices which do not disadvantage either holders who exit or holders who stay).
There's also another information edge that comes with being at the center of Berkshire. Not only does Buffett get timely updates on the economy, quite competitive with the information received by the Federal Reserve, but he also receives extremely valuable insight into particular industries, including some which are out of favor and thus candidates for investment. The Berkshire Hathaway Energy division run by Greg Abel has been a particular source of such information. Abel has made many bolt-on acquisitions. His extensive experience with energy transmission and storage assets enabled Berkshire's single largest capital commitment so far this year, the $10 billion cash-plus-debt-assumption acquisition of pipeline and storage assets for which Dominion Energy was, if not quite desperate, a highly motivated seller.
What's Your Edge?
Here are a few things Buffett's actions seem to be telling us:
Unless you have an edge, there are currently few opportunities in the US stock market either for making acquisitions or for buying shares.
Berkshire Hathaway itself is reasonably cheap and safe. Buffett makes buybacks at prices not accretive to book value but accretive to overall value.
Foreign investments may provide more opportunity at this time.
The small scale of his investments as a percentage of Berkshire's cash reserve signify his view that these are risky times in which cash may be needed unexpectedly, but you can expect better opportunities at some point in the future.
These are all implications of Buffett's action which may provide important food for thought for the average investor.
Should you try to piggyback the actions of Buffett? Certainly not in all cases. One can make the case for looking closely at the Japanese trading companies if dividend yield with modest growth are your primary objectives. I may attempt to write a short article about that, prompted by my ex-wife's query about which of them she should buy. At the present moment you can probably buy these sogo shosha for about what Buffett paid, although they have traded at times as much as 30% below the current price over the past couple of years. You'll just have to accept exposure to the Japanese currency, as you can't easily replicate Buffett's borrowing in yen. Currency hedging is expensive and not generally recommended in stocks although it sometimes makes sense with bonds.
As for Snowflake? It was risky even at Buffett's price, a risk which he and his lieutenants had clearly thought through. If you check the market, you will see that you and I cannot get anything close to Buffett's price. The value of Buffett's position more than doubled on day one. I doubt that he would buy it today. You and I shouldn't.
It's too bad we can't all take advantage of the kind of edges that Buffett often has available. We can from time to time look at mis-priced securities and buy them in the size that edge/odds calculation suggests. First, however, assess yourself and be sure you are aren't the type of better who bets the jockey's colors or the horse's name. Then ask yourself the basic question: what's my edge?
I would like to hear your thoughts on this question in comments.
*Buffett's racetrack and horse handicapping experience are from Alice Schroeder's Buffett biography The Snowball. Information on the Kelly Criterion and its application are from William Poundstone's Fortune's Formula and a variety of other sources.
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>>> Berkshire Hathaway Slashes Stake in Troubled Lender Wells Fargo
Bloomberg
By Katherine Chiglinsky and Hannah Levitt
September 4, 2020
https://www.bloomberg.com/news/articles/2020-09-04/buffett-s-berkshire-slashes-stake-in-troubled-lender-wells-fargo
Warren Buffett’s Berkshire Hathaway Inc., once the biggest holder of Wells Fargo & Co. common stock, slashed its investment by more than 40% as the San Francisco-based lender copes with the aftermath of consumer-abuse scandals.
Berkshire sold more than 100 million shares, trimming its stake in Wells Fargo common stock to about 3.3%, according to a regulatory filing Friday. A Wells Fargo spokesperson declined to comment.
Berkshire, a long-time investor in the lender, has been trimming its bet in recent months, down to a stake valued at $3.4 billion based on Friday’s closing price. Wells Fargo is grappling with lingering fallout from its sales scandals plus the effects of the pandemic and related shutdowns across the U.S. That’s led to a share slump this year of more than 50%.
The lender announced in July that it would cut its dividend. The bank posted its first quarterly loss since 2008 in the three months ended June 30 as it set aside a record $9.5 billion for credit losses. Under new Chief Executive Officer Charlie Scharf, Wells Fargo has pledged to cut $10 billion in annual expenses and has embarked on job cuts that could ultimately number in the tens of thousands.
Berkshire has been reallocating investments in financials, cutting bets on JPMorgan Chase & Co. and PNC Financial Services Group Inc. and eliminating a stake in Goldman Sachs Group Inc. in the second quarter, then boosting a holding in Bank of America Corp. Just a few days ago, Berkshire announced a roughly $6 billion wager on five of Japan’s biggest trading companies, which are conglomerates with exposure to commodities and businesses including convenience-store chains and home-shopping networks.
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>>> Warren Buffett's Berkshire Hathaway makes big bets on Japan
By Laura He
CNN Business
August 31, 2020
https://www.cnn.com/2020/08/31/investing/berkshire-hathaway-warren-buffett-japan-intl-hnk/index.html
Warren Buffett is ushering in his nineties with big bets on Japan.
Berkshire Hathaway (BRKA), the American billionaire's industrial and insurance conglomerate, on Sunday announced that it has purchased stakes in Japan's five leading trading companies. The stakes are worth roughly 5% each, and have a combined value of $6.7 billion based on the companies' share prices Monday.
The five firms — Itochu (ITOCF), Marubeni (MARUY), Mitsubishi (MBFJF), Mitsui (MITSY) and Sumitomo (CMTDF) — are known as "sogo shosha," or "general trading companies," in Japan. They play a vital role in the country's economy, dealing in a wide range of industries, including energy, technology and manufacturing.
"I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies we have chosen for investment," Buffett said in a statement, noting that the firms have worldwide business partnerships. "I hope that in the future there may be opportunities of mutual benefit."
Berkshire said that it bought the holdings over the last year through regular purchases on the Tokyo Stock Exchange.
Japanese companies have not always welcomed foreign direct investment and some, such as New York hedge fund Third Point's stake in Sony, have turned contentious. But Buffett is a household name in Japan and books about his legendary investment style have been mainstays in Japanese bookstores for years.
The companies' stocks surged on the news, popping between 4% and 10% in Japan. The benchmark Nikkei 225 (N225) surged more than 1% as of Monday afternoon.
Berkshire said it intends to hold onto the investments for the long haul, adding that it may increase the size of its holdings to as much as 9.9%.
The stakes are among Berkshire's most notable inroads in Asia. It also has a major stake in BYD (BYDDF), the largest electric vehicle maker in China.
It's also a sign of how Berkshire may be trying to hedge against a weak US dollar, according to Stephen Innes, chief global market strategist for AxiCorp, a Sydney-based financial services firm.
Innes pointed out that Berkshire earlier this month revealed that it had bought a stake in Barrick (GOLD), a Canadian gold mining firm that is one of the world's most valuable. Gold prices have benefited from the US dollar's weakness this year, rising to all-time highs.
