Berkshire Hathaway’s Stock Portfolio
Warren Buffett’s latest trades were just revealed via the most recent Berkshire Hathaway Inc. (BRK.B) 13F filing, which is a filing that gives us information on all of the transactions that took place over the first quarter of 2021 — the quarter ending March 31 — in the stock portfolio managed by the legendary investor.
This filing can provide some valuable insight into where Warren Buffett thinks the best investments might lie.
Now, it might not make sense to piggyback on his trades and simply buy and/or sell whatever he has because these filings are generally released 45 days after the most recent quarter ended, but it would appear to be an intelligent move to investigate exactly where the most successful investor of all time is (and isn’t) putting his capital to work.
It’s also important to note that Buffett allows two other executives – Todd Combs and Ted Weschler – to authorize smaller transactions, so it’s difficult sometimes to decipher who bought and/or sold what.
Below, I’m going to go over every transaction and give some quick thoughts on each respective company.
I’m going to do my best to infer what each purchase and sale means, but it’s obviously impossible to know exactly what Warren Buffett or his lieutenants were thinking when each transaction was executed.
Let’s take a look!
Berkshire Hathaway’s Latest Transactions
Please keep in mind this list is for informational purposes only, and is not a recommendation to buy any specific stocks.
Purchased 4,096,146 shares of Aon PLC (AON) – NEW POSITION
Purchased 17,526,279 shares of Kroger Co. (KR)
Purchased 1,019,701 shares of Marsh & McLennan Companies, Inc. (MMC)
Purchased 23,900 shares of RH, Inc. (RH)
Purchased 12,108,079 shares of Verizon Communications Inc. (VZ)
Sold 2,664,904 shares of AbbVie Inc. (ABBV)
Sold 9,532,963 shares of Axalta Coating Systems Ltd. (AXTA)
Sold 2,303,789 shares of Bristol-Myers Squibb Co. (BMY)
Sold 24,826,694 shares of Chevron Corporation (CVX)
Sold 5,500,000 shares of General Motors Company (GM)
Sold 14,650,169 shares of Liberty Global PLC Class A (LBTYA)
Sold 10,815,047 shares of Merck & Co., Inc. (MRK)
Sold 6,341,200 shares of Sirius XM Holdings (SIRI)
Sold 3,471,300 shares of StoneCo Ltd. (STNE)
Sold 13,849,207 shares of Suncor Energy, Inc. (SU) – SOLD OUT
Sold 20,128,000 shares of Synchrony Financial (SYF) – SOLD OUT
Sold 1,450,914 shares of U.S. Bancorp (USB)
Sold 51,748,813 shares of Wells Fargo & Co. (WFC)
Aon PLC (AON) – Purchased 4,096,146 shares.
This is a new position for Berkshire Hathaway.
Aon PLC is a professional services company that sells a variety of risk-management products that include insurance, pension management, and human resource solutions.
Based on the size of the position (~$1 billion), it’s unlikely that Buffett was behind this move. Nonetheless, it’s a classic Buffett investment in many respects. I mean, Aon is in the insurance space, which is where Buffett has really cut his teeth and made a significant portion of his wealth.
The Buffett attraction also relates to cash flow; Aon is a free cash flow machine, as almost all of their operating cash flow drops straight down. Then there’s the “stickiness” to their products and services, which is also something Buffett loves.
Aon, like a lot of other similar firms, has faced trouble with revenue growth over the last decade. However, a combination of margin expansion and substantial buybacks have allowed them to triple EPS over the last 10 years anyway.
That’s impressive, which has a lot to do with driving the share price higher – it’s up fivefold since mid-2011.
The one thing that isn’t terribly Buffett-like here is the valuation, with the stock sporting a P/E ratio over 27. Most basic valuation metrics are well above their recent respective historical averages. But if there were to be a dip here, it would be a good name to put on your radar.
Kroger Co. (KR) – Purchased 17,526,279 shares.
This purchase increased Berkshire Hathaway’s position by 52.3%, now up to 51,060,296 shares.
Kroger Co. operates more than 2,700 supermarkets across 35 states (and the District of Columbia), in addition to multi-department stores, pharmacies, jewelry stores, fuel centers, and food processing plants.
Again, it’s unlikely that Buffett was behind this move. But once more, it’s another classic Buffett investment. I’ve said that before about Berkshire Hathaway’s position in Kroger, and I’ll say it again.
