Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK.B), wasn't doing much buying during the first quarter, which ended just before the economic impact of the coronavirus really set in. But he sure did a lot of selling.
Buffett has dumped shares in 21 stocks since the start of the year. For the most part, the Oracle of Omaha has merely trimmed BRK.B's positions. Reducing risk and raising cash are certainly prudent moves when facing the unprecedented uncertainty that we are now. In a few cases, however, Buffett sold the great majority or entirety of Berkshire's positions in some of its biggest and best-known holdings.
On the other side of the ledger, Buffett made just one buy in the quarter, adding a modest amount to a well-known regional bank.
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 take that as a vote of confidence. On the other hand, if he pares his holdings in a stock, it can spark investors to rethink their own investments. The fact that Buffett was fearful rather than greedy as the market plunged in Q1 underscores how challenging it is to make investing decisions these days.
Here's the scorecard for what Berkshire Hathaway bought and sold during the three months ended March 31, 2020, based on the most recent 13F that the company filed on May 15. 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.
Disclaimer
Current price data is as of May 15. Holdings data is as of Feb. 14. Sources: Berkshire Hathaway’s SEC Form 13F filed May 15, 2020, for the reporting period ended March 31, 2020; and WhaleWisdom.
PNC Financial Services
- Action: Added to stake
- Shares held: 9,197,984 (+6% from Q1 2019)
- Value of stake: $880,431,000
PNC Financial Services (PNC, $97.25) claims the honor of being the only stock Warren Buffett bought more of in Q1 2020 … that he stuck with. What's more, he hiked Berkshire Hathaway's stake in the regional lender by 6% at a time when he's been a huge net seller of bank stocks. (We'll get to that momentarily.)
Berkshire first started investing in the nation's sixth-largest bank by assets during the third quarter of 2018. Buffett upped Berkshire Hathaway's stake by another 4% in Q1 2019. And he added another 526,930 shares to start this year. BRK.B is now PNC's seventh-largest investor with 2.2% of the bank's shares outstanding.
Buffett has 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."
The uncertainties unleashed by the coronavirus pandemic appear to have changed Buffett's estimation of this sector of the economy, however.
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General Motors
- Action: Reduced stake
- Shares held: 74,681,000 (-0.4% from Q4 2019)
- Value of stake: $1,551,872,000
Warren Buffett shaved a little bit off Berkshire Hathaway's stake in General Motors (GM, $22.63), the world's fourth-largest auto manufacturer by production, in the first quarter.
BRK.B now holds 74.7 million shares after selling off about 319,000 during the first three months of the year. That total equates to 5.2% of GM's shares outstanding, making BRK.B the car company's fifth-largest stockholder.
GM has always looked like a classic Buffett value bet. General Motors is an iconic American brand and a play on the long-term growth of the U.S. economy. Buffett also likes CEO Mary Barra, singing her praise on multiple occasions. At one point, he said, "Mary is as strong as they come. She is as good as I've seen."
But General Motors hasn't returned the favor. Berkshire paid an estimated average price per share of $31.82 when he initiated his position during the first quarter of 2012. Shares now trade in the low $20s, widely underperforming the market in that same time.
Adding injury to injury: GM also suspended its dividend in late April, depriving Berkshire of any income from those shares.
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Suncor Energy
- Action: Reduced stake
- Shares held: 14,949,031 (-0.5% from Q4 2019)
- Value of stake: $236,195,000
Warren Buffett trimmed BRK.B's stake in Suncor Energy (SU, $16.15), but only by a mere 70,000 shares, or about half a percent. As we'll see later, that's nothing compared to what he did to another of his few holdings in the energy sector.
Suncor is as widely exposed to the crash in oil prices as a company can be. Canada's largest integrated energy company has operations in oil sands developments, offshore oil production, biofuels and even wind energy. It also sells its refined fuel via a network of more than 1,500 Petro-Canada stations.
