Renowned value investor Warren Buffett prefers to invest in companies that are reliable money makers, companies that can withstand economic and business quirks over time. With $ 122 billion in cash available from Berkshire Hathaway & # 39; s (NYSE :), (NYSE 🙂 most recent, it goes without saying that private investors and markets would like to know its latest porpholio holdings.
Inclusion in his Berkshire portfolio is considered a stamp of approval for the shares purchased or held. It is also the reason why many private investors follow his example and markets respond to what Buffet buys and sells.
Although Buffet has traditionally invested in financial institutions such as American Express (1945) and blue chip stocks such as Coca-Cola (NYSE :), he recently started purchasing in technology shares, in particular a huge interest in Apple (NASDAQ :). Is this a sign that his investment focus is shifting?
No one but Buffett can say for sure, but on Thursday, August 15, Berkshire Hathaway will publish its 13F deposit, the quarterly report required by the US Securities and Exchange Commission (SEC) of all institutional investment managers that list all equity investments under management. worth at least $ 100 million. It is a long-awaited event, not least because it offers investors and markets a more detailed understanding of the spirit of Buffett, and what he thinks is worth betting on now.
Prior to the release, we tried to predict what Buffett's biggest trade might have been this quarter.
New purchase: why not Microsoft?
Each of the past three quarters had a new, sometimes surprising position. Berkshire added Amazon (NASDAQ 🙂 to its portfolio in the first quarter of 2019. In Q4 2018, Berkshire acquired shares of Suncor Energy (NYSE :), open source specialist Red Hat (purchased by in October 2018) and fintech solutions developer StoneCo (NASDAQ :). So this time, why not Microsoft (NASDAQ :)?
BRKb Weekly vs SPX vs MSFT 1998-2009
Although once famous for avoiding the technology sector, Buffett has recently reversed the course. Berkshire Hathaway has recently purchased $ 860 million Amazon shares and has made Apple the largest position in its portfolio, with a stake of $ 47 billion now. Among his recent technical moves, Berkshire – which tends to buy and hold positions – has so far made only one tech-related misstep, when it quickly sold its Oracle (NYSE 🙂 position within three months.
Because Buffett is known for relatively safe picks and Microsoft is currently one of the safest technical stocks available, this bet would make perfect sense. The newest software giant showed growth across the board and has a dominant market position. That is probably Buffett's # 1 criteria when choosing stocks.
Important additions: industry leaders JPMorgan, Amazon
In the light of Buffett & # 39; s recent failure with Oracle, his comment at the time of the sale that he was "surprised" about what Amazon and Microsoft have done in the cloud business, could tell. Only a quarter later, Buffett bet on the undisputed leader in the cloud, Amazon. He often mentions the importance of market leadership; if this is what he is interested in, Amazon is a slot for a substantial position addition this quarter.
With regard to leading positions in the industry, Buffett has always had a weakness for banks and other shares in the financial sector. They currently make up 45% of his portfolio, and two of his three largest companies, Bank of America (NYSE 🙂 and Wells Fargo (1945), are second and third respectively after his Apple deployment. Since the Wells Fargo scandals came to light, JPMorgan Chase (NYSE 🙂 has emerged as the top bank choice, plus a value-oriented PE ratio of 11 and a dividend of almost 3% to start. These are things that Buffett is known to praise, so a larger JPMorgan position makes sense for Berkshire Hathaway.
Position trim: Apple
Why would Buffet Apple sell after it had acquired $ 47 billion in shares in recent years? Now that the iPhone manufacturer now accounts for 24% of the Berkshire Hathaway portfolio, Buffett and the company could certainly consider themselves invested in Apple. Berkshire could also have decided to reduce this position, not because of a lack of conviction at Apple, but rather because it may have become too large, something that is a common risk management method.
For comparison, the largest position of the portfolio after Apple is Bank of America, which represents 12% of the interests of Berkshire, and no other position is greater than 10% of the portfolio. With that in mind, don't get excited if Buffett sold this Apple share this quarter. He said before he is in the long run, but nothing is more important than managing risks.
Sold: Phillips 66
In the third quarter of 2016, Berkshire Hathaway had nearly 81 million shares in energy company Phillips 66 (NYSE :), now worth $ 6.4 billion. After continuously shortening that stake from Q1 2018 and selling 50% of the remaining position last quarter, Berkshire now owns only 5 million Phillips 66 shares, with a value of just over $ 500 million. Buffett recently agreed to invest $ 10 billion in Occidental Petroleum (NYSE :), for which he also receives a preferred 8% dividend of $ 800 million annually. This alternative oil exposure should make it easy to completely remove Phillps 66 shares from the Berkshire Hathaway portfolio.