The massive stock portfolio of Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), the conglomerate led by billionaire Warren Buffett, is perhaps the most closely watched portfolio in the world.
Investors keep track of the portfolio’s changes to figure out which stocks the Oracle of Omaha is willing to put his money into.
Berkshire just released its most recent Securities and Exchange Commission filings, which show the portfolio’s activity during the fourth quarter of 2017, and while it wasn’t the most active quarter for Berkshire, there were a few notable buys and sells.
With that in mind, here’s what Buffett and his team bought and what they sold during the last three months of the year.
Berkshire has a new top stock investment
As of the end of 2017, Berkshire Hathaway had a new top stock investment, as a result of adding to its already massive Apple (NASDAQ:AAPL) position.
During the fourth quarter, Berkshire bought more than 31.2 million shares of Apple, and although we don’t know the exact price Berkshire paid, based on the tech giant’s share price during the quarter, it’s likely that the company spent upwards of $5 billion.
Berkshire now owns 165.3 million shares of Apple worth just under $28 billion as of this writing, making the stock the largest position in its portfolio. Even though Apple has performed quite well over the past couple years, Buffett and his team clearly think it still represents a compelling value.
I wouldn’t be surprised to see Berkshire add even more Apple shares after the recent market drop. It now owns just 3.2% of the iPhone giant and is still sitting on a cash stockpile of more than $100 billion.
Berkshire added to several other investments
Besides Apple, Berkshire made a few other notable additions to its existing investments:
- The company added 2 million shares to its U.S. Bancorp (NYSE:USB) stake and another 10.6 million shares to its Bank of New York Mellon (NYSE:BK-PC) investment. Berkshire owns many bank stocks in its portfolio, and these are two of the best-run institutions in the sector.
- Berkshire also increased its Monsanto (NYSE:MON) investment by 31% and now owns 11.7 million shares.
One new position
The sole addition to Berkshire’s closely watched stock portfolio during the fourth quarter was beaten-down pharmaceutical stock Teva Pharmaceuticals (NYSE:TEVA). Berkshire’s 18.9 million share stake is a relatively small investment for the company, worth “only” $358 million, but investors are optimistic that Buffett or his stock pickers see value in the company, as shares rose by 11% immediately after Berkshire’s investment was announced.
Even after rebounding a bit, Teva is still down 39% from a year ago — even after the after-hours “Buffett rally.”
Big Blue is almost gone from Berkshire’s portfolio
Berkshire had been gradually unloading its IBM (NYSE:IBM) stake for some time. Buffett admittedly misjudged IBM and has said that he revalued the company lower than he initially did.
Well, IBM rallied a bit during the fourth quarter of 2017, and apparently that was enough to send Berkshire heading for the exits. During the quarter, Berkshire unloaded 94% of its remaining IBM stake, and now owns just 0.2% of Big Blue worth $314 million.
Other selling activity
In addition to IBM, which was its most notable reduction, Berkshire also reduced a few other positions:
- The company sold 6 million shares of Wells Fargo (NYSE:WFC), but before you read too much into that, keep in mind that this represents just about 1% of its position, and was likely done to prevent Berkshire’s stake from rising over 10% due to share buybacks. Berkshire owns 9.3% of the bank and Buffett also owns shares in his personal portfolio, and he has mentioned previously that some selling would be necessary.
- Berkshire’s stake in American Airlines (NASDAQ: AAL) was slightly reduced by 1 million shares.
- Berkshire unloaded 10 million shares of General Motors (NYSE:GM), which reduced its stake by 16%.
- Its Sanofi (NYSE:SNY) investment was also decreased, but by a negligible amount — at just over 27,000 shares.
Berkshire still has a big cash problem
One key takeaway is that Berkshire was not much of a buyer during the fourth quarter, which is likely to be a bit disappointing to investors who have been patiently waiting for it to put some of its $109 billion cash hoard to work.
Sure, the company likely invested more than $6 billion during the quarter between Apple, Teva, Monsanto, and the two bank stocks it added to, but it also took in proceeds of approximately the same amount between its sales of IBM, Wells Fargo, and General Motors. I’d be surprised if Berkshire was a net buyer of stocks during the quarter, and it’s possible that the company’s cash pile will have grown even larger at the end of the year.
Buffett told CNBC in early January that Berkshire was a net buyer of stocks early this year, so it’s possible that it could be making a dent in its stash of cash now. We won’t know what he’s buying now until mid-May, but many of its investors are probably hoping for more buying, especially after the recent market correction.
— Matthew Frankel
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Source: The Motley Fool