Berkshire increased its stake in SU by 40% during the final quarter of 2019 before making a slight reduction in Q1 2020. It's still a small holding, representing about 0.14% of the Berkshire equity portfolio's worth, according to data from S&P Global Market Intelligence.
Income investors should be aware that Suncor has raised its annual payouts for 18 consecutive years, making it a member of the Canadian Dividend Aristocrats.
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Amazon.com
- Action: Reduced stake
- Shares held: 533,300 (-0.7% from Q4 2019)
- Value of stake: $1,039,786,000
Berkshire Hathaway cut its stake in Amazon.com (AMZN, $2,409.78) by less than 1% earlier this year, which means he lightened up just before shares in the e-commerce giant went on a hot run.
AMZN is up 24% since the end of the first quarter, boosted by the enormous demand unleashed by consumers sheltering in place because of COVID-19.
Not that it matters much. Berkshire was an insignificant investor in AMZN even before selling 4,000 shares in Q1, with just 0.1% of Amazon's shares outstanding.
Interestingly, the Amazon holding isn't one of Buffett's ideas. In 2019, Buffett told CNBC: "One of the fellows in the office that manage money ... bought some Amazon."
Buffett, however, has long been an admirer of Amazon CEO Jeff Bezos, he admitted in an interview. He also said he wished he had bought the stock sooner. "Yeah, I've been a fan, and I've been an idiot for not buying (AMZN shares)," Buffett told CNBC.
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Liberty Sirius XM Group
- Action: Reduced stake
- Shares held: 30,850,985 (-0.8% from Q4 2019)
- Value of stake: $975,508,000
Buffett also took a little off the top of Berkshire's position in Liberty Sirius XM Group Series C (LSXMK, $31.44).
But that doesn't make the holding any less complicated.
Liberty Media has for years held a large stake in Sirius XM. 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 exposed to Sirius XM before Berkshire directly invested in SIRI shares in Q4 2016.
But over time, he has bought more of the tracking stock; the overall body of tracking stock currently represents Liberty's roughly 70% stake in Sirius XM. The Berkshire Hathaway portfolio now holds more than 45 million shares of Liberty Sirius XM Group Series A (LSXMA, $31.80) and LSXMK combined. That sum is a little smaller than it was a quarter ago, as Buffett dumped 240,000 Series C shares representing a tiny slice of his stake.
Berkshire is the largest institutional shareholder in each class, holding 4.2% of Liberty Sirius XM's A shares, and 8.7% of the C shares.
Combined with his SIRI stake, the Oracle of Omaha holds three different investments in Sirius XM. Continue reading for more details.
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Axalta Coating Systems
- Action: Reduced stake
- Shares held: 24,070,000 (-0.8% from Q4 2019)
- Value of stake: $415,689,000
Berkshire Hathaway snipped its stake in Axalta Coating Systems (AXTA, $19.70) during the first three months of the year. Buffett sold 194,000 shares, or less than 1% of Berkshire's stake.
Nonetheless, Berkshire remains Axalta's largest investor, holding 10.2% of the shares outstanding.
Axalta joined the ranks of the Buffett stocks in 2015, when Berkshire Hathaway purchased 20 million shares in AXTA from private equity firm Carlyle Group (CG). The stake makes sense given that Buffett is a longtime fan of the paint industry; Berkshire Hathaway bought house-paint maker Benjamin Moore in 2000.
Axalta, which makes industrial coatings and paints for building facades, pipelines and cars, is the belle of the ball when it comes to mergers and acquisitions suitors. The company has rejected more than one buyout bid in the past, and analysts note that it's a perfect target for numerous global coatings companies.
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Biogen
- Action: Reduced stake
- Shares held: 643,022 (-0.8% from Q4 2019)
- Value of stake: $203,440,000
Berkshire Hathaway cut its stake in biotechnology giant Biogen (BIIB, $316.60) by 5,425 shares in Q1. The remaining position is worth more than $203 million, which isn't much in the grand scheme of Buffett's holdings.
