Warren Buffett.
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Given Warren Buffett’s cautious investment approach since the pandemic began, it’s a good bet that Berkshire Hathaway
‘s quarterly filing of its equity holdings, expected on Monday, won’t show much buying activity in the fourth quarter.
Berkshire Hathaway (ticker: BRK.A, BRK.B) was a net seller of $7 billion of stocks during the first nine months of 2021, based on its third-quarter 10-Q report, after unloading a net $8 billion in 2020.
The company has an equity portfolio, some 40% of it in Apple stock (AAPL), that totaled about $325 billion on Sept. 30. Like other big institutional holders, it files a 13-F report detailing its equity investments that is due 45 days after each quarter ends.
Berkshire CEO Buffett, 91, and his investment lieutenants, Todd Combs and Ted Weschler, have failed to take real advantage of pandemic-related opportunities in the stock market. This has disappointed many Berkshire holders who would have liked Buffett to heed his maxim “to be fearful when others are greedy and to be greedy only when others are fearful.”
The company didn’t immediately respond to a request for comment.
Berkshire has the wherewithal for large stock purchases given its $149 billion in cash. But instead of buying big amounts of shares of publicly traded companies, Berkshire has chosen to repurchase its own stock, which is itself a successful tactic.
Buffett’s only major purchase since the pandemic has been an $8 billion stake in Verizon Communications (VZ), which is down about 10% from Berkshire’s cost. Although Berkshire has taken a modest position in Chevron (CVX) and has a nice gain of over $1 billion on that $4 billion holding, Barron’s believes Buffett has been too timid on energy, an area he knows well.
Many holders had hoped he would have taken a 5% position in Exxon Mobil (XOM) and Chevron (CVX) in 2020, when energy was out of favor and Exxon traded at half its current level. Berkshire held a sizable Exxon stake and then sold it during the past decade.
Buffett has scored with the purchase of a group of five Japanese trading companies, including Itochu (ITOCY), Marubeni (MARUY), and Mitsui (MITSY). When Berkshire revealed the holdings in August 2020, the investment totaled $6 billion and it is now worth about $10 billion. While a nice gain, it doesn’t move the needle much at a company with a $715 billion market value. Those and other foreign holdings aren’t listed in the 13-F report.
Also disappointing have been Buffett’s sales of stock, notably a longstanding large position in Wells Fargo (WFC), as well as JPMorgan Chase (JPM) and Goldman Sachs Group (GS).
Barron’s estimates that Berkshire left about $10 billion on the table with its sales of Wells Fargo and $15 billion between the three banks. Berkshire held 345 million shares of Wells Fargo at the end of 2019 and we estimate that it sold the stock at an average price of about $26, less than half its current price of $60.
Buffett also unloaded about $10 billion of airline stocks near the bottom in the second quarter of 2020, including Delta Air Lines (DAL) and Southwest Airlines (LUV).
Buffett would rather buy back Berkshire’s shares than purchase a lot of public stocks or pay a dividend. The repurchases look smart, with Berkshire shares up 6% this year and 33% in the past 12 months, comfortably ahead of the S&P 500
‘s 19% total return.
Berkshire bought back $20 billion of stock in the first three quarters of 2021 after repurchasing almost $25 billion in 2020. Berkshire was buying back close to 1% of its shares every quarter during the first nine months of 2021
Berkshire’s Class A shares were down 0.8% Thursday to $479,845 and the Class B stock was off 0.8% to $319.66.
Write to Andrew Bary at [email protected]
