Is The Oracle of Omaha Becoming a Bear?

By Glenn Dyer | More Articles by Glenn Dyer

We know Warren Buffett’s Berkshire Hathaway is finding it harder to find a home for its near $US150 billion cash pile in stocks, bonds and other investments, such as buying companies.

Yes, the company finds itself as the best investment – and plonked $US7.6 billion into Berkshire shares in the September quarter, and a further $US1.7 billion in October, as well as selling $US1.95 billion more shares than it bought in the same period – but it still bought.

But the overall tone of the $US293 billion portfolio at September 30 was negative – if you think that selling more than buying is a negative view of the outlook for equities.

Monday’s 13F filing with the US Securities and Exchange Commission for big fund managers revealed that Berkshire sold all its shares in drug group Merck & Co and reduced its stakes in AbbVie Inc and Bristol-Myers Squibb Co.

The filing shows Berkshire’s respective share stakes in AbbVie and Bristol-Myers fell 30% and 16% in the quarter.

Berkshire also sold its small stakes in Organon & Co, a Merck spinoff specialising in women’s health products.

But it didn’t wholly abandon the drug sector – Berkshire reckons it found value in a company that collects royalties from drugs. Berkshire said it invested $US475 million in Royalty Pharma Plc, which buys drug royalties.

That was the only purchase in the quarter and saw shares of Royalty Pharma rose more than 5% after the market close on Monday thanks to the ‘blessing’ by the world’s most followed single investor.

Reuters says Royalty Pharma helps fund late-stage clinical trials and product launches in exchange for future royalty streams, and sometimes buys royalties from drug developers.

Its larger revenue streams come from Vertex Pharmaceuticals Inc treatments for cystic fibrosis, Biogen Inc’s Tysabri for multiple sclerosis, and AbbVie’s Imbruvica for various cancers.

The company’s share price has recently traded about 50% above its initial public offering price in June 2020, but below where it closed on its first trading day.

Berkshire sold shares in telecommunications company Liberty Global Plc (a London based subscription TV business controlled by media magnate John Malone) but invested a paltry $99 million in flooring retailer Floor & Decor Holdings. Berkshire has considerable interests in real estate and housing, especially mobile homes.

Berkshire sold 2.5 million shares in US Bancorp (1% of the stake) after selling 0.6% in the second quarter and 1.1% in the three months to March

After making another small trim to its Chevron stake in the June quarter, Berkshire came back in the third quarter and added nearly 29 million more shares, or 24% to the existing holding.

Berkshire also sold some of its holdings in Visa, Mastercard and Charter Communications.

Berkshire further cut its stake in insurance brokers Marsh McLennan by 34% in the three months to September – after unloading a fifth of the Marsh McLennan position in the June quarter. That left 2.7 million shares worth $415.2 million or a little more than 0.1% of Berkshire’s equity portfolio.

Apple dominates the portfolio, accounting for more than 42% of the $US293 billion. Bank America accounts for around 14.6% and Amex just over 7%.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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