BIIB accounts for just 0.12% of Berkshire Hathaway's equity portfolio. At the same time, the holding company is Biogen's 32nd largest stockholder with just 0.4% of the biotech's shares outstanding.
While Buffett has a history of making bets on the health care sector, the small stake size signals this might be an idea from lieutenants Ted Weschler or Todd Combs.
Either way, it has been a good holding in 2020. BIIB is up about 7% for the year-to-date vs. a gain of less than 1% for the Nasdaq Composite. It also helps that Biogen reliably generates several billion dollars each year in free cash flow.
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Teva Pharmaceutical
- Action: Reduced stake
- Shares held: 42,789,295 (-1% from Q4 2019)
- Value of stake: $384,248,000
Warren Buffett also liquidated a bit of Teva Pharmaceutical (TEVA, $11.21) in Q1, shaving the position by 1% or 460,000 shares.
Berkshire Hathaway first invested in TEVA during the fourth quarter of 2017. At the time, the Israel-based drug manufacturer looked like a distressed value play. A bloated balance sheet, mass layoffs and the looming expiration of drug patents made Teva about as out of favor as they come.
By the time Buffett stepped in, Teva shares were off about 70% from their mid-2015 peak. Berkshire then doubled his stake in Teva during the first quarter of 2018, when shares looked really cheap.
TEVA is off about 8% in 2020 – not a bad performance, given 11% losses for the S&P 500 – and still looks cheap, trading at just 4.3 times next year's earnings.
As of March 31, BRK.B owned 3.9% of Teva's shares outstanding.
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Verisign
- Action: Reduced stake
- Shares held: 12,815,613 (-1% from Q4 2019)
- Value of stake: $2,307,964,000
You can add Verisign (VRSN, $217.25) to the long list of stocks Buffett turned to for an incremental infusion of cash last quarter. BRK.B sold 137,132 shares, or 1% of its stake. The holding company now owns 12.8 million shares, or 11.1% of VRSN's shares outstanding.
Verisign – an internet infrastructure service company that quite literally keeps the world connected online and acts as a domain registry for the .com, .net and other top-level domains – exemplifies Buffett's love for companies with deep moats. And it continues to pay off.
VRSN is up nearly 13% in 2020, and it has raced ahead 460% since Buffett bought the stock at the end of 2012, more than tripling the S&P 500's 134% total return.
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DaVita
- Action: Reduced stake
- Shares held: 38,095,570 (-1% from Q4 2019)
- Value of stake: $2,897,549,000
Buffett took a bit of profit in DaVita (DVA, $79.25) in the first quarter, paring BRK.B's stake by 470,000 shares, or 1%.
That hardly makes a dent in Berkshire's position in the kidney care provider and dialysis center operator. Its stake of 38.1 million shares represents more than 31% of the company's shares outstanding. It's the top stockholder in the firm by a wide margin.
Berkshire disclosed its initial position in DaVita during 2012's first quarter. Given that DVA was a large position of Ted Weschler's Peninsula Capital in his pre-Berkshire days, it wasn't unreasonable to assume that it was his pick. Weschler confirmed as much in 2014.
DaVita serves patients via more than 3,000 dialysis centers in the U.S. and nine other countries. Aging baby boomers and a graying population in many developed markets should provide a strong, secular tailwind.
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Liberty Global
- Action: Reduced stake
- Shares held: 19,310,000 (-2% from Q4 2019)
- Value of stake: $318,808,000
Liberty Global Class A (LBTYA, $21.83) and Liberty Global Class C (LBTYK, $21.30) also became a very modest source of new funds in the first quarter.
Berkshire cut its holdings of Class A shares by 2% but left its Class C shares untouched. Berkshire remains the second-largest holder of LBTYA at 3.1% of shares outstanding, and the No. 10 holder of LBTYK at 1.2%.
Bets on Liberty Global are bets on the communications and media empire created by billionaire dealmaker John Malone. Liberty Global says it's the world's largest international TV and broadband company, with operations in seven European countries.