It’s a high-quality, profitable, scaled-up, easy-to-understand business that pays a growing dividend (which Buffett can collect and redeploy back into investments). That’s about as Buffett as it gets.
Unlike Aon, however, this stock also fits the valuation mold.
The P/E ratio is below 12, which is obscenely low in this market. Every basic valuation metric I look at is below its recent respective historical average, including the P/CF ratio of 4.3 (compared to its three-year average of 5.5).
Meanwhile, the stock yields almost 2%. That beats the market. And it comes with strong dividend growth – the dividend has been increased for 15 consecutive years, with a 10-year dividend growth rate of 13.3%.
Marsh & McLennan Companies, Inc. (MMC) – Purchased 1,019,701 shares.
Berkshire Hathaway’s position is now at 5,287,526 shares, an increase of 23.9% over last quarter.
Marsh & McLennan Companies, Inc. is a global professional services firm that provides a range of advisory and consulting services.
This purchase comes after Berkshire Hathaway initiated their position in Marsh & McLennan just last quarter, so they’re quickly following that up with an add-on. That shows confidence.
Again, this is another small position (by Berkshire Hathaway standards, at least). Thus, it’s most likely Combs or Weschler behind it. But that takes away nothing from the insight the transaction provides, as both of the investing lieutenants have been hand-picked by Buffett. Moreover, Buffett has gone on record to say that both of them have been outperforming him within the investment portfolio.
This investment is similar to Aon, as it’s a professional services firm that operates an asset-light business model with great margins and plenty of free cash flow. With that and the “stickiness” of their offerings, it’s another investment that I’m sure Buffett would happily approve of.
Revenue is up by about 50% over the last decade. EPS has doubled. The dividend has doubled. The balance sheet isn’t severely encumbered.
As with Aon, though, the issue here for investors looking to get in now might be valuation.
After starting the year by going on a big run, the P/E ratio is over 30. And most valuation metrics indicate fair value at best (and material overvaluation at worst).
But if the stock were to correct by 10% or so, that might be a good entry point for investors.
RH, Inc. (RH) – Purchased 23,900 shares.
Berkshire Hathaway increased their stake by 1.4%, up to 1,756,448 shares.
RH, Inc. is a holding company that, through its subsidiary, offers a range of high-end home furnishing products across multiple retail channels.
This buy follows up a similarly-sized purchase of 24,200 shares last quarter, so there’s definitely some consistency here.
Now, this was a rather small transaction by Berkshire Hathaway standards. Along with that, the position is also relatively small. We can safely conclude that Buffett isn’t behind this move, either.
Regardless, RH runs a fantastic niche business. They’re basically the go-to company for extremely high-end home furnishings. I can’t think of a single serious competitor. They essentially operate in a league of their own.
This has been a home run of an investment for Berkshire Hathaway since initiating their position in Q3 2019. For perspective, the stock was in the low $100s back then. It’s now over $600/share!
With that kind of explosive stock performance, it’s terribly difficult for business performance to keep up with. Indeed, RH has performed admirably over the last two years – EPS has doubled between FY 2019 and FY 2021 – but not to the level that would seem to allow for this kind of stock performance.
Thus, the stock has become egregiously expensive based on just about every valuation metric you could possibly look at.
For example, the P/CF ratio of 34.5 is almost three times higher than its three-year average of 12.7.
RH is positioned very well, particularly since housing has boomed since the pandemic struck. But a lot of that future business performance seems to be priced into the stock here, so be cautious.
Verizon Communications Inc. (VZ) – Purchased 12,108,079 shares.
Berkshire Hathaway increased the size of their stake by 8.3%, which is now up to 158,824,575 shares.
Verizon Communications Inc. is a multinational telecommunications conglomerate that provides a range of products and services across voice, data, and entertainment.
This transaction comes after Berkshire Hathaway initiated their stake in Verizon just last quarter. They’re quickly following that up with more shares, so they must like what they see.
Based on the size of the position (valued at more than $8 billion), we can safely bet that Buffett was behind both the initial investment and this follow-up buy.
Besides buying back Berkshire Hathaway shares, Buffett hasn’t been very busy with capital allocation over the last year or so. And I’ve commented on that numerous times, stating that it’s my belief that Buffett is simply making room (and capital) for his investing lieutenants. Both Combs and Weschler are surely going to slowly manage more capital and responsibility for Berkshire Hathaway with each passing year.