As the world continues to work toward recovery from Covid-19, Innes said, the Japanese trading houses that Berkshire is now investing in "will be a hot commodity," as they deal in the trading of resources.
"They will be the conduits to stoke Japan's economic engines," he added.
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>>> A Look At Berkshire Hathaway's Top 9 Holdings On Warren Buffett's 90th Birthday
Benzinga
by Chris Katje
August 30, 2020
https://finance.yahoo.com/news/look-berkshire-hathaways-top-9-163624076.html
Warren Buffett, the “Oracle of Omaha”, turns 90 today. The legendary investor has been one of the most followed figures in the stock market. He is the leader of Berkshire Hathaway (NYSE: BRK-A), a conglomerate that owns a portfolio of diversified assets, and also owns a sizable investment portfolio of publicly traded stocks.
Berkshire Hathaway owns well-known companies like Geico, Duracell, and Dairy Queen. For years, many have followed the other portion of the portfolio, tracking the stock picks of the legendary Buffett. The company’s equity investment portfolio owns stakes in 44 companies and holds a value of $207 billion.
In honor of his 90th birthday, here is a look at the top nine holdings in the Berkshire Hathaway equity investment portfolio as of June 30.
Apple (NASDAQ: AAPL) $89.4 billion
Bank of America (NYSE: BAC) $22 billion
Coca-Cola (NYSE: KO) $17.9 billion
American Express (NYSE: AXP) $14.4 billion
Kraft Heinz Co (NYSE: KHC) $10.4 billion
Moody’s Corp (NYSE: MCO) $6.8 billion
Wells Fargo (NYSE: WFC) $6.1 billion
US Bancorp (NYSE: USB) $4.9 billion
DaVita Inc (NYSE: DVA) $3 billion
Technology makes up the largest part of the equity investment portfolio with 46% of assets. Apple makes up the majority of that large stake, making up 44% of the entire investment portfolio. Buffett started purchasing a stake in Apple in the first quarter of 2016. That stake he bought in several installments has gained more than $80 billion over the last three or four years.
The financial sector makes up 32% of the investment portfolio. Three bank stocks are represented in the top nine with American Express also being a top-five holding. In the second quarter, Buffett did lower stakes in two banks, cutting stakes in both Wells Fargo and JPMorgan Chase (NYSE: JPM).
The quarterly filing by Berkshire Hathaway showed that the cost basis for the current $207.5 billion in securities was $96.1 billion. This shows that these 44 stocks have net unrealized gains of $11.4 billion.
Coca-Cola has remained one of the longest-held stocks in the portfolio, first purchased in 1988. Buffett is famous for his love for the brand as he himself drinks five cans a day. “I’m one quarter Coca-Cola,” Buffett once told Fortune, referring to the drink amounting to 25% of his daily calorie intake.
Warren Buffett is currently the fourth richest person in the world with Forbes ranking his net worth at $82.3 billion. Berkshire Hathaway shares are down 4% in 2020. Shares have increased by 59% over the last five years. Over the last ten years, shares are up 176%.
Happy Birthday to the legendary investor Warren Buffett!
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>>> 8 Stocks Warren Buffett Is Selling (And 6 He's Buying)
Kiplinger
by Dan Burrows
8-15-20
https://www.msn.com/en-us/money/companies/18-stocks-warren-buffett-is-selling-and-6-hes-buying/ss-BB180iJh?li=BBnb7Kz&ocid=mailsignout#image=1
After pretty much laying low in the first three months of the year, Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK.B), made sweeping changes to its stock portfolio during the second quarter.
Most notably, he continued to sell off equities. After dumping shares in 19 positions during the first quarter, Warren Buffett fully exited seven positions and sold off parts of another 11 stakes. But he was a little more active on the buying side, too, adding to four positions and initiating a stake in a company that's well outside of his traditional wheelhouse.
The Oracle of Omaha has made a few other interesting moves of late, too. That includes finally putting Berkshire's massive cash pile to use in a $9.7 billion buyout of Dominion Energy's (D) midstream energy business – his biggest deal in years – and a big bet on himself.
Of course, we know what the greatest long-term investor of all time has been doing because the U.S. Securities and Exchange Commission requires all investment managers with more than $100 million in assets to file a Form 13F quarterly to disclose any changes in share ownership. These filings add an important level of transparency to the stock market and give Buffett-ologists a chance to get a bead on what he's thinking.
When Buffett starts a new stake in some company, or adds to an existing one, investors read into that as a vote of confidence. But if he pares his holdings in a stock, it can spark investors to rethink their own investments. The fact that Berkshire Hathaway continued to shed weight even as the market began to rebound in Q2 underscores how challenging it is to make investing decisions these days.
Here's the scorecard for what Warren Buffett was buying and selling during the three months ended June 30, 2020, based on the most recent 13F that the company filed on Aug. 14. And remember: Not all "Warren Buffett stocks" are actually his picks. Some smaller positions are believed to be handled by lieutenants Ted Weschler and Todd Combs.
U.S. Bancorp
Action: Reduced stake
Shares held: 131,961,832 (-0.4% from Q1 2020)
Value of stake: $4,858,836,000
U.S. Bancorp (USB, $37.78) is the nation's fifth-largest bank by assets and America's biggest regional bank. It's also one of the oldest Buffett stocks in the Berkshire Hathaway portfolio; the Oracle of Omaha initiated his position in the first quarter of 2006.
And unlike with many other Berkshire bank holdings, Buffett did very little with it during the second quarter. BRK trimmed a quarter of a million shares in Q2, representing a mere fifth of a percent of the overall stake.
Buffett typically doesn't talk much about U.S. Bancorp, but it has been a solid pick by comparison to many of his other bank holdings. The lender has consistently generated the highest returns among the top 10 banks, and it has delivered a total return of 84% since March 31, 2006, versus a 28% gain for the financial sector.
Liberty Sirius XM Group Series A
Action: Reduced stake
Shares held: 14,860,360 (-1% from Q1 2020)
Value of stake: $512,980,000
Berkshire has managed to find a way to own Sirius XM in multiple ways.
Liberty Media (LBTYA), another Berkshire holding, has for years held a large stake in Sirius XM Holdings. But in 2015, the company actually recapitalized, offering (among other things) several tracking stocks that allowed investors to enjoy in the performance of Liberty's Sirius XM investment directly rather than get it piecemeal through Liberty Media itself.
Thus, Buffett was actually exposed to Sirius XM before it directly invested in SIRI shares in Q4 2016. And over time, he has bought more of the tracking stock, the overall body of which currently represents Liberty's 70%-plus stake in Sirius XM.
