Buffett's First Quarter Buys & Sells

05/23/2019 5:00 pm EST


Ben Reynolds

CEO, Sure Dividend

Warren Buffett is arguably the best investor of all time. Self-directed investors can learn from his success by studying his stock market holdings, which are published in regulatory filings with the U.S. Securities & Exchange Commission, notes Ben Reynolds, editor of Sure Dividend.

These filings are called “13Fs” and are published on a quarterly basis. The latest 13F for Buffett’s company Berkshire Hathaway (BRK.B) was published on May 15 and we wanted to provide an update on the Oracle of Omaha’s stock market activities in the first quarter.

Berkshire Hathaway’s 10 Largest Positions

1 — Apple Inc. (AAPL): $47.4 billion
2 — Bank of America Corp. (BAC): $24.7 billion
3 — Wells Fargo & Company (WFC): $19.8 billion
4 — The Coca-Cola Company (KO): $18.7 billion
5 — American Express Co. (AXP): $16.6 billion
6 — The Kraft-Heinz Company (KHC): $10.6 billion
7 — U.S. Bancorp (USB): $6.2 billion
8 — JPMorgan Chase & Co. (JPM): $6.0 billion
9 — Moody’s Corporation (MCO): $4.5 billion
10 — Bank of New York Mellon Corp. (BK): $4.0 billion

Buffett’s portfolio continues to be remarkably concentrated. 79.5% of this portfolio is held in his top 10 positions and 63.8% is in his top 5 positions.

Changes to the Top 10 and Financial Sector Exposure

The only two majors changes that Buffett made within his top 10 since the last 13F filing was to trim his stake in Wells Fargo (WFC) by 17 million shares (or $780 million at current prices) and increase his stake in JPMorgan (JPM) by 9.4 million shares ($1.046 billion at current prices).

The reduction in Buffett’s Wells Fargo stake was likely done to stay under the 10% ownership threshold that triggers the company to register as a “bank holding company”. This transition triggers additional regulatory scrutiny which Buffett has explicitly stated that he wants to avoid.

Still, Buffett’s portfolio suggests he remains extremely bullish on the American banking sector. A remarkable 46.5% of Berkshire’s portfolio is invested in the financial sector.

In addition, Buffett is close to touching the 10% ownership threshold in four major banks: Wells Fargo, Bank of America, Bank of New York Mellon, and U.S. Bancorp

Interestingly, Buffett owns just 1.7% of JPMorgan. We would not be surprised to see him significantly increase that stake in the near future. Some back-of-the-envelope math suggests he could deploy about $28 billion into JPM at current prices without crossing the 10% ownership threshold.

Increased Stake in Delta Air Lines, Reduced Stake in Southwest

Buffett made headlines back in 2016 when he began investing in the airline industry. While he was historically vocally bearish on the industry as a whole, his stance changed significantly. Today, Buffett owns $9.6 billion of common equity in the industry, divided as follows:

* Delta Air Lines (DAL): $3.7 billion
* Southwest Airlines Co. (LUV): $2.8 billion
* United Continental Holdings (UAL): $1.8 billion
* American Airlines Group (AAL): $1.4 billion

When Buffett began investing in the sector, many analysts wondered if he planned to eventually acquire one of the companies in full. This mirrors his strategy with several past acquisitions (GEICO and BNSF come to mind) where public market purchases were followed by a bid for the remainder of the business.

If this is the case, Buffett’s activity in the first quarter suggests that he is leaning towards a favorite. His latest 13F shows purchases of 5.4 million of Delta stock (worth $299 million at current prices) while he simultaneously sold 1.2 million of Southwest stock (worth $63 million at current prices). Investors should monitor this trend closely moving forward.

Berkshire's Amazon Stake

The last component of Berkshire’s 13F worth discussing is his Amazon (AMZN) stake. Importantly, this investment was made by one of Buffett’s investment managers (Todd Combs or Ted Weschler) and not Buffett himself.

Berkshire’s recent 13F revealed that the Amazon investment was valued at $861 million at the end of the quarter. While this is small relative to Berkshire’s overall value (the equity portfolio alone was worth $199.5 billion at the end of the quarter), it’s important to acknowledge that this stake could very well grow over time.

Berkshire’s massive $47.4 billion Apple stake, which was first initiated in the first quarter of 2016, began as a similarly 'small' $1.07 billion position. The Apple investment was also instigated by one of Buffett’s lieutenants.

With that in mind, there is a possibility that the Amazon investment grows into something more substantial in the quarters to come.

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