That said, Buffett can still move capital (and markets) when he wants to. And he clearly has confidence in Verizon as a business and stock.
I’m on the same page.
Verizon offers an attractive yield 4.3%, along with an undemanding P/E ratio below 13. The P/CF ratio of 5.6 is well off of its three-year average of 6.8.
With 16 consecutive years of dividend raises and a 10-year dividend growth rate of 2.6%, this is an appealing stock for income-oriented dividend growth investors who are looking to juice the overall yield of their portfolio.
At the very least, it’s not a bad place to park some cash and collect some income. Sure beats the bank or treasuries, which might just be what Buffett is thinking.
AbbVie Inc. (ABBV) – Sold 2,664,904 shares.
This sale brought Berkshire Hathaway’s position down to 22,868,178 shares, a reduction of 10.4%.
AbbVie Inc. is a global pharmaceutical company with a particular focus on immunology and oncology.
This move is perplexing. Berkshire Hathaway initiated their position in AbbVie in Q3 2020, then added to it in Q4 2020. They now spent part of Q1 2021 reducing it. That’s a pretty quick about-face.
I’m not quite sure what would have led Berkshire Hathaway to reduce their stake in AbbVie. I’m actually a big fan of the business. I think their long-term prospects are great, although the near term could be a bit bumpy once they start to lose Humira’s patent protection and the exclusivity value that provides.
That all said, it was a pretty small move. So it might just be a capital allocation move for Berkshire Hathaway more than anything else.
I’d be more likely to buy AbbVie than to sell it, however.
The stock trades hands for a P/CF ratio of 10.9, which is slightly below its three-year average of 11.1.
More importantly, it offers a very juicy 4.5% yield. That blows the broader market out of the water. And AbbVie has been very generous with dividend increases – their most recent dividend increase came in at over 10%.
AbbVie is busy integrating Allergan and making the business more robust, which alleviates some of the Humira pressure. I think this is an attractive long-term investment for dividend growth investors.
Axalta Coating Systems Ltd. (AXTA) – Sold 9,532,963 shares.
This reduced Berkshire Hathaway’s by 41%, now at 13,887,037 shares.
Axalta Coating Systems Ltd. is a coatings company.
This was a small sale of a small position that doesn’t really move the needle for Berkshire Hathaway in any meaningful way. There’s not much to discuss here.
Notably, the stock has performed really well since the end of Q1. If Berkshire Hathway wanted to start moving out of this name below $30/share (which is where the stock was for most of last quarter), I’m sure they’d be even more interested in selling the stock now at almost $33/share.
Bristol-Myers Squibb Co. (BMY) – Sold 2,303,789 shares.
Berkshire Hathaway now owns 31,032,227 shares, which is down by 6.9%.
Bristol-Myers Squibb Co. is a pharmaceutical company that manufactures treatments in several areas, including cancer, HIV/AIDS, cardiovascular disease, diabetes, hepatitis, rheumatoid arthritis and psychiatric disorders.
This move perplexes me in the same way that the AbbVie sale does. The buying and selling shadows AbbVie in a way that almost makes me think that Berkshire Hathaway is just buying and selling baskets of stocks in the pharma space rather than doing a deep dive into individual businesses. It’s quite strange.
As with AbbVie, Berkshire Hathaway initiated their stake in Bristol-Myers Squibb in Q3 2020. They then added to the stake in Q4 2020. Here they are, now in Q1 2021, reducing the position down.
I don’t see anything that’s markedly changed in terms of either the businesses or stocks of these pharmaceutical companies to warrant such a quick shift in the investment thesis or exposure.
And this is another case where I’d be more likely to buy than to sell the stock.
This stock trades hands for a P/CF ratio of 10.6, which is quite a ways off of its three-year average of 14.1. And it offers an attractive 3% yield, which beats the market and is above the stock’s own five-year average yield of 2.8%.
I also like the recent acceleration in dividend growth – the most recent dividend increase of almost 9% came in a lot higher than the stock’s 10-year dividend growth rate of 3.5%.
Chevron Corporation (CVX) – Sold 24,826,694 shares.
This sale dropped Berkshire Hathaway’s position by 51.2%, which now stands at 23,672,271 shares.
Chevron Corporation is an integrated global energy company, with exploration, production, and refining operations across the world.