Berkshire did do a little trimming to this position in Q2 2020 … sort of. He let go of roughly a quarter million Liberty Sirius XM Group Series A (LSXMA, $36.04) shares. But as we'll see in a bit, that wasn't his final word on Liberty Sirius XM Group.
Charter Communications
Action: Reduced stake
Shares held: 5,213,461 (-3% from Q1 2020)
Value of stake: $2,659,074,000
Charter Communications (CHTR, $604.99) markets cable TV, internet, telephone and other services under the Spectrum brand, which is America's second-largest cable operator behind Comcast (CMCSA). It greatly expanded its reach in 2016 when it acquired Time Warner Cable and sister company Bright House Networks.
Buffett entered CHTR in the second quarter of 2014, but he has seemingly lost his love for the telecom company in recent years. His position has been trimmed down from 9.4 million shares in early 2017 to just 5.2 million shares as of Berkshire's most recent 13F, including a 210,000-share reduction in Q2 2020.
The move away from Charter meshed with a lousy 2018 for the stock, which lost 15% that year. But he had lousy timing in 2019. Buffett continued to sell his position during the first and second quarters, but CHTR shares finished the year with a 70% return.
Berkshire Hathaway's current stake still represents a decent-sized 2.5% ownership in Charter, and 1.3% of Berkshire's equity assets.
Visa
Action: Reduced stake
Shares held: 9,987,460 (-5% from Q1 2020)
Value of stake: $1,929,278,000
Warren Buffett took a little bite out of his holdings in America's two largest payments providers last quarter.
First up: Visa (V, $196.64), which operates the world's largest payments network, and thus is well-positioned to benefit from the growth of cashless transactions and digital mobile payments. Visa was the idea of lieutenants Todd Combs and/or Ted Weschler (Buffett won't tell), and Buffett has expressed previously that he wished Berkshire had bought more.
Berkshire Hathaway initiated its position in Visa during the third quarter of 2011, and it has proven to be a mammoth winner. Including dividends, Visa has delivered a whopping annualized return of 30.7% since Sept. 30, 2011. It's also a dividend-growth machine, ramping up its payout by 150% over the past five years alone.
"If I had been as smart as Ted or Todd, I would have (bought Visa)," Buffett told shareholders at the 2018 annual meeting.
Berkshire's half-percent stake in Visa doesn't even put it among the top 25 investors, though it's a not-insignificant 1% or so of Buffett's portfolio.
Mastercard
Action: Reduced stake
Shares held: 4,564,756 (-7% from Q1 2020)
Value of stake: $$1,349,798,000
Warren Buffett gives credit where credit is due. While Berkshire Hathaway does indeed own Mastercard (MA, $326.80), he has nodded to his portfolio managers Todd Combs and Ted Weschler, who made the call to buy both Mastercard and rival Visa.
"I could have bought them as well, and looking back, I should have," Buffett said about Visa and Mastercard in 2018, referring to his own investment in American Express.
Mastercard, which boasts 926 million cards in use across the world, is one of several payments processors under the Berkshire umbrella. However, after mostly leaving the stock alone since entering a position during the first quarter of 2011, Buffett sold off 300,000 shares, or 7% of the stake, in Q2 2020.
Don't take this as a bearish stance on Mastercard. MA has returned some 1,270%, including dividends since March 31, 2011 – several times better than the S&P 500 in that time. Warren Buffett was due for a little profit-taking.
Bank of New York Mellon
Action: Reduced stake
Shares held: 72,357,453 (-9% from Q1 2020)
Value of stake: $2,796,615,000
Bank of New York Mellon (BK, $37.53) isn't a household name, but it's a big deal in financial services, and Warren Buffett has been enamored with the stock for some time.
And despite some trimming in Q2 2020, he largely seems to remain a fan.
Bank of New York Mellon is a custodian bank that holds assets for institutional clients and provides back-end accounting services. Its roots actually go all the way back to 1784, when Bank of New York was founded by a group including Alexander Hamilton and Aaron Burr. Today, BK is the nation's ninth-largest bank by assets, according to data from the Federal Reserve.
Berkshire Hathaway first took a position in BK back during Q3 2010, when it paid an estimated average price of $43.90. Bank of New York Mellon wasn't completely spared a haircut during the second quarter, but Warren Buffett's 7.4 million-share sale, at 9% of the stake, was less drastic than his other financial-stock reductions.
Buffett remains the largest investor at 8.2% of shares, ahead of No. 2 Vanguard, at 7.3%.
M&T Bank
Action: Reduced stake
Shares held: 4,536,174 (-15% from Q1 2020)
Value of stake: $471,626,000
Warren Buffett's affection for M&T Bank (MTB, $109.21), like many of his other financial holdings, seems to have waned this year.
M&T Bank is a regional bank that operates more than 690 branches in nine states, including New York, Maryland and New Jersey, as well as Washington, D.C., and it has been profitable year after year for decades. It also has been a reliable dividend payer.
Buffett has a soft spot for well-run, unassuming businesses. And he frequently cites the importance of management talent when it comes to deciding where to invest. He certainly was a fan of M&T Bank's late CEO. In 2011, Buffett recommended that Berkshire Hathaway shareholders read M&T's annual reports, which were written by Robert Williams, chairman and CEO from 1983 until his death in 2017. "Bob is a very smart guy and he has a lot of good observations," Buffett said.
Nonetheless, Buffett dumped about 850,000 shares during the second quarter. Even then, Berkshire remains M&T's seventh-largest shareholder at 3.5% of the stock outstanding.
Wells Fargo
Action: Reduced stake
Shares held: 237,582,705 (-26% from Q1 2020)
Value of stake: $6,082,118,000
Warren Buffett clearly is tiring of Wells Fargo (WFC, $25.30).
The nation's fourth-largest bank by assets has been in the Berkshire portfolio since 2001. But it has turned into a weight around Buffett's neck since 2016, when numerous scandals bubbled to the surface. The bank opened millions of phony accounts, modified mortgages without authorization and charged customers for auto insurance they did not need. The clean-up process has been slow and claimed not one, but two CEOs.
WFC stock, meanwhile, has lagged its peers for quite some time.
Buffett has sold off Wells Fargo shares in numerous quarters since the start of 2018. Most of the previous sales appeared to be routine paring on the position to keep it below a regulatory 10% maximum ownership threshold for banks. However, Buffett dumped more than 55 million shares, or nearly 15% of his position, at the end of last year. And in Q2 2020, he booted 85.6 million shares, or more than a quarter of the remaining stake.
As a result, Berkshire, at a 5.8% stake, is now the former largest WFC shareholder. Vanguard and BlackRock are now la Berkshire The Berkshire Hathaway portfolio is no longer the largest WFC shareholder as a result. The now 5.8% stake is behind both Vanguard and BlackRock.
