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In addition to its collection of more than 60 subsidiaries, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) has a broad portfolio of shares worth over $ 200 billion. Since most stock positions were hand-picked by legendary investor Warren Buffett himself, it's no surprise that this is one of the most watched equity portfolios in the world.
With this in mind, we recently had a glimpse of what Buffett and his team bought and sold in the second quarter. Here is an overview of all of Berkshire's recent stock market movements and what investors need to know about them.
Source of the image: The Motley Fool.
What Berkshire Hathaway bought in the second quarter
Berkshire has not initiated any new positions, but he has added four more:
|
Company (stock symbol) |
Shares purchased in Q2 2019 |
Shares held at the end of Q2 2019 |
Market value of purchased shares |
|---|---|---|---|
|
Bank of America (NYSE: BAC) |
31,081,000 |
927,248,600 |
$ 914.4 million |
|
US Bancorp |
3150787 |
132,459,618 |
$ 167.0 million |
|
Amazon.com (NASDAQ: AMZN) |
54,000 |
537,300 |
$ 103.8 million |
|
Red Hat |
61,419 |
5171890 |
$ 11.7 million |
|
Total purchases |
– |
– |
$ 1.197 billion |
Data Source: Berkshire Hathaway's filings with the SEC. Market value as of June 30, 2019.
First and foremost, note that Buffett still seems to be optimistic about bank stocks. Berkshire has added to many of its bank equity investments in recent quarters and continued this trend in the first quarter with approximately $ 1.1 billion invested between Bank of America and the United States Bancorp.
To be fair, we already knew the Bank of America investment. In fact, in a separate document filed by the SEC at the end of July, Berkshire announced the ownership of 950 million shares of Bank of America. This means that Berkshire has bought even more stock from the bank since the end of the quarter.
It is also important to realize that the investment of Amazon.com was not made by Buffett, but by Todd Combs or Ted Weschler, Buffett's two stock pickers.
Finally, although Berkshire purchased more from Red Hat during the quarter, it was probably seen as an arbitrage opportunity. Shortly after the end of the quarter, IBM closed its acquisition of Red Hat for $ 190 per share. Berkshire probably thought that the agreement had a high probability of success and decided to add shares at a price lower than the acquisition of IBM. It is also interesting to note that, thanks to the acquisition of Red Hat by IBM, Berkshire has obtained nearly a billion dollars worth of money to add to its growing war chest.
What Berkshire Hathaway has sold
At first glance, it appears that Berkshire was a net seller of securities during the second quarter. Here are the two shares sold by Berkshire, and the important point that investors need to know.
|
Company (stock symbol) |
Shares sold in Q2 2019 |
Shares held at the end of Q2 2019 |
Market value of the shares sold |
|---|---|---|---|
|
Communication Charter (NASDAQ: CHTR) |
284102 |
5,426,609 |
$ 113.0 million |
|
USG |
39,002,016 |
0 |
$ 1.638 billion |
|
Total provisions |
– |
– |
$ 1.751 billion |
Data Source: Berkshire Hathaway's filings with the SEC. Market values as at June 30, 2019, with the exception of USG, which was sold to Knauf in the second quarter at $ 42 per share.
The key point to mention here is that the US government's position was not exactly sold, at least not in the sense that Buffett decided to get rid of it. During the second quarter, USG was acquired by Knauf and Berkshire received $ 42 per share for its participation. So I would say that the small reduction in investment in Berkshire Charter Communications is the only real "sell" of the quarter.
Another "purchase"
It should also be noted that Berkshire also spent a considerable amount – about $ 400 million – to buy back its own shares, as revealed in its second quarter earnings report. This is a sharp drop from the $ 1.7 billion in first-quarter buybacks, but it does indicate that Warren Buffett and Charlie Munger both think Berkshire is considerably cheaper than its intrinsic value.
(If you're curious, the average price that Berkshire paid for his stock was about $ 201.50 per Class B share during that period.)
Still a shortage of attractive opportunities
The second quarter was the least active of Berkshire in terms of recent stock purchase. In recent years, Berkshire has struggled to find attractive ways to grow cash. That's why the company posts more than $ 122 billion in balance sheet. Now that we have had a glimpse of the company's second-quarter activity, it is clear that it was still the case.
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