Warren Buffett (Trades, Portfolio)’s major bank holdings, which include Bank of America Corp. (BAC, Financial), Wells Fargo & Co. (WFC, Financial), U.S. Bancorp (USB, Financial), Goldman Sachs Group Inc. (GS, Financial) and JPMorgan Chase & Co. (JPM, Financial) continued Tuesday’s major slump on Thursday on fears of an inverting yield curve, a major harbinger of a potential market recession.
Dow tumbles nearly 500 points, adding to Tuesday’s woes
The Dow traded near 24,583.43 around 9 a.m., adding nearly 500 points to Tuesday’s 800-point nosedive as the gap between short-term Treasury yields and long-term Treasury yields begins to narrow. As of Dec. 3, the spread between the 10-year yield and the one-year yield is approximately 0.26% while the spread between the 10-year yield and the two-year yield is approximately 0.15%.
Bank of America
Representing 11.69% of the equity portfolio, Bank of America is Buffett’s largest bank holding and second-largest overall holding, just behind Apple Inc. (AAPL, Financial). The Charlotte, North Carolina-based bank traded near $25.80 around 9 a.m., down approximately 4.44% from the previous close of $27 and approximately 15.29% lower than the third-quarter average price of $30.46.
GuruFocus ranks the bank’s financial strength 4 out of 10: while the bank’s equity-to-asset ratio of 0.11 outperforms 68% of global competitors, Bank of America’s debt-to-equity ratio of 1 ranks lower than 63% of global banks. Despite this, the website lists two positive investing signs: a price-book ratio near a one-year low of 1.08 and a dividend yield near a five-year high of approximately 1.93%.
Other gurus with large holdings in Bank of America include Dodge & Cox and Pioneer Investments (Trades, Portfolio).
Wells Fargo
Representing 10.52% of the equity portfolio, Wells Fargo is Buffett’s second-largest bank holding and third-largest overall. The San Francisco-based bank traded near $50.42 around 9 a.m., down approximately 2.64% from the previous close of $51.79 and approximately 11.70% lower the third-quarter average price of $57.10.
GuruFocus ranks Wells Fargo’s financial strength 4 out of 10: although the company’s debt-equity ratio is near a 10-year low of 0.87, Wells Fargo has increased its debt levels over the past three years, a warning sign of potential financial distress. Despite this, the bank’s price-book ratio of 1.36 is near a two-year low.
Other gurus with large holdings in Wells Fargo include PRIMECAP Management (Trades, Portfolio) and Chris Davis (Trades, Portfolio).
U.S. Bancorp
U.S. Bancorp, Buffett’s seventh-largest holding overall, represents 2.98% of the equity portfolio. The Minneapolis-based regional bank traded around $51.71 at market open, down 1.69% from the previous close of $52.60 and approximately 2.38% lower than third-quarter average price of $52.97.
U.S. Bancorp’s cash-debt ratio of 0.31 and a debt-equity ratio of 1.29 both underperform over two-thirds of global competitors. Such metrics contribute to a poor financial strength rank of 4. Additionally, GuruFocus lists two severe warning signs: increasing long-term debt and asset growth faster than revenue growth.
Goldman Sachs
Goldman Sachs, Buffett’s ninth-largest holding overall, represents 1.86% of the equity portfolio. The New York-based investment bank traded around $180.94 at market open, down approximately 1.93% from the previous close of $184.31 and approximately 22.21% lower than the third-quarter average price of $232.61.
Goldman Sachs’ equity-asset ratio of 0.09 and debt-equity ratio of 3.43 both underperform over 90% of global competitors according to GuruFocus data, suggesting weak financial strength.
Despite low financial strength, Goldman Sachs offers a dividend yield near a five-year high of 1.83% and has a price-book ratio near a two-year low of 0.91.
JPMorgan Chase
JPMorgan Chase, Buffett’s 10th-largest holding overall, represents 1.82% of the equity portfolio. The New York-based bank traded near $103.24 at 9 a.m., down 3.81% from the previous close of $107.23 and approximately 9.06% from the third-quarter average price of $113.52.
JPMorgan Chase’s net profit margin is near a 10-year high of 27.68% while the bank’s return on equity is near a 10-year high of 10.82%. Both metrics are outperforming over 60% of global competitors, suggesting good profitability potential.
Even though the bank trades near a 10-year high, JPMorgan Chase’s price-book ratio is near a one-year low of 1.49.
See also
Buffett’s other top holdings in financial services include American Express Co. (AXP, Financial), Moody’s Corp. (MCO, Financial) and Bank of New York Mellon Corp. (BK, Financial).
One new feature of the guru pages is a revamped sector weightings page. The new page allows you to view a guru’s equity portfolio as a pie chart illustrating the portfolio weights for each sector. A second pie chart below illustrates the industry weights within a specific sector, which you can select by clicking on the drop-down menu located in the top-right corner of the “weighting history chart” shown in the image below.
Disclosure: No positions.
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Warren Buffett's Top 5 Holdings