PNC Financial Services
Action: Reduced stake
Shares held: 5,350,586 (-41% from Q1 2020)
Value of stake: $562,935,000
Warren Buffett had been buying PNC Financial Services (PNC, $111.75) for a couple years. Berkshire began investing in PNC, the nation's sixth-largest bank by assets and second-largest regional lender, during the third quarter of 2018. Buffett upped Berkshire Hathaway's stake by another 4% in Q1 2019. And he added another 6%, or 526,930 shares, to start this year.
But Buffett sold off heavily from his bank positions during the second quarter, and that included lopping off 3.9 million shares from his PNC position.
That dropped his holding company well out of PNC's top 10 holders with 1.3% of the bank's shares outstanding.
Buffett had long been comfortable with investing in the banking business. At the 1995 Berkshire Hathaway annual meeting, he said the industry "falls within our circle of competence to evaluate." But 2020's pain in the financial sector forced Buffett's hand.
JPMorgan Chase
Action: Reduced stake
Shares held: 22,208,427 (-61% from Q1 2020)
Value of stake: $2,088,925,000
Berkshire Hathaway treated JPMorgan Chase (JPM, $102.41), the nation's largest bank by assets, much the same way it treated PNC during the second quarter. While Buffett upped his stake several times after entering his position during the third quarter of 2018, he chopped 35.5 million shares, or 61% of the position, last quarter following a 1.8-million share (3%) trim during Q1 2020.
Berkshire still was the sixth-largest shareholder in JPM as of the first quarter's end, but it has since dropped to 18th.
Part of the original attraction for JPMorgan is because of Warren Buffett's professed admiration for CEO Jamie Dimon. The two have partnered with Jeff Bezos, chairman and CEO of Amazon.com, to form a health care initiative intended to improve coverage and lower costs. Dimon and Buffett also have teamed up to decry the practice of giving quarterly profit forecasts, saying "short-termism is hurting the economy."
But banks have fallen out of Uncle Warren's favor, so much of the JPM stake had to go.
Sirius XM Holdings
Action: Reduced stake
Shares held: 50,000,000 (-62% from Q1 2020)
Value of stake: $293,500,000
Sirius XM (SIRI, $5.98) reaches more than 100 million listeners via its core satellite radio business and Pandora, which it acquired in 2018. And it's yet another stock pick related to John Malone, the chairman of Liberty Media, which owns a massive stake in Sirius XM.
It's possible that all of Berkshire's investments in companies that are somehow tied to Malone's truly Byzantine corporate structure could very well be the responsibility of one of Buffett's portfolio managers. Liberty Media was a large position held by Ted Weschler's Peninsula Capital in his pre-Berkshire days.
But Berkshire's affinity for this particular Malone-related position has been waning of late.
Buffett first bought shares in SIRI during the final quarter of 2016. Berkshire unloaded a small portion (1%) of its Sirius XM position during the third quarter. The Oracle of Omaha then trimmed his position by another 3.9 million shares, or about 2% of Berkshire's stake, in Q1 2020.
But Berkshire Hathaway really went to town in Q2, unloading more than 82 million shares. That brings its ownership down from 3% to a little more than 1%. But that still makes Buffett the fourth-largest owner of SIRI stock, well behind Liberty Global's 72% stake.
Occidental Petroleum
Action: Exited stake
Shares held: 0 (-100% from Q1 2020)
Value of stake: $0
Warren Buffett spent the better part of 2019 building up a stake in Occidental Petroleum (OXY, $14.64), but it appears he finally had enough. BRK.B sold it the entirety of its OXY holdings in Q2.
Buffett invested $10 billion in the integrated oil-and-gas company in late April 2019 to help finance a $38 billion bid for exploration-and-production firm Anadarko Petroleum. Berkshire continued to amass a stake over the next year, but apparently Buffett's strategy in the energy sector changed.
First, he dumped Berkshire's stake in Phillips 66 (PSX) in the first quarter of 2020. Then he bought natural gas assets from Diamond Energy for almost $10 billion in July. And now he's out of OXY, making Suncor Energy (SU) the lone energy component of Berkshire Hathaway's equity portfolio.
The fact that Occidental was forced to slash its dividend earlier this year no doubt factored into his decision.
At one point, Berkshire's stake represented 2.1% of Occidental's shares, making it the company's eighth-largest stakeholder. That's all ancient history now.
Airline Stocks
Action: Exited stakes
Shares held: 0 (-100% from Q1 2020)
Value of stakes: $0
As was well reported at the time, Buffett jettisoned all four of his airline stocks last spring as the global pandemic caused travel to collapse.
"I don't know whether two or three years from now that as many people will fly as many passenger miles as they did last year," Buffett said. "They may and they may not, but the future is much less clear to me."
Collectively, Berkshire sold 175 million shares in the four air carriers – Delta Air Lines (DAL, $28.94), United Airlines (UAL, $36.18), American Airlines (AAL, $13.33) and Southwest (LUV, $34.90). The stakes were worth a total of around $4 billion at the time.
In the case of DAL, he sold off the 71.9 million shares in Berkshire's portfolio in Q2. As for the others, UAL share sales came to 22.2 million, LUV shares were 53.6 million and the AAL stake comprised 41.9 million shares.
Buffett's original airline investments, made back in 2016, raised some eyebrows given his long-term disdain for the industry as a place where capital goes to die. It looks like he was right the first time.
Goldman Sachs
Action: Exited stake
Shares held: 0 (-100% from Q1 2020)
Value of stake: $0
Berkshire Hathaway had been hacking away at its Goldman Sachs (GS, $207.97) stake for a couple of quarters before unloading everything it had left. The holding company sold the last of its 1.9 million shares in the second quarter.
Berkshire first picked up its stake in Goldman during the 2008 financial crisis. Buffett paid $5 billion for preferred shares and warrants to purchase common stock. The preferred shares came with a dividend yield of 10% – almost twice the rate of some preferred stocks, which already are considered generous income plays.
Goldman redeemed its preferred shares in 2011. Berkshire bought another $2 billion in GS stock when it exercised the warrants in 2013.
Buffett parlayed the original investment into what at one point was a $3.8 billion, 5.1% stake in Wall Street's preeminent investment bank that made Berkshire its fourth-largest shareholder.
But times change. Buffett is now out of the Goldman Sachs business.
Restaurant Brands International
Action: Exited stake
Shares held: 0 (-100% from Q1 2020)
Value of stake: $0
We don't know for sure, but the reasons behind Buffett exiting Berkshire's position in Restaurant Brands International (QSR, $54.42) seem obvious.
