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Rupert Hargreaves
Rupert Hargreaves
Articles (1195)  | Author's Website |

Warren Buffett's Portfolio Moves Suggest He's Preparing for a Downturn

A look at Buffett's latest 13F report

Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) filed its 13F report for the three months to the end of March at the end of last week. The report revealed that the Oracle of Omaha made some significant changes to his equity portfolio during the first three months of 2020.

It should be noted that this report does not contain any significant details about Berkshire's airline holding sales, as these were mostly conducted during the first few weeks of April and thus will be reported as part of the second quarter.

Despite the significant market volatility seen during March, Buffett did not add to any of his holdings substantially during the month. In fact, I have noticed that he's been a net seller of equities so far this year.

According to Berkshire's first-quarter filing, the group divested two positions entirely. These were not significant holdings, so Buffett's portfolio managers likely instigated the trades. The conglomerate sold its 312,000 shares of Travelers Companies Inc (NYSE:TRV) and its 227,000 shares of Phillips 66 (NYSE:PSX), which accounted for 0.02% and 0.01% of the portfolio, respectively.

One position I think it highly likely that the Oracle of Omaha pulled the trigger on himself was the conglomerate's sale of part of its Goldman Sachs (NYSE:GS) holding. Berkshire sold 10 million shares of the Wall Street giant, or 84% of its position in the stock, during the first quarter. Previously, the position accounted for just under 1% of the overall equity portfolio. At the end of last year, this position was worth $2.3 billion and gave Berkshire ownership of 2.9% of the investment bank.

Buffett has had a relationship with Goldman Sachs for almost as long as he has been an investor. He bailed out the investment bank in 2008, providing $5 billion in preferred stock, which earned Berkshire about $500 million a year in dividends.

The two parties renegotiated this deal in 2013. Buffett became one of Goldman's most significant shareholders as a result. At the time of this deal, the CEO of Berkshire said, "We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago." With this being the case, the fact that he has decided to sell is a curious development.

Berkshire also decided to reduce its position in JP Morgan Chase (NYSE:JPM) during the first quarter. It trimmed its holding from 1.94% of total shares outstanding to 1.88%.

The Oracle of Omaha has has also sold shares of Synchrony Financial (NYSE: SYF). Berkshire's 13F shows that the conglomerate sold 3.2% of its position in the credit card provider during the three months to the end of March.

In my opinion, there were two very notable thinkgs that did not happen in the quarter. First of all, the fact that Buffett did not take advantage of the March market decline in any sizeable way caught my attention. Secondly, he didn't sell any shares of Wells Fargo (NYSE:WFC). Buffett has been gradually reducing his position in the bank over the past year or so. Based on this trend, I thought he would have continued to do so this year. However, there's been no change so far.

Disclosure: The author owns shares in Wells Fargo and Berkshire Hathaway.

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About the author:

Rupert Hargreaves
Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors.

Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.

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Rating: 5.0/5 (5 votes)

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Comments

sf_tsai
Sf_tsai - 2 weeks ago    Report SPAM

Great analysis, very insightful!

Bruce Bohannon
Bruce Bohannon premium member - 2 weeks ago

Thank You Rupert. I like your two notables listed here.

I am a bit surprised he didn't reduce his position in WFC during 1Q 20 as well. I think BRK sold over 55 Million Shares of WFC in 4Q 2019.

Rupert Hargreaves
Rupert Hargreaves - 2 weeks ago    Report SPAM

Thanks Bruce, it'll be interesting to see what he does next quarter. In a recent interview when asked about WFC he seemed to give the impression that he'd continued to sell, although he declined to give specifics. So that's something to watch.

marty1h
Marty1h premium member - 2 weeks ago

Out-of-the-box guess: Warren's getting ready for the advent of digital currencies residing in blockchain.

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