Warren Buffett’s Berkshire Hathaway’s topline profit will take a $US38 billion whack from the slide in the value of the company’s huge share portfolio for the December quarter.
Berkshire is due to report its 4th quarter and 2019 results a fortnight this weekend, along with the annual letter to investors from Mr. Buffett.
Given the surge in volatility and big share falls in the 4th quarter and the big rebound in January, but not February, it should make for entertaining reading.
But you can be sure that Buffett will be quick to point out the difference between the top line profit and the impact of the share price fall and Berkshire’s underlying results.
Berkshire detailed its 4th quarter holdings in a regulatory report filed on Thursday (as did all other big fund managers).
The filing suggests that Berkshire has gone all traditional, seemingly looking for value in old-line stocks – cutting its stake in Apple, selling out of Oracle but topping up its holdings in JPMorgan Chase and General Motors.
The report shows that the value of the portfolio fell $US38 billion in the quarter to $US183.1 billion. It would have been well under $US180 billion if the value had been taken on Christmas Eve – Wall Street staged a post-Christmas rally from the 24th of December which is sort of continuing seven weeks later.
Berkshire Hathaway reduced its position in Apple Inc. at the end of December, shedding 2.89 million shares of Apple or about 1%.
Berkshire had 249,589,329 million shares of Apple worth about $US39.4 billion, making up 21.5% of Berkshire’s holdings, down from 25.8% at September 30. Berkshire’s stake was valued at more than $US56 billion at its peak when Apple was worth more than a trillion US dollars earlier in 2018.
Reuters pointed out that Buffett had nothing to do with the selling.
“One of the managers other than Warren had a position in Apple and sold part of it in order to make an unrelated purchase,” Buffett’s assistant Debbie Bosanek said in an email. “None of the shares under Warren’s direction have ever been sold,” Reuters reported.
That means the sales were made by either Todd Combs or Ted Weschler, Buffett’s two other managers – that means the Apple holding was built by either of those managers or both and the holding sold by either or both.
Berkshire cut its take in oil processing group, Phillips 66 reducing it by 22%, or 3.5 million shares, and cutting its holdings in the parent company of United Airlines by 15%, or by about 4 million shares.
Berkshire also notably unloaded its entire stake in Oracle Corp – a little over 41 million shares. That was disclosed in the November filing for September 30, so it has been an unusually quick investment.
Berkshire re-invested in Canadian energy group Suncor after quitting it in 2016. Berkshire says it owned 10.76 million shares worth $US300.9 million.
It popped up in the register of software group red Hat for the first time in the quarter, buying 4.18 million shares worth $US733.4 million.
Berkshire’s boosted its stake in huge US bank, JPMorgan Chase & Co 41% to 50.1 million shares (up from 35.7 million), worth $US4.9 billion. Berkshire also lifted its stake in General Motors in the quarter by 19.8 million shares to nearly 72.3 million worth $US2.4 billion at December 31
Berkshire sold about 15.6 million shares in Wells Fargo, cutting its stake to 426.8 million shares, worth $US19.7 billion.
The bank’s stock continues to struggle in the wake of scandals involving fake accounts, product miss-selling and auto loan practices.
It was one of the core holdings but several years ago Buffett declared it was no longer core because the Fed would not allow Berkshire to lift its holding above 10% without Buffett making far more disclosures about the financial relations between Wells and Berkshire. The Wells Fargo stake is no longer overseen by Buffett.
Todd Combs is a director at JPMorgan, which is working with Berkshire and Amazon to create a new company aiming to cut employee healthcare costs.
Berkshire also confirmed its new, $2US61 million stakes in StoneCo Ltd, a Brazilian credit card processor that went public in October.
Berkshire Class A and B shares are down by about 0.7% so far in 2019, compared with a 9.1% year-to-date gain for the Dow and a 9.5% gain for the S&P 500. The Nasdaq is up 12% so far this year.