QSR is a fast-food powerhouse, and it's not like the restaurant biz is thriving in this age of coronavirus. Restaurant Brands International was formed by the 2014 merger of Burger King and Tim Hortons. Three years later, the company acquired Popeyes Louisiana Kitchen. It's now the world's fourth-largest operator of fast-food restaurants.
So where did Warren Buffett come in? Berkshire Hathaway helped fund Burger King's acquisition of Tim Hortons by purchasing a combination of preferred shares and warrants. In a classic Buffett move, he was able to finagle a 9% yield from the preferred shares. QSR redeemed the preferreds in 2017, adding to Berkshire's cash pile.
The loss of foot traffic to restaurants of all sizes and types makes the industry's future opaque at best. Thus, it's not surprising that Buffett made his exit, selling 8.4 million shares in QSR last quarter.
Kroger
Action: Added to stake
Shares held: 21,940,079 (+15% from Q1 2020)
Value of stake: $742,672,000
Berkshire Hathaway's stake of supermarket titan Kroger (KR, $35.39), entered in Q4 2019, seemed like a sleepy pick. After all, many investors have soured on traditional supermarket chains given the emergence of Walmart (WMT), Amazon.com (AMZN) and other competitors.
Also, Kroger stood out as an old-economy value play versus many of the more "growthy" picks Berkshire has made of late, such as Apple (AAPL), Amazon and StoneCo (STNE).
But Buffett nonetheless entered a 18.9 million-share position at the end of 2019, then added another 3 million shares (15%) during the second quarter of 2020 to give him nearly 22 million shares. That makes Berkshire the sixth-largest investor in Kroger at 2.8% of shares outstanding. It's a small 0.37% of Berkshire's equity assets, but Kroger's 25% returns year-to-date have no doubt been welcome as so many other Buffett stocks have floundered.
Suncor Energy
Action: Added to stake
Shares held: 19,201,525 (+28% from Q1 2020)
Value of stake: $323,738,000
Suncor Energy (SU, $17.00)– an integrated energy giant whose operations span oil sands developments, offshore oil production, biofuels and even wind energy – also sells its refined fuel via a network of more than 1,500 Petro-Canada stations.
It also stands alone. Thanks to several other exits over the past year, this Canadian integrated oil company is the lone energy stock in the Berkshire portfolio.
And after trimming his position a little in Q1, Buffett added to it in a big way during Q2.
Buffett bought 4.25 million shares last quarter to bring his stake to more than 19 million shares. It's still a small holding, representing about 0.16% of the Berkshire equity portfolio's worth, according to data from S&P Global Market Intelligence. But the stake is meaningful to Suncor, as it represents 1.3% of its shares outstanding, making Buffett the 13th-largest owner of SU shares.
If this bet on Suncor sounds familiar, it should: When Buffett entered SU during the fourth quarter of 2018, that marked the second time Berkshire Hathaway has taken a stab at Suncor. The company originally invested in the energy giant in 2013, then sold the entirety of the position three years later.
Store Capital
Action: Added to stake
Shares held: 24,415,168 (+31% from Q1 2020)
Value of stake: $581,325,000
Berkshire's position in Store Capital (STOR, $25.26), which it entered during the summer of 2017, was an unusual one. Real estate investment trusts (REITs) – a way to invest in real estate without owning the actual assets – have never been big among Buffett stocks.
Store invests in single-tenant properties including chain restaurants, supermarkets, drugstores and other retail, service and distribution facilities. That is to say, Store is a bet on brick-and-mortar retail, which is thought to be in permanent decline.
Buffett, however, spied value – and he spied it for quite some time. Store Capital CEO Christopher Volk told CNBC that Buffett studied the REIT for three years before taking his position.
The Oracle of Omaha must've seen similar value arise in the company's February-March dip, which sent STOR shares off by roughly 65% from peak to trough. Because he bought 5.8 million shares, or an additional 31%, to bring his stake to 24.4 million shares yielding 5.5% at current prices.
BRK.B now owns 10% of shares outstanding, making it Store Capital's second-largest shareholder after Vanguard and BlackRock.
Liberty Sirius XM Group Series C
Action: Reduced stake
Shares held: 43,208,291 (+37% from Q1 2020)
Value of stake: $1,488,525,000
As we mentioned before, Buffett did give his holding in Liberty Sirius XM Group Series A shares a small haircut. But he more than made up with it via a big buy of Liberty Sirius XM Group Series C (LSXMK, $35.95) during the quarter.
Namely, he tacked on 11.8 million shares of LSXMK in Q2, which was his largest portfolio addition of any existing Berkshire position.
The Berkshire Hathaway portfolio now holds more than 58 million shares of LSXMA and LSXMK combined. Warren Buffett is the largest institutional shareholder in each class, holding 4.3% of Liberty Sirius XM's A shares, and 12.6% of the C shares. Combined with his SIRI stake, the Oracle of Omaha holds three different investments in Sirius XM.
Barrick Gold
Action: Initiated stake
Shares held: 20,918,701
Value of stake: $563,550,000
Warren Buffett is the farthest thing from a gold bug. "It doesn't do anything but sit there and look at you," he's been known to say. But holding gold as an asset class isn't the same thing as investing in a gold miner such as Barrick Gold (GOLD, $26.99).
True, mining stocks are sensitive to the price of whatever commodity they are digging out of the ground. But at least they produce something, as in cash flow. In the case of Barrick, it even pays a small dividend.
Besides, Barrick has more going for it than gold. It also mines copper, which is used in just about everything. As such, it's a bet on a return to global growth.
Buffett picked up 20.9 million shares in Barrick in the second quarter. The stake has a value of $563.6 million. The Oracle of Omaha typically doesn't comment on his reasons for buying or selling a stock but let's hope he makes an exception for this one. It would be fascinating to hear his investment thesis for a stock that's so sensitive to the price of the so-called barbarous relic.
Berkshire Hathaway
Value of repurchased shares: $5.1 billion
OK, this one is a bit of a cheat, but Buffett did pour another big chunk of cash into another blue-chip equity: his own stock.
The firm bought back $5.1 billion in Berkshire's shares during the second quarter. That follows $1.74 billion in repurchases during the first quarter of 2020, and another $2.2 billion in Q4 2019.
In the most recent round of buybacks, Buffett picked up more than $4.6 billion of Berkshire Hathaway's Class B stock and about $486.6 million in Class A shares.
It hasn't been the greatest investment so far. Shares in BRK.B lost 2.6% over the course of the second quarter – a time when the broader market rallied by nearly 20%. And the conglomerate's stock is down almost 7% for the year-to-date vs. a gain of 4.4% for the S&P 500.
Still, Buffett, as disciplined a value investor as there ever was, is practically shouting from the rooftops that he thinks BRK.B is a slam-dunk bargain.