But it's more than just those core businesses: LBTYA also has a venture arm that invests in 40 companies in content, technology, internet and distribution, and it also boasts ownership in the sustainable-energy racing series Formula E.
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Sirius XM
- Action: Reduced stake
- Shares held: 132,418,729 (-2% from Q4 2019)
- Value of stake: $654,149,000
Back to Sirius XM (SIRI, $5.34). The satellite radio operator and owner of streaming music company Pandora claims more than 100 million listeners. It's also another stock pick with a connection to John Malone. Malone is chairman of Liberty Media, which owns a 72% stake in Sirius XM.
Buffett trimmed BRK.B's stake in SIRI by 2%, or 3.9 million shares, in Q1. It remains the company's third-largest stockholder with 3% of its shares outstanding. BlackRock (3.1%) is the No. 2 shareholder.
As Kiplinger has noted, 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.
While Sirius XM's business model is being hit on two fronts – plunging auto sales and declining ad revenue – the company beat first-quarter revenue and profit guidance, and CEO Jim Meyer says he expects Sirius to "continue to generate substantial positive free cash flow." Nonetheless, the company withdrew full-year 2020 guidance.
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Liberty Latin America
- Action: Reduced stake
- Shares held: 2,630,792 (-3% from Q4 2019)
- Value of stake: $27,676,000
Berkshire has made several de facto bets on legendary pay-TV mogul John Malone. Liberty Latin America Class A (LILA, $9.08) and Liberty Latin America Class C (LILAK, $8.88) shares are the smallest of those, and they got a little smaller during the first quarter of 2020, as Buffett shed roughly 84,000 Class A shares.
Liberty Latin America provides cable, broadband, telephone and wireless services in Chile, Puerto Rico, the Caribbean and other parts of Latin America. Liberty Global, the multinational telecommunications company in which Berkshire also holds a stake, issued tracking stock of its Latin American operations in 2015. It then spun off those operations entirely in 2018.
The appeal of Malone-backed properties to Buffett and his lieutenants is plain to understand: Game knows game.
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Synchrony Financial
- Action: Reduced stake
- Shares held: 20,128,000 (-3% from Q4 2019)
- Value of stake: $323,860,000
Berkshire Hathaway sold 675,000 shares in Synchrony Financial (SYF, $16.54), or about 3% of its stake, in Q1 2020. It now owns 3.4% of Synchrony Financial's shares outstanding, which makes it the firm's eighth-largest shareholder.
SYF jibes with Buffett's affection for credit-card companies and banks. Synchrony, a major issuer of charge cards for retailers, was spun off of GE Capital in 2014. It's both a lender and a payments processor – like Buffett's beloved American Express (AXP) – but it caters to customers who skew more toward the middle and lower end of the income scale.
Berkshire first jumped into SYF during the second quarter of 2017, paying an estimated price per share of $30.02. Since the end of Q2 2017, the stock has lost more than 40% of its value, versus a 25% positive total return for the S&P 500 during that time. That includes a nasty 54% spill so far in 2020.
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JPMorgan Chase
- Action: Reduced stake
- Shares held: 57,714,433 (-3% from Q4 2019)
- Value of stake: $5,196,030,000
With the exception of PNC, Buffett did a bit of a number on BRK.B's bank stocks in Q1. A rapidly deteriorating economic situation and unprecedented uncertainty makes the bull case for the sector opaque at best.
To that end, BRK.B cut its stake in JPMorgan Chase (JPM, $85.90), the nation's largest bank by assets, by about 1.8 million shares, or roughly 3% of its stake. Nonetheless, Warren Buffett's holding company still holds 1.9% of shares outstanding to rank as the bank's sixth-largest shareholder.
Buffett, an unabashed fan of CEO Jamie Dimon, previously had been big on JPMorgan's shares. BRK.B upped its stake by 40% in the fourth quarter of 2018 and again by 18% in the first quarter of 2019.
