Since the beginning of 2010 Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has taken his fair share of criticism for not benchmarking the benchmark S&P 500. By this past weekend, Berkshire Hathaway’s share had risen 221% since 2010, with the S&P 500 offering a total return of 277%, including dividends.
But when it comes to Warren Buffett, a decade can be considered a short time frame. Over the past 55 years, the share price of Berkshire Hathaway has gained an aggregate of 2,744,062%, which is more than 2,700,000% better than the S&P 500, including dividends, over this same span.
One look at Buffett’s investment in Call, which in four years resulted in unrealized gains of $ 80 billion, shows that he has not lost his touch. Investors like this have Wall Street and investors waiting on the edge of their seats to find out what Omaha’s Oracle has bought and sold in one of the most volatile years on record for shares.
Image Source: Getty Images.
Buffett has been on a sales rampage in 2020
This past Friday, August 14, following the closing clock, Berkshire Hathaway submitted Form 13F to the Securities and Exchange Commission. Obliged by all companies with more than $ 100 million in assets under management, Form 13F offers an under-the-hood look at what’s in Berkshire Hathaway’s portfolio. Put another way, it shows us what Buffett and his investment team bought and sold between April 1st and June 30th.
Similar to the first four years, Buffett and his investors’ lieutenants, Todd Combs and Ted Weschler, were very busy bees. In the second quarter, one new position was initiated, along with four existing positions enlarged. Meanwhile, 18 separate shares were paired or sold in their entirety. In fact, from the beginning of the year, Buffett and his team sold shares in 32 separate shares in six months.
The following nine stocks are completely sold out:
- Phillips 66
- Reizgers Cos.
- Goldman Sachs
- American Airlines Group (NASDAQ: AAL)
- Southwest Airlines (NYSE: LUV)
- United Airlines (NASDAQ: UAL)
- Delta Air Lines (NYSE: DAL)
- Occidental Petroleum
- Restaurant Brands International
Meanwhile, over the past six months, these five stocks have seen their positions in Berkshire’s portfolio decrease by a double percentage:
- JPMorgan Chase
- Sirius XM
- Wells Fargo (NYSE: WFC)
- M&T Bank
- PNC Financial Services
Image Source: Getty Images.
These remaining shares were all paired at one point, with a small handful able to build up their positions in the second quarter:
- Synchrony financially
- DaVita
- VeriSign
- Teva Pharmaceutical Industry
- Liberty Latin America
- Liberty Global (Class A)
- Liberty SiriusXM Group (Class A)
- Liberty SiriusXM Group (Class C) (was added in Q2)
- General Motors
- Amazon
- Suncor Energy (was added in Q2)
- Biogen
- Axalta Coating Systems
- Bank of NY Mellon
- Charter communication
- Fisa
- Mastercard
- American Bancorp
Go ahead and take a deep breath after all that.
Berkshire Hathaway CEO Warren Buffett. Image Source: The Motley Fool.
Four trends coming out
You are probably asking yourself, why all the selling? I believe the answer comes on four factors.
First, Buffett and his team realize that the coronavirus pandemic can last a long time and may well change how certain industries operate. Buffett sold American Airlines, Southwest Airlines, Delta Air Lines and United Airlines specifically because he expects it will take years for the airline to recover. He is counting on the airlines to take substantial amounts of debt to finance their operations during this crisis. For American Airlines, Southwest, Delta and United, this means more cash flow after service delivery, along with no share purchase or dividend for a long time. In other words, the reasons for owning airlines are no more.
The same thesis can be applied to the restaurant sector (e.g. the sale of Restaurant Brands International) and the oil industry (e.g. the Occidental Petroleum disinvestment). Occidental is a perfect example of a broken thesis, with the takeover of Anadarko’s company last year now punishing its balancing act and forcing the company to pay Berkshire dividends in ordinary share (Berkshire Hathaway prefers Occidental).
Image Source: Wells Fargo.
Second, we witnessed Buffett and his team consolidating their investments in the banking sector. It’s no secret that bank shares are Buffett’s favorite place to park Berkshire Hathaway cash. However, an environment with low inflation and the recession of COVID-19 will control the resilience of most banks. This is what likely the billionaire has significantly increased his company’s assets in JPMorgan Chase and Wells Fargo.
Also remember that Wells Fargo is trying to move on to a scandal that saw 3.5 million unauthorized accounts opened between 2009 and 2016 to carry out aggressive cross-selling campaigns at the branch level. Buffett is a big fan of confidence-building brands, and Wells Fargo has shattered that confidence in 2016 and 2017.
A third trend you will notice is a marked uptick in transactions that accept small purchases as well as sales in the quarter. Holding a steady press is not Buffett’s style, suggesting that Todd Combs and Ted Weschler are becoming increasingly involved in portfolio oversight. The token sales in the first quarter in Biogen and Amazon are perfect examples of this.
Fourth and last, Berkshire Hathaway’s aggressive sales indicate that Buffett is still looking a bit in the way of value in this market. Even though Omaha’s Oracle has invested nearly $ 12 billion since the beginning of July, it will remain a net seller of shares by 2020.