Yet another about-face for Berkshire Hathaway, who initiated their position in Chevron in Q4 2020. One quarter later, they’re selling off half of it.
Nothing has really changed in terms of Chevron’s business model or long-term prospects in only a few months, nor has the stock done very much to change one’s opinion of it in a big way.
It’s a head-scratcher for sure.
Buffett was actually asked at this year’s Berkshire Hathaway meeting about the increased frequency of trading within the common stock portfolio, which he basically brushed off. Buffett didn’t seem to recognize any increased trading, but I’d beg to differ. I’ve been covering Berkshire Hathaway’s portfolio for years, and I’ve definitely noticed a lot of in-and-out moves like this over the last 2-3 years that were incredibly uncommon about 10 years ago.
Again, this is another stock that I see as more buyable than sellable.
The valuation is reasonable across the board. And it offers a near-5% yield, which is obviously appealing in this market.
Chevron’s extremely long-term future (i.e., 50+ years out) is highly uncertain, as the world is moving away from hydrocarbons. But if you’re looking at the next 10-20 years, I believe Chevron should do well enough to warrant investment consideration (rather than selling it).
General Motors Company (GM) – Sold 5,500,000 shares.
This transaction reduced Berkshire Hathaway’s stake by 7.6%, which is now down to 67,000,000 shares.
General Motors Company is a multinational corporation that designs, manufactures, markets, and distributes vehicles and vehicle parts, and also provides financial services.
Here’s some consistency. Berkshire Hathaway reduced their GM stake by 7.5 million shares just last quarter. And here they are back at it, down another 5.5 million shares.
This one makes sense to me. Berkshire Hathaway is selling into strength, as the stock has been a solid performer this year. If you have it in mind to sell a stock at one price, you should like the idea of selling it even more if it’s priced higher.
Personally, I’ve never been a big fan of the car industry. It’s a hypercompetitive industry with low margins, high fixed costs, little brand loyalty, and a lot of product turnover. I fail to see the appeal.
Merck & Co., Inc. (MRK) – Sold 10,815,047 shares.
Berkshire Hathaway reduced its position down to 17,882,388 shares, which is a 37.7% reduction.
Merck & Co., Inc. is a leading global pharmaceutical company that produces a range of medicines, vaccines, and animal healthcare products.
Everything I said about AbbVie and Bristol-Myers Squibb can be said about Merck. It’s a strange trading pattern that doesn’t have a lot of precedent in terms of Berkshire Hathaway’s longstanding modus operandi.
And as with the other pharma stocks, I’d be a buyer rather than a seller of this one.
In fact, I recently highlighted, analyzed, and valued this name in one of the recent Undervalued Dividend Growth Stock of the Week articles.
Sirius XM Holdings (SIRI) – Sold 6,341,200 shares.
Berkshire Hathaway’s position is down to 43,658,800 shares, which is 12.7% lower than last quarter.
Sirius XM Holdings is a broadcasting company that provides satellite radio and online radio services.
This is an unremarkable sale on an unremarkable position in the portfolio. This position is worth less than $300 million for Berkshire Hathaway, which is nothing more than a rounding error for them.
I don’t see any insight here, nor do I see anything compelling in terms of the investment thesis. The business barely makes a profit, and the balance sheet is heavily leveraged.
StoneCo Ltd. (STNE) – Sold 3,471,300 shares.
This sale reduced Berkshire Hathaway’s stake by 24.5%, now down to 10,695,448 shares.
StoneCo Ltd. is a Brazilian-based digital payments and financial services company.
This is a relatively exotic investment for Berkshire Hathaway. Along with the somewhat small size of the position, it’s safe to say that Buffett had nothing to do with any of it.
That said, it’s an interesting move.
The digital payments space is very exciting. And I think the future for companies in this space is extremely bright.
However, I personally prefer to play it with some of the major American-based payments providers that are more established, have great profits, and sport reasonable stock valuations.
StoneCo, on the other hand, has a P/E ratio of over 100.
I’m not quite sure what led Berkshire Hathaway to reduce their stake. However, I will note that the stock has fallen precipitously of late, perhaps ignited by the very high valuation, and is now well off of its 52-week high. The stock has been disastrous since its February peak, so Berkshire Hathaway might have saw that extended valuation as a sign to lower their exposure.
