According to current portfolio statistics, a Premium feature, four holdings of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) are trading near 52-week lows on Monday as markets around the globe grapple with accelerating coronavirus fears: United Airlines Holdings Inc. (UAL, Financial), General Motors Co. (GM, Financial), Synchrony Financial (SYF, Financial) and The Travelers Companies Inc. (TRV, Financial).
Dow plunges more than 1,000 points as coronavirus cases expand worldwide
The Dow Jones Industrial Average closed at 27,960, down 1,031.61 points from Friday’s close of 28,992.41. The 30-stock index closed below 28,000 for the first time since Dec. 11, 2019, driven primarily on increased coronavirus cases outside China, especially in South Korea and Italy.
The U.S. Department of State enacted a Level 2 Travel Advisory for South Korea, which increased the Korean country’s coronavirus alert to the “highest level” over the weekend: CNBC added that South Korea’s virus cases increased to 750, the highest number of cases in a country outside of China.
Apple Inc. (AAPL, Financial), the top holding of Berkshire, closed at $298.18, down 4.75% from the previous close of $313.05. The Cupertino, California-based tech giant said in an investor update last week that the company expects to miss its March-quarter revenue guidance due to two key reasons: iPhone supply shortages around the globe due to deceleration of manufacturing, and lower demand of Apple products in China as partner stores operate at reduced hours and low customer traffic.
Buffett welcomes the price drop as a "good sign" for Berkshire, continues looking at long term
Buffett said in a CNBC “Squawk Box” interview that the price drop “is good for [Berkshire].” The “Oracle of Omaha” told CNBC’s Becky Quick that when stock prices drop, Berkshire “will buy stocks on balance,” i.e., the conglomerate prefers to buy at low prices than at high prices. Buffett further said that he has been “a personal buyer of stocks” since he was 11 years old.
The Berkshire chairman and CEO further added that despite the short-term drop in share prices, the “real question” is where the business will be five to 10 years from now. Buffett also underscored that while companies will have “ups and downs,” other, long-term things like tariffs, taxes and competition are more likely to drive company direction than do short-term setbacks like the coronavirus outbreak.
52-week lows screener overview
Gurus like Robert Rodriguez, Arnold Van Den Berg and Carl Icahn (Trades, Portfolio) seek companies trading either at a new low or close to its exiting low. Icahn, an avid activist investor, once said he buys “companies that are not glamorous and usually out of favor” and that it is better if the entire industry is out of favor.
As the name implies, the 52-week lows screener lists the companies that are trading near a one-year low. The page allows Premium members to also view the 52-week low stocks that gurus and insiders are buying.
United
United, a major Chicago-based airline, tumbled approximately 4% on the virus fears. The company reported late on Monday that it will withdraw its full-year 2020 earnings guidance due to the uncertainty surrounding the virus outbreak. United has suspended all flights between the U.S. and each of several major cities in China and Hong Kong through April 24.
The airline's share price of $75.47 is approximately 1.38% above the 52-week low of $74.44.
GuruFocus ranks United’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and operating margins that have increased approximately 0.50% per year over the past five years and are outperforming over 65% of global competitors.
United’s valuation ranks 7 out of 10 on several signs of undervaluation, which include a price-book ratio near a 10-year low and a price-earnings ratio and a price-sales ratio near a three-year low.
Berkshire owns 21,938,642 shares of United as of the December 2019 quarter. Other gurus with holdings in United include PRIMECAP Management (Trades, Portfolio) and Diamond Hill Capital (Trades, Portfolio).
General Motors
General Motors traded around $33.09, approximately 0.36% above the 52-week low of $32.97.
The Detroit-based company operates eight businesses across three reporting segments: GM North America, GM International and GM Financial. GuruFocus ranks GM’s profitability 6 out of 10: Although the company has expanding operating margins and a return on equity that outperforms over 80% of global competitors,its three-year revenue growth rate underperforms approximately 70% of global auto manufacturers.
Berkshire owns 75 million shares of GM as of quarter-end. Other gurus with holdings in GM include David Einhorn (Trades, Portfolio)’s Greenlight Capital and Bill Nygren (Trades, Portfolio).
Synchrony Financial
Synchrony Financial traded around $32.25, approximately 3.73% from the 52-week low of $31.09.
The Stamford, Connecticut-based company offers a wide range of credit products through three sales platforms: retail cards, payment solutions and CareCredit. According to GuruFocus, Synchrony’s equity-to-asset ratio of 0.14 underperforms over 80% of global competitors, suggesting low financial strength. Despite this, Synchrony’s cash-to-debt ratio outperforms approximately 63% of global credit services companies.
Berkshire owns 20.803 million shares of Synchrony as of quarter-end. Other gurus with holdings include Steven Cohen (Trades, Portfolio)’s Point72 Asset Management and Seth Klarman (Trades, Portfolio).
Travelers
Travelers traded around $134.12, approximately 4.54% from the 52-week low of $128.29.
The New York-based company offers a wide range of commercial and personal insurance, including auto and homeowner's insurance. GuruFocus ranks Travelers’ profitability 7 out of 10: The company’s three-year revenue growth rate of 9.5% outperforms 63.88% of global competitors despite net margins and returns outperforming just over 56% of global insurance companies.
Berkshire axed 94.76% of its Travelers stake during the quarter, selling 5,646,012 shares. The shares averaged $135.98 during the quarter; according to GuruFocus estimates, Berkshire has an estimated gain of approximately 6.69% on the stock.
See also
Delta Air Lines Inc. (DAL, Financial) and American Airlines Group Inc. (AAL, Financial), two other major Berkshire airline holdings, tumbled over 6% on the coronavirus issues. Additionally, Fort Worth, Texas-based American disclosed in a Regulation FD filing last week that the airline has announced flight cancellations of the Boeing Co. (BA, Financial) 737 Max aircraft through Aug. 17.
Disclosure: No positions.
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