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Goldman Sachs
- Action: Reduced stake
- Shares held: 1,920,180 (-84% from Q4 2019)
- Value of stake: $296,841,000
Buffett took a sledgehammer to BRK.B's stake in Goldman Sachs (GS, $171.87) in Q1. Indeed, the holding company dumped the great majority of its shares in the Dow component.
Berkshire first picked up its stake in Goldman during the 2008 financial crisis when it threw the capital-starved bank a lifeline. Buffett later parlayed the original investment into what at one point was a $3.8 billion, 5.1% stake in GS that made BRK.B its fourth-largest shareholder.
However, in Q1 2020, the holding company dumped more than 10 million shares, or about 84% of its stake, in Q1 2020 to give GS a severely diminished position among Buffett's stocks.
It was the second straight quarter that Buffett reduced BRK.B's holdings in the Wall Street investment bank. Even before the coronavirus crisis hit, Buffett saw something he didn't like. He sold nearly a third of his holdings during Q4 2019 to make GS account for just 1.1% of BRK.B's portfolio. After the Q1 flush, GS now accounts for a mere 0.2% stake in Berkshire Hathaway's equity holdings.
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Travelers
- Action: Exited stake
- Shares held: 0 (-100% from Q4 2019)
- Value of stake: $0
It was a small, almost orphan of a position to begin the year, and now it is no more. Buffett sold the entirety of BRK.B's stake in Travelers (TRV, $90.31) in Q1.
TRV, an insurance giant and Dow stock always seemed a natural fit for BRK.B, at least on the surface. Insurance, after all, is the holding company's core business. In addition to TRV, Berkshire Hathaway has a stake in insurer Globe Life (GL) and counts numerous insurer companies as wholly owned subsidiaries. Geico, General Re and United States Liability Insurance Group are just three companies BRK.B owns as part of its sprawling insurance empire.
And Travelers, a component of the Dow Jones Industrial Average with a modest dividend yield of 3.7%, has the kind of pedigree and income stream Buffett favors.
But BRK.B doesn't really need more exposure to the insurance industry, even in the best of times. And these, of course, are nowhere near the best of times.
Whatever the reason, Buffett unloaded all of Berkshire Hathaway's 312,379 shares in TRV.
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Phillips 66
- Action: Added to stake
- Shares held: 0 (-100% from Q4 2019)
- Value of stake: $0
Buffett has been paring Berkshire'ss stake in Phillips 66 (PSX, $70.93) for some time. And now, the holding company is out for good. BRK.B sold all of its 227,436 shares in the oil and gas company.
Perhaps it was only a matter of time. Buffett was a big seller of PSX all through 2019. In the first quarter of last year alone, he pared Berkshire's stake by 53%. It was a somewhat surprising turn of events at the time, given that Berkshire was Phillips' largest shareholder with 9.8% of all shares outstanding as recently as early 2018.
Buffett was characteristically mum on his reasons for the sales.
With the end of the PSX position, Suncor and Occidental Petroleum (OXY) are the only energy-sector stocks left in BRK.B's portfolio.
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Airline Stocks
- Action: Exited*
- Shares held: 0 (-100% from Q4 2019)*
- Value of stake: $0*
As was well documented at the time, Buffett dumped the entirety of Berkshire's stakes in the nation's four largest air carriers because of the coronavirus crisis.
The sales of American Airlines (AAL, $9.04), Delta Air Lines (DAL, $19.19), Southwest Airlines (LUV, $23.87) and United Airlines (UAL, $19.92) actually took place after the close of Q1, in early May. (Hence the asterisks.)
During the first quarter, Buffett actually added to his stakes in Delta and United in the first quarter. By April, however, it was clear that Buffett's rationale for buying shares in airlines – a sector he once excoriated – was dead.
"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 about the moves. "They may and they may not, but the future is much less clear to me."
Shares in the four air carriers have lost anywhere from 50% to 75% so far in 2020.
* Moves announced during Q2 rendered Berkshire's Q1-end positions moot.
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