The 4th quarter and 2020 figures for Warren Buffett’s Berkshire Hathaway are out this Saturday (February 27) and will reveal that its biggest investment last year wasn’t the likes of Apple, but itself – which wasn’t mentioned in the company’s quarterly 13F fund managers return to the US SEC last week.
The omission wasn’t deliberate – companies buying back their shares do it to support the share price while returning capital to shareholders. But in Buffett’s case it is in important because it tells us that he thinks Berkshire is a far better investment than many of the companies in the company’s $US270 billion share portfolio.
Up to the end of the third quarter, Buffett has bought back $US16 billion of Berkshire’s shares, including $US9 billion in the three months to September in the largest buying back spree so far seen from the world’s most followed investors.
The buying was in contrast to the active year in the company’s quarter of a trillion-dollar portfolio – many of his bank shares went, some stocks came and went in a quarter such as Barrick Gold, the big plunge in US air stocks was reversed quickly as COVID grabbed hold of the economy and shutdown aviation.
The most fascinating deal was the move onto the share registers of Japan’s five biggest trading houses mid-year, a move that has paid off as the Japanese economy has rebounded and the stockmarket has recovered the losses of the past 30 years.
The December quarter report last week revealed one big new stake – this time in Verizon Communications, the huge US telco.
So hungry was Buffett and his stock pickers for Verizon that Berkshire now holds 147.6 million Verizon shares at the end of December for a value of around $US8.6 billion. That’s the 6th largest position in the company’s portfolio.
Besides Verizon, Berkshire also revealed new stakes in Chevron and E.W. Scripps & Co as part of the latter’s $US2.6 billion takeover of ION Media – a deal that Berkshire substantially funded in September.
Berkshire held 48.4 million shares of Chevron and 23.07 million shares of E.W. Scripps at the end of the quarter.
Berkshire also lifted its stakes in pharmaceutical companies AbbVie, Bristol Myers Squibb, and Merck. These positions were revealed in the third quarter of 2020 filing. Berkshire sold all of its Pfizer shares, so no money in the vaccine rollout then?
Berkshire Hathaway also sold the last of its positions in JPMorgan Chase and PNC Financial. Berkshire also again cut its Wells Fargo stake by about 58%, selling 74.95 million shares.
Berkshire trimmed its position in US Bancorp too to reveal under the 10% upper limit and has narrowed its interest in bank and financial stocks to Bank of America where it is the major shareholder, US Bancorp and Amex.
Berkshire also trimmed its stake in Apple by about 6%, selling 57.16 million shares. While Apple is still Berkshire Hathaway’s largest stock holding, Buffett and his managers seem to be using money raised by the sale of its shares to finance other purchases.
The holding in Snowflake was maintained after being picked up in the September quarter in the IPO. It was valued at $US1.7 billion at the end of 2020. Berkshire paid around $US7.320 million for the original stake and some of the holding of the founder.
Snowflake was an important deal because it was the first time Buffett has bought shares in an IPO since Ford floated in 1956, when Buffett was in the early days as a high profile public investment manager. Before then he had managed money for a group of friends and partners for around 20 years in private.
But over the year the activity in the portfolio was quite noticeable.
Buffett’s company completely disposed of or reduced its stake in 37 companies last year.
The December quarter saw Berkshire Hathaway cut its holdings in Apple, Wells Fargo, General Motors, US Bancorp, Suncor Energy, and Liberty Latin America (Class C).
Berkshire exited the bottom five — Barrick, M&T, PNC, JPMorgan Chase, and Pfizer — during the fourth quarter. Barrick Gold and Pfizer were held for mere months before they were flicked.
Berkshire completely exited the following 15 positions at some point in 2020: American Airlines Group, Delta Air Lines, United Airlines, Southwest Airlines,Goldman Sachs,Travelers Companies,Costco Wholesale,Restaurant Brands International,Phillips 66,Occidental Petroleum,Barrick Gold,M&T Bank,PNC Financial Services,JPMorgan Chase an Pfizer.
Holdings in 22 stocks were reduced at some point last year including Apple,General Motors,Visa,Mastercard,Wells Fargo,Synchrony Financial,US Bancorp, Bank of NY Mellon,Sirius XM,Teva Pharmaceutical Industries,Biogen,DaVita,Charter Communications,Amazon,VeriSign,Suncor Energy,Axalta Coating Systems,Liberty Global (Class A),Liberty SiriusXM Group (Class A),Liberty SiriusXM Group (Class C),Liberty Latin America (Class A) and Liberty Latin America (Class C).
The most problematic holding remains the 26% of Kraft Heinz which is still struggling.
The Berkshire portfolio had a value of $US270 billion at the end of December, up from $US236 billion at the end of the 3rd quarter and $US248 billion at the end of 2019.
The value of the portfolio plunged to $US180 billion at the end of the March quarter in the depths of the pandemic-driven sell off.