Berkshire Hathaway‘s (NYSE:BRK-A) (NYSE:BRK-B) stock portfolio is perhaps the most closely watched in the entire world — and for good reason. Many of the investments in the $235 billion portfolio were selected by CEO Warren Buffett himself, who is arguably the best long-term investor who ever lived.
We only get glimpses of Berkshire’s portfolio every three months when it files its 13F with the SEC, and we just learned what moves the company made during the third quarter of 2019. Here’s a rundown of what changed.
Two major buys in the third quarter
The third quarter of 2019 was a relatively slow one for buying stocks for Berkshire. There were only two major stock purchases during the period, and both were for relatively small amounts.
First, Berkshire bought about 7.5 million shares of Occidental Petroleum (NYSE:OXY), which translates to a roughly 1% stake in the company worth about $330 million at the current stock price. This shouldn’t come as too much of a surprise. After all, Berkshire recently invested $10 billion in Occidental’s preferred stock. At the time Berkshire decided to make its investment in the energy company, its common stock was trading for nearly $60 per share. At less than $40 per share currently, Buffett could see this as an opportunistic value investment.
The other, more surprising buy is about 1.2 million shares of furniture manufacturer RH (NYSE:RH), which represents a 6.5% stake in the company. While we don’t know if Buffett himself made this investment or if it originated from one of his stock-picking lieutenants, we do know that Buffett has been a fan of the furniture business — after all, Nebraska Furniture Mart is one of Berkshire Hathaway’s subsidiaries.
Here’s what Berkshire sold in the third quarter
During the third quarter, Berkshire sold some or all of five stock positions in its portfolio:
- 750,650 shares of Apple (NASDAQ:AAPL)
- 31,434,755 shares of Wells Fargo (NYSE:WFC)
- 1,640,000 shares of Sirius XM (NASDAQ:SIRI)
- 370,078 shares of Phillips 66 (NYSE:PSX)
- 5,171,890 shares of Red Hat
While this is a fair amount of selling activity, most of it isn’t too surprising or concerning. The Apple and Sirius XM sales represent just 0.3% and 1.2% of Berkshire’s positions, respectively, so I wouldn’t read too much into those.
Furthermore, Berkshire has been strategically selling shares of Wells Fargo for years now in an effort to keep Buffett’s control of the bank under 10% of its outstanding shares. Berkshire still owns 8.6% of the banking giant and Buffett owns shares in his personal portfolio as well, and Wells Fargo is buying back stock at an aggressive pace.
This is also just the latest in a series of reductions in Berkshire’s Phillips 66 stake, which appears to have fallen out of favor with Buffett; perhaps he prefers Occidental for Berkshire’s energy investment dollars. And finally, IBM (NYSE:IBM) closed on its acquisition of Red Hat shortly after the start of the third quarter, so this stake disappearing from Berkshire’s portfolio was already well known. Berkshire acquired its Red Hat stake in the fourth quarter of 2018 for significantly less than the $190-per-share price IBM paid, so this was a quick and easy win for the company.
A net seller of stocks
It appears that Buffett and his stock pickers are still having trouble finding compelling investment opportunities. The roughly $540 million that Berkshire invested in stocks during the third quarter is one of the lowest totals in recent memory. What’s more, even if we exclude the Red Hat sale, Berkshire unloaded about $1.9 billion in stocks during the quarter, making the company a net seller of stocks, even when considering the $700 million Berkshire spent buying back its own stock.