Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) made some significant changes to its equity portfolio during the first quarter of this year. According to the group's 13F report, which was filed with the SEC on Monday, during the three months to the end of March, the conglomerate added one new position to its portfolio, increased holdings of four others and sold or reduced 13 positions.
Disclaimer
Before I move on to take a look at which stocks Buffett and his team were buying and selling during the first three months of the year, I should note that 13F reports are backwards-looking filings, and they only tell us what has happened at a period in the past.
They also exclude cash, debt and international stock holdings. As such, they should not be relied upon to provide a full picture of a firm's investing activities.
What's more, in the case of Berkshire, just because a position appears on a 13F, it does not necessarily mean that the Oracle of Omaha is directly involved in the position himself. Indeed, in the past, Buffett has commented that holdings below $1 billion in value fall in the domain of Todd Combs and Ted Weschler, who have slightly different investment approaches to Buffett.
Berkshire's notable deals
Two transactions really stand to me out in the 13F. The first was the sale of Chevron (CVX, Financial). Looking back at the trading history of this position, it first appeared in the portfolio in the third quarter of 2020. However, it's likely Berkshire started buying in the second quarter, as it filed to keep several new stakes confidential in that period.
When the Chevron position was revealed, Berkshire owned 44.2 million shares. It kept buying in the fourth quarter, taking the holding up to 48.5 million shares. As this made the company a top-10 holding, it does not seem unreasonable to say Buffett was involved.
But it now seems as if he has gone off the business. Berkshire reduced its holding in Chevron by 51% in the first quarter. It currently owns 23.7 million shares worth around $2.5 billion.
Between the end of the third quarter of 2020 and the end of March 2021, the investment in Chevron returned around 45%, excluding dividends. I estimate this would have netted Berkshire a quick $1.5 billion profit. Thus, I would not be surprised if we see that the group has continued to divest its Chevron holding in the second quarter.
The other interesting trade was the near removal of Wells Fargo (WFC, Financial) from the Berkshire portfolio. Buffett has been steadily reducing his stake in the enterprise over the past few years. From a peak of around 480 million shares in the first quarter of 2017, the holding stood at 52 million shares in the fourth quarter of 2020. It is now just 675,054 shares, an overall decline of more than 99%.
Buffett has been selling Wells slowly ever since its fake accounts scandal in 2016, which has cost the bank billions in fines and billions more in lost income from its balance sheet cap. He also admitted that he decided to sell some banking stocks at the beginning of the pandemic last year as he didn't want too much exposure to the sector.
In the third quarter of last year, Berkshire acquired extensive holdings of healthcare stocks, AbbVie Inc. (ABBV, Financial), Merck & Co. (MRK, Financial) and Bristol-Myers Squibb (BMY, Financial). Together, the conglomerate spent around $6 billion buying these equities. In the first quarter of 2021, the group reduced its holdings in these stocks by between 7% and 38%. In the case of Merck, which has gone nowhere over the past 12 months, Berkshire reduced its holding by 38%. While I don't want to second-guess Buffett or his investing lieutenants, this seems a bit short-termist to me.
Based on these short-term trades, it's now clear why Charlie Munger (Trades, Portfolio) was so happy to criticize Buffett over his trading activity at this year's Berkshire annual meeting.
Disclosure: The author owns no share mentioned.
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