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AMZN, AAPL, TEVA - >>> Warren Buffett's 3 Biggest Winners in the First Half of 2020: Are They Still Buys Now?
Winning stocks for the Oracle of Omaha were few during the first six months of the year.
Motley Fool
by Keith Speights
Jul 5, 2020
https://www.fool.com/investing/2020/07/05/warren-buffetts-3-biggest-winners-in-the-first-hal.aspx
Warren Buffett ranks as one of the greatest investors of all time. But the billionaire's investments didn't fare well in the first half of 2020. Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) shares fell 21% in the first six months of the year. Most of the stocks in Berkshire's investment portfolio were down as well.
However, there some stocks in the group that delivered impressive returns. Here are Warren Buffett's three biggest winners in the first half of 2020 -- and whether or not they're still great stocks to buy for investors who aren't yet legends.
1. Amazon.com
Buffett readily acknowledges that he has been a fan of Amazon.com (NASDAQ:AMZN) for a long time but didn't buy the stock. It took the prodding of one of his trusted investment managers to add the e-commerce giant to Berkshire's portfolio last year. Buffett is undoubtedly happy with the purchase: Amazon was his biggest winner in the first half of the year with a 49% gain.
Like most stocks, Amazon's shares slid during the coronavirus-fueled market sell-off that began in late February. However, investors realized pretty quickly that Amazon's business was actually booming as a result of the COVID-19 pandemic as consumers increasingly shopped online.
It didn't seem to matter too much to investors that Amazon's profits were squeezed somewhat as the company's pandemic-related costs rose. Many of the products with a spike in demand generate low margins. Amazon also is spending a lot more on wages and bonuses, personal protective equipment, and is even investing $300 million to build a COVID-19 testing lab for its employees.
2. Teva Pharmaceutical
Earlier in his career, Buffett was known as a by-the-book value investor. His training under another legendary investor, Benjamin Graham, might have made Teva Pharmaceutical (NYSE:TEVA) look like an attractive value stock. And the drugmaker's value was unlocked quite a bit in the first six months of 2020 as Teva's shares jumped 25%.
Teva's revenue fell in 2019. However, the company posted a 5% year-over-year revenue jump in the first quarter. That's pretty impressive considering that Teva continues to face declining sales for its former top-selling multiple sclerosis drug Copaxone and a challenging U.S. generic drug market.
Buffett has always maintained a long-term perspective, though. He led Berkshire to invest in Teva when it wasn't performing very well. It's likely that he viewed the pharma stock as dirt cheap considering the potential growth in the generic and prescription drug markets over the next couple of decades as the world's population ages.
3. Apple
Apple (NASDAQ:AAPL) ranks as Berkshire's top holding, by far. Buffett said in an interview with CNBC earlier this year that Apple is "probably the best business I know in the world." It's also one of his best-performing stocks, with Apple shares vaulting 24% higher in the first half of the year.
The company closed its Apple stores across the world temporarily in response to the COVID-19 pandemic. Apple stock plunged more than 30% during the overall market meltdown. But it roared back as investors realized the impact on the company's business should only be temporary.
Apple also benefited from several moves. It launched a new 13-inch MacBook Pro. The company unveiled 12-month no-interest installment payment plans for all of its devices. Apple also confirmed a highly anticipated shift to using its own chips in its Mac computers.
Are they buys now?
My view is that two of Buffett's three biggest winners of the first half of 2020 are still good picks, but one isn't.
I'm not a big fan of Teva. Some stocks are cheap for a season, while some are cheap for a reason. I think the latter is the case for Teva. The drugmaker still has a massive debt load even after paying down some of its debt. Its solid Q1 results were likely boosted largely by individuals stocking up on prescription drugs during the early part of the COVID-19 pandemic -- a temporary effect. Teva claims some promising new products. But it also has plenty of headwinds.
On the other hand, I really like both Amazon and Apple. Amazon continues to have strong growth prospects in e-commerce and cloud hosting. I suspect the company will also become a major player in healthcare. Apple should see stronger sales as it rolls out 5G iPhones. The company's services business is another solid growth driver. My hunch is that Amazon and Apple could be two of Buffett's biggest winners not just in 2020 but over the next 10 years.
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>>> Meet the Stock Buffett Has Spent $7 Billion Buying Over the Past 2 Years
There hasn't been a more attractive stock on the Oracle of Omaha's radar.
by Sean Williams
Jul 30, 2020
https://www.fool.com/investing/2020/07/30/meet-the-stock-buffett-has-spent-7-billion-buying.aspx
In recent years, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) CEO Warren Buffett has taken a lot of flak for his investment style. More specifically, Buffett's unwillingness to chase after innovative tech stocks has left his company to underperform the benchmark S&P 500. Some folks have even implied that the Oracle of Omaha has lost his touch.
But a quick look at Berkshire Hathaway's performance under Buffett shows that his steadfastness in long-term investing is exactly what's made his company so successful. Since 1965, Berkshire Hathaway's per-share market value has risen by 2,744,062%. Put another way, a $100 investment back in 1965 would have been worth more than $2.7 million as of the end of 2019. When coupled with the fact that Buffett is up more than $50 billion on his company's stake in Apple, it's somewhere between premature and wrong to suggest he's lost his touch.
Buffett has been gun-shy about putting his company's record cash hoard to work
What has been odd, though, is Buffett's unwillingness to deploy his capital over the last 4.5 years. Although he and his team did spend more than $10 billion over the past couple of weeks by acquiring natural gas transmission and storage assets from Dominion Energy, as well as by purchasing 33.9 million shares of Bank of America stock, Berkshire's cash hoard is still, presumably, near its record high of $137 billion.
The Oracle of Omaha has made a habit over the past five decades of regularly acquiring brand-name businesses with entrenched economic moats. This has resulted in Berkshire Hathaway owning about five dozen companies, including well-known names like insurer GEICO, railroad operator BNSF, and confectioner See's Candies.
However, since the buyout of Precision Castparts in January 2016, Buffett has predominantly sat on his hands. Many investors -- myself included -- have taken this lack of participation as a signal that equities aren't a good value.
But there has been one stock to catch the Oracle of Omaha's eye. It's a stock that Buffett sank close to $1 billion into in 2018, nearly $5 billion into in 2019, and has acquired approximately $1.6 billion of just during the first quarter of 2020. And it's not Apple or Bank of America, if that's what you're thinking.
Instead, the real Apple of Buffett's eye is (drum roll) Berkshire Hathaway.
That's right, Buffett can't stop repurchasing his own stock.
This is the real apple of Buffett's eye
Believe it or not, Buffett and his right-hand man Charlie Munger went approximately five years without repurchasing a single share of Berkshire Hathaway stock between 2013 and 2018. That's because a rule was in place that disallowed buybacks if Berkshire Hathaway's stock was any higher than 20% above its book value. For years, Berkshire was regularly valued between 30% and 60% above its book value, thereby disallowing Buffet and Munger from pulling the trigger on share buybacks.
