What will it take for Warren Buffett to buy stocks?

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It may take a massive sell-off in the stock market for Warren Buffett to make any major stock purchases.

But even that might not be enough for Buffett to recover shares given his inactivity in the spring of 2020 during the sharp decline linked to Covid when the S&P 500 index hit half of its current level.

Buffett, longtime CEO of

Berkshire Hathaway

(ticker BRK.A and BRK.B), apparently doesn’t see much value in stocks – and hasn’t for several quarters – and would rather buy something he knows and loves, Berkshire stocks.

Berkshire’s regulatory brief on Monday detailing its more than $ 300 billion in shares as of June 30 showed no noticeable change. The company reduced its stakes in three drugmakers—

AbbVie

(ABBV),

Bristol Myers Squibb

(BMY), and

Merck

(MRK) – while reducing its stake in General Motors (GM) from seven million shares to 60 million shares now worth more than $ 3 billion.

Berkshire increased its stake in

Kroger

(KR), now holding nearly $ 3 billion of the grocer. He made no changes to his largest holdings,

Apple

(AAPL) currently at around $ 134 billion and

Bank of America

(BAC) at $ 41 billion.

Buffett’s inactivity hasn’t hurt Berkshire stocks this year. Class A shares rose 0.1%, to $ 435,695 at the start of trading on Tuesday, while Class B shares were unchanged, at $ 289.45. Both share classes are up around 25% this year,

S&P 500

total index return of approximately 20%. Investors are excited about Berkshire’s exposure to strengthening the US economy.

Berkshire has shown a new stake in

Organon

(OGN) of about 1.5 million shares in the second quarter, but that was likely the result of Merck’s split from the pharmaceutical group in the spring rather than a purchase on the open market. Holders of Merck got one Organon share for every 10 Merck shares. Barron Organon’s outlook was bullish, noting its relatively inexpensive valuation.

In the second quarter, Berkshire was a net seller of around $ 1 billion of shares according to its 10-Q record, making it the fourth of the last five quarters that the company was a net seller of shares. Edward Jones analyst James Shanahan has calculated that Berkshire has been a net seller of $ 13.6 billion of shares since early 2019.

Buffett also doesn’t have much patience with some of the new equity holdings, which has surprised some Berkshire watchers who remember that his oft-reported preferred holding period is forever.

The company racked up around $ 2 billion in stakes in AbbVie, Bristol Myers and Merck in 2020 and sold them in the second quarter. Merck’s stake has been reduced for two consecutive quarters, falling to 9.2 million shares from 28.7 million at the end of the year, a decline of about two-thirds.

Berkshire slightly reduced its stake in

Chevron

in the second quarter, to 23.1 million shares, a decrease of about 600,000 shares, after having reduced it by about half in the first quarter. Chevron’s stake is now worth around $ 2.4 billion.

It is worth noting that Buffett used a confidential file with the Securities and Exchange Commission to accumulate Chevron’s stake in 2020 to halve it this year.

Buffett’s investments since early 2020 have been disappointing, including selling four airline stocks near the bottom of the market in April 2020.

He eliminated once large holdings in

JPMorgan Chase

(JPM) and

Goldman Sachs Group

(GS) last year at prices significantly below current prices and virtually eliminated a once large stake in

Wells fargo

(WFC) at a price significantly lower than its current price. Buffett probably left over $ 10 billion on the table with these sales of financial stocks.

Berkshire has also been silent with acquisitions for several years. The last major deal was the purchase of Precision Castparts for more than $ 30 billion in 2016.

Buffett said at Berkshire’s annual meeting in May that he was prepared to invest. Berkshire is sitting on around $ 144 billion in cash and cash equivalents, mostly treasury bills.

“But we’ve got more than we – we’ve got probably $ 70 billion or $ 80 billion, something like that maybe, that we’d like to put to work,” Buffett told shareholders. “But that’s about 10% of our assets. And we probably won’t – we won’t have a chance to do it under these conditions, but conditions change very, very, very quickly sometimes in the markets. ”

For now, Buffett appears to be content to spend Berkshire’s operating profits, which now stand at more than $ 25 billion a year after tax, on buyouts and hold onto a large cash flow in case the markets go down. would return and opportunities would arise.

Berkshire has repurchased about $ 6 billion of shares in each of the past two quarters, or about 1% of the shares outstanding in each period.

With Buffett turning 91 later this month, the question remains open as to whether he will have such a great opportunity at the helm of the company he has led since 1965.

Write to Andrew Bary at [email protected]