Suncor Energy, Inc. (SU) – Sold 13,849,207 shares.
Berkshire Hathaway completely sold out of this position.
Suncor Energy, Inc. is a Canadian integrated energy company.
After selling a big chunk of their Suncor position in Q4 2020, Berkshire Hathaway decided to completely cut ties with Suncor.
I see this as a good move, actually. I’m not sure what Berkshire Hathaway ever saw in Suncor in the first place, to be honest.
I’ve been consistently negative on Suncor for years. While I think there’s an investment case to be made with some of the American-based supermajors (like Chevron above), Suncor is in the Candian oil sands. This is a notoriously expensive patch to be in, with difficult-to-move heavy oil that isn’t as attractive on the market. It’s simply a less appealing set of assets with relatively unfavorable economics.
Synchrony Financial (SYF) – Sold 20,128,000 shares.
Berkshire Hathaway completely sold out of their stake.
Synchrony Financial is a financial services company that provides financing solutions primarily through credit cards.
This was an ill-timed sale. The stock ended Q1 2021 at under $41/share. It’s now coming up on $47/share.
That said, the business itself has seen its growth challenged in recent years, which might be what prompted Berkshire Hathaway to finally move on.
EPS for FY 2020 was the same as it was for FY 2011. While 2020 was obviously an anomaly that hit financial companies particularly hard, a lot of other banks held up reasonably well and still show growth over the last decade.
I don’t see a lot to like about this name.
U.S. Bancorp (USB) – Sold 1,450,914 shares.
Berkshire Hathaway dropped their position down to 129,687,084 shares, which is a reduction of 1.1%.
U.S. Bancorp is a bank holding company that offers a diversified mix of financial services, including traditional retail banking, wealth management, commercial banking, and payment services.
Berkshire Hathaway has been busy selling out of bank holdings over the last 18 months, which accelerated throughout the pandemic. This was another topic that Buffett recently addressed at the annual Berkshire Hathaway meeting. When asked about the bank sales, he alluded to a feeling of overexposure and wanting to reduce that in the wake of so much economic turmoil and uncertainty.
Indeed, I noted Berkshire Hathaway’s prior overexposure to banks as one of the potential reasons for their consistent bank sales. I also highlighted the likelihood of Buffett thinking about making more room for the young guns, which would mean lightening up on some of the older positions in the portfolio. Simply put, Buffett has to be more concerned about his legacy and the long-term future of Berkshire Hathaway rather than stock moves in the present.
All that said, mere mortal investors like us needn’t worry about billions of dollars wrapped up in banks. And I’ve been consistently saying that banks are buys, not sells, for the rest of us. That’s due to valuation and quality in this space being about as compelling as ever.
I analyzed and valued this bank specifically in an Undervalued Dividend Growth Stock of the Week article that went live in August, when the stock was in the mid-$30 range. I noted its appeal as a long-term investment then. It’s now over $60/share.
Investors would have been wise to have been buying banks while Buffett has been selling.
Wells Fargo & Co. (WFC) – Sold 51,748,813 shares.
This transaction reduced Berkshire Hathaway’s position by 98.7%, with the stake now at 675,054 shares.
Wells Fargo & Co. is one of the four largest banks in the US, with diversified financial offerings across retail, commercial, and corporate banking services.
Here’s what I said in the Q4 update I penned back in March about Berkshire Hathaway’s Wells Fargo stock sales:
“Berkshire Hathaway has been systematically selling out of this longtime investment for quite a while now. The only reason it’s taking so long is, it was once a very large position for the firm. Berkshire Hathaway has had to slowly move out of it in order to minimize unfavorable changes to the stock price.”
I also said this:
“If you’re a long-term Wells Fargo shareholder, it might be wise to do the opposite of Berkshire Hathaway in this case and hold on while the bank finally starts to turn a corner.”
While Wells Fargo doesn’t earn the same kind of admiration from me as the other big banks do, the stock is very cheap and they do appear to be finally turning the corner from an operational standpoint.
It’s highly likely that Berkshire Hathaway will be completely sold out of its longtime Wells Fargo investment by the end of Q2 2020. But I think retail investors would be wise to hang on and see what unfolds for Wells Fargo after the asset cap is lifted and general bank restrictions start to unwind. Investors have been served well by doing the opposite of Buffett on the banks over the last two years, and I don’t see that dynamic as all that different today.
— Jason Fieber