Then things changed in 2018. A new repurchase program structure was laid out that allowed Buffett and Munger to rebuy Berkshire Hathaway stock as long as two criteria were met:
There would need to be at least $20 billion in cash and cash equivalents on the company's balance sheet; and Buffett and Munger must agree that Berkshire Hathaway's stock is trading at a sizable discount to its intrinsic value.
The best aspects of these new criteria are that they eliminate any sort of time constraints that might be associated with a rigid line-in-the-sand book value metric and they allow two great money managers to do what they do best: buy value when they see it.
Clearly, this dynamic duo has seen opportunity of late. Berkshire Hathaway is currently trading at 25% above its book value, a level that was last consistently seen in 2012.
By repurchasing Class A and B shares, Buffett and his team are driving down the number of outstanding shares of the company. This usually has a positive impact on earnings per share (since there are fewer shares to divide net income into), and it can make a company more fundamentally attractive.
Yes, Berkshire Hathaway is an attractive investment opportunity
But these repurchases are about far more than just helping to pump up Berkshire Hathaway's earnings per share. They're about recognizing the real value that lies in these shares.
Though Buffett's company has underperformed in 2020, it has exceptionally strong tie-ins to the health of the U.S. and global economies. A quick peek under Berkshire's hood shows that a vast majority of the company's investment portfolio is tied up in Apple, bank stocks, and consumer staples. These are all companies/industries/sectors that benefit when the economy is running on all cylinders. Buffett emphatically proclaimed during his company's virtual shareholder meeting in May that investors should "never bet against America." This series of buybacks over the past two years supports that thesis.
To add to this point, Berkshire Hathaway has five dozen owned subsidiaries that also have cyclical tie-ins -- some of which have near-guaranteed cash flow. Berkshire Hathaway rarely invests in the utility sector, but subsidiary Berkshire Hathaway Energy owns quite a few energy-generating and natural gas-transmitting assets. These are businesses you can count on to deliver in virtually any economic environment.
With Berkshire Hathaway valued at levels last seen eight years ago and Buffett still very much in control of the big decision making, it looks to be every bit the value that the Oracle of Omaha perceives it to be.
<<<
______________________________________________________________
#N/A | ATVI | 52,717,075 | 6.7% | #N/A | ||
#N/A | ALLY | 29,800,000 | 9.9% | #N/A | ||
Amazon.com, Inc. | AMZN | 10,666,000 | 0.1% | $105.45 | $1,124,729,700 | #N/A |
American Express Company | AXP | 151,610,700 | 20.4% | $161.34 | $24,460,870,338 | #N/A |
#N/A | AON | 4,396,000 | 2.1% | #N/A | ||
#N/A | AAPL | 915,560,382 | 5.8% | #N/A | ||
#N/A | BAC | 1,032,852,006 | 12.9% | #N/A | ||
#N/A | BK | 25,069,867 | 3.2% | #N/A | ||
BYD Co. Ltd | BYDDF | 119,730,142 | 10.9% | #N/A | ||
#N/A | CE | 9,710,183 | 8.8% | #N/A | ||
#N/A | CHTR | 3,828,941 | 2.3% | #N/A | ||
#N/A | CVX | 167,353,771 | 8.8% | #N/A | ||
#N/A | C | 55,244,797 | 2.8% | #N/A | ||
#N/A | KO | 400,000,000 | 9.2% | #N/A | ||
#N/A | DVA | 36,095,570 | 39.8% | #N/A | ||
#N/A | DEO | 227,750 | 0.0% | #N/A | ||
Floor & Decor Holdings Inc | FND | 4,780,000 | 4.5% | $99.34 | $474,845,200 | #N/A |
#N/A | GM | 50,000,000 | 3.6% | #N/A | ||
#N/A | GL | 6,353,727 | 6.6% | #N/A | ||
#N/A | HPQ | 120,952,818 | 12.3% | #N/A | ||
Itochu Corporation | ITOCF | 98,380,800 | 6.2% | #N/A | ||
#N/A | JEF | 433,558 | 0.2% | #N/A | ||
#N/A | JNJ | 327,100 | 0.0% | #N/A | ||
#N/A | KHC | 325,634,818 | 26.5% | #N/A | ||
#N/A | KR | 50,000,000 | 7.0% | #N/A | ||
#N/A | LILA | 2,630,792 | 5.9% | #N/A | ||
#N/A | LILAK | 1,284,020 | 0.7% | #N/A | ||
#N/A | FWONK | 7,722,451 | 3.7% | #N/A | ||
#N/A | LSXMA | 20,207,680 | 20.6% | #N/A | ||
#N/A | LSXMK | 43,208,291 | 19.8% | #N/A | ||
#N/A | LPX | 7,044,909 | 9.8% | #N/A | ||
#N/A | MKL | 471,661 | 3.5% | #N/A | ||
#N/A | MMC | 404,911 | 0.1% | #N/A | ||
#N/A | MA | 3,986,648 | 0.4% | #N/A | ||
#N/A | MCK | 2,855,514 | 2.1% | #N/A | ||
#N/A | MDLZ | 578,000 | 0.0% | #N/A | ||
#N/A | MCO | 24,669,778 | 13.4% | #N/A | ||
#N/A | NU | 107,118,784 | 2.3% | #N/A | ||
#N/A | OXY | 211,707,119 | 23.6% | #N/A | ||
#N/A | PARA | 93,637,189 | 15.3% | #N/A | ||
#N/A | PG | 315,400 | 0.0% | #N/A | ||
#N/A | RH | 2,360,000 | 10.7% | #N/A | ||
#N/A | SNOW | 6,125,376 | 1.9% | #N/A | ||
#N/A | SPY | 39,400 | 0.0% | #N/A | ||
StoneCo Ltd | STNE | 10,695,448 | 3.3% | $12.32 | $131,767,919 | #N/A |
