Finance – banking and insurance, tech (one bank) and airlines are out along with retailer Walmart or ignored. That’s the bottom line from the September quarter fund manager’s filing from Berkshire Hathaway.
The plunge deeper into banks, insurers, techs (Apple) were all made when the US market was much higher than it is now – the S&P 500 has fallen 7.3% since the end of September.
Apple shares are down 17.25% in the same time, so its no wonder that Berkshire is wearing a near $10 billion loss on the value of its Apple stake, despite increasing it in the quarter.
In fact, out of the blue, Warren Buffett has made another major investment switch to match the surprise of his move into Apple nearly three years ago and the move into airlines two years ago.
The move deeper into US banks and insurance means Berkshire’s fate is now tied more firmly to that of the American banking sector it is the biggest shareholder in Bank of America, Wells Fargo (it sold off some Wells shares in the quarter) and major shareholders in Goldman Sachs and several other smaller groups.
Berkshire also holds the biggest stake in American Express as well as being a top two reinsurer in the US and top five globally in its own right. It is also the second largest car insurer in the US and a major player in the so-called catastrophe bond reinsurance market which covers mega risks.
In the regular quarterly filing by investment managers, Berkshire Hathaway revealed that Buffett had emerged with a stake of more than 1% in JPMorgan Chase, America’s biggest and most profitable bank by spending nearly $US4 billion on 35.7 million shares in the September quarter.
At the same time, the filing reveals that Berkshire, Buffett and his team of managers have topped their holdings in other banks.
The Morgan investment takes the number of shareholdings major US financial institutions held by Berkshire to 14, in a $US94 billion portfolio that ranges from regional banks such as US Bancorp and M&T Bank to Goldman Sachs (up 5.1 million to a stake worth $US4.1 billion), Bank of America and Wells Fargo.
Berkshire also purchased more than 6 million shares in PNC Financial, the regional bank with a large presence on the US east coast, worth more than $US800 million. It topped up its stakes in Bank of America, US Bancorp and the Bank of New York Mellon.
Berkshire, whose overall stock portfolio was valued at $US207 billion at the end of September, cut its stake in Wells Fargo by about 9.6 million shares in the third quarter to a still considerable value of $US23.5 billion.
Mr. Buffett last year said Berkshire would sell shares in the scandal-riddled bank because it needed to keep its holding below the 10% threshold at which the Federal Reserve can exert oversight over a bank shareholder.
The September quarter regulatory filing reveals that Berkshire also bought more shares in tech giant Oracle (4.1 million shares worth $2.1 billion) and insurance company Travelers during the third quarter, while it sold out of Walmart and reduced its stake in energy group Phillips 66.
Berkshire had held a stake in Walmart that started 20 years ago, rose to a value of $US5 billion in 2014 but has progressively cut that as the pressures on US retailers from Amazon and others have made retailing tougher. The final 1.4 million holding disappeared in the September quarter.
It also topped up its Apple holding, adding 522,902 shares, bringing the firm’s total stake in the iPhone maker to 252.5 million shares, worth $US56.994 billion. But at Wednesday’s closing price of $US186.80, Berkshire’s holding is worth considerably less – nearly $10 billion in fact at $US47.16 billion
The company also made the rare move of buying back its own shares in the quarter, spending just under $US1 billion on mostly non-voting shares.
The direct investment in JPMorgan comes after the bank and Berkshire teamed up with Amazon in a healthcare joint venture that they plan to use to cut their employee healthcare costs.