#N/A | TSM | 8,292,724 | 0.2% | #N/A | ||
#N/A | TMUS | 5,242,000 | 0.4% | #N/A | ||
#N/A | UPS | 59,400 | 0.0% | #N/A | ||
#N/A | USB | 8,098,178 | 0.5% | #N/A | ||
#N/A | VOO | 43,000 | 0.0% | #N/A | ||
#N/A | VRSN | 12,815,613 | 12.3% | #N/A | ||
#N/A | V | 8,297,460 | 0.2% | #N/A | ||
TOTAL | #N/A |
Symbol | Holdings | Stake | Mkt. price | Value | Pct of portfolio | |
---|---|---|---|---|---|---|
Activision Blizzard, Inc. | ATVI | 74,187,400 | 9.5% | $80.49 | $5,971,343,826 | 1.7% |
Ally Financial Inc | ALLY | 8,969,420 | 2.9% | $32.58 | $292,223,704 | 0.1% |
Amazon.com, Inc. | AMZN | 10,666,000 | 0.1% | $140.80 | $1,501,772,800 | 0.4% |
American Express Company | AXP | 151,610,700 | 20.2% | $157.51 | $23,880,201,357 | 6.7% |
Aon PLC | AON | 4,396,000 | 2.1% | $287.53 | $1,263,981,880 | 0.4% |
Apple Inc | AAPL | 911,347,617 | 5.7% | $165.35 | $150,691,328,471 | 42.5% |
Bank of America Corp | BAC | 1,032,852,006 | 12.9% | $33.96 | $35,075,654,124 | 9.9% |
Bank of New York Mellon Corp | BK | 74,346,864 | 9.2% | $43.50 | $3,234,088,584 | 0.9% |
BYD Co. Ltd | BYDDF | 225,000,000 | 7.7% | $36.75 | $8,268,750,000 | 2.3% |
Celanese Corporation | CE | 7,880,998 | 7.3% | $110.85 | $873,608,628 | 0.2% |
Charter Communications Inc | CHTR | 3,828,941 | 2.4% | $462.98 | $1,772,723,104 | 0.5% |
Chevron Corporation | CVX | 159,178,117 | 8.1% | $153.64 | $24,456,125,896 | 6.9% |
Citigroup Inc | C | 55,244,797 | 2.9% | $51.66 | $2,853,946,213 | 0.8% |
Coca-Cola Co | KO | 400,000,000 | 9.2% | $63.38 | $25,352,000,000 | 7.2% |
Davita Inc | DVA | 36,095,570 | 39.5% | $85.68 | $3,092,668,438 | 0.9% |
Diageo plc | DEO | 227,750 | 0.0% | $188.37 | $42,901,268 | 0.0% |
Floor & Decor Holdings Inc | FND | 4,780,000 | 4.5% | $92.92 | $444,157,600 | 0.1% |
General Motors Company | GM | 62,045,847 | 4.3% | $36.06 | $2,237,373,243 | 0.6% |
Globe Life Inc | GL | 6,353,727 | 6.4% | $97.88 | $621,902,799 | 0.2% |
HP Inc | HPQ | 121,092,418 | 11.7% | $33.58 | $4,066,283,396 | 1.1% |
Itochu Corporation | ITOCF | 81,304,200 | 5.6% | $27.37 | $2,225,295,954 | 0.6% |
Johnson & Johnson | JNJ | 327,100 | 0.0% | $171.11 | $55,970,081 | 0.0% |
Kraft Heinz Co | KHC | 325,634,818 | 26.6% | $37.57 | $12,234,100,112 | 3.5% |
Kroger Co | KR | 57,985,263 | 8.1% | $47.25 | $2,739,803,677 | 0.8% |
Liberty Latin America Ltd Class A | LILA | 2,630,792 | 5.6% | $7.24 | $19,046,934 | 0.0% |
Liberty Latin America Ltd Class C | LILAK | 1,284,020 | 0.7% | $7.16 | $9,193,583 | 0.0% |
Liberty Media Formula One Series C | FWONK | 7,722,451 | 3.8% | $62.89 | $485,664,943 | 0.1% |
Liberty Sirius XM Group Series A | LSXMA | 20,207,680 | 20.4% | $41.08 | $830,131,494 | 0.2% |
Liberty Sirius XM Group Series C | LSXMK | 43,208,291 | 19.6% | $40.96 | $1,769,811,599 | 0.5% |
Markel Corporation | MKL | 424,343 | 3.1% | $1,167.94 | $495,607,163 | 0.1% |
Marsh & McLennan Companies, Inc. | MMC | 404,911 | 0.1% | $165.60 | $67,053,262 | 0.0% |
Mastercard Inc | MA | 3,986,648 | 0.4% | $357.51 | $1,425,266,526 | 0.4% |
McKesson Corporation | MCK | 2,921,975 | 2.0% | $346.69 | $1,013,019,513 | 0.3% |
MONDELEZ INTERNATIONAL INC Common Stock | MDLZ | 578,000 | 0.0% | $63.77 | $36,859,060 | 0.0% |
Moody’s Corporation | MCO | 24,669,778 | 13.4% | $311.07 | $7,674,027,842 | 2.2% |
Nu Holdings Ltd | NU | 107,118,784 | 2.3% | $4.49 | $480,963,340 | 0.1% |
Occidental Petroleum Corporation | OXY | 181,684,791 | 19.5% | $59.01 | $10,721,219,517 | 3.0% |
Paramount Global Class B | PARA | 68,947,760 | 11.3% | $24.26 | $1,672,672,658 | 0.5% |
Procter & Gamble Co | PG | 315,400 | 0.0% | $144.72 | $45,644,688 | 0.0% |
RH | RH | 2,170,000 | 8.8% | $286.87 | $622,507,900 | 0.2% |
Royalty Pharma plc | RPRX | 1,496,372 | 0.2% | $42.45 | $63,520,991 | 0.0% |
Snowflake Inc | SNOW | 6,125,376 | 1.9% | $165.53 | $1,013,933,489 | 0.3% |
SPDR S&P 500 ETF Trust | SPY | 39,400 | 0.0% | $413.47 | $16,290,718 | 0.0% |
StoneCo Ltd | STNE | 10,695,448 | 3.3% | $11.07 | $118,398,609 | 0.0% |
Store Capital Corp (acquired) | STOR | 14,754,811 | 5.3% | $27.90 | $411,659,227 | 0.1% |
T-Mobile Us Inc | TMUS | 5,242,000 | 0.4% | $144.56 | $757,783,520 | 0.2% |
United Parcel Service, Inc. | UPS | 59,400 | 0.0% | $196.76 | $11,687,544 | 0.0% |
US Bancorp | USB | 144,046,330 | 9.7% | $47.39 | $6,826,355,579 | 1.9% |
Vanguard 500 Index Fund ETF | VOO | 43,000 | 0.0% | $379.98 | $16,339,140 | 0.0% |
Verisign, Inc. | VRSN | 12,815,613 | 11.9% | $198.70 | $2,546,462,303 | 0.7% |
Verizon Communications Inc. | VZ | 1,380,111 | 0.0% | $44.95 | $62,035,989 | 0.0% |
Visa Inc | V | 8,297,460 | 0.4% | $215.87 | $1,791,172,690 | 0.5% |
TOTAL | $354,252,534,978 | 100.0% | ||||
Berkshire Cash as of 31 Mar 22: $106.3 billion |
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