Every hedge fund with more than $100 million of assets under management has to file a 13F with the SEC 45 days after the end of every calendar quarter. These reports provide an interesting snapshot of portfolios. However, these reports have some significant limitations. They only highlight U.S. equity positions, they do not include debt or international equity positions and they definitely don't include cash holdings.
They are also out of date. It has been a month and a half since the end of June. During that time, Berkshire could have undertaken any number of trades and position changes. We won't have any information on the trades placed in the third quarter until the middle of November.
Nevertheless, while these reports have significant drawbacks, they can be a good place to start when researching potential investment opportunities.
Berkshire's 13F changes
There were no significant portfolio changes at Berkshire in the second quarter, although there were some notable minor adjustments.
Generally speaking, these days, any position worth more than $1 billion in the portfolio may have had some input from the Oracle of Omaha himself. However, anything less than that is likely to have been administered by one of his portfolio managers Todd Combs and Ted Weschler.
The most significant position to see a change was General Motors (GM, Financial). Berkshire owned $3.5 billion worth of shares in this auto producer at the end of the second quarter after reducing its position by around 10%. The holding has a 1.2% portfolio weight.
The conglomerate also marginally reduced its investment in Chevron (CVX, Financial) by 2.3%, which is not enough to register. It remains a $2.4 billion holding for the conglomerate. Based on his recent comments regarding the oil giant, it would appear that Buffett is planning to hold onto the stock for the time being, and he's not worried about climate change concerns.
The biggest single portfolio addition during the three months to the end of June was Kroger (KR, Financial). Berkshire increased the size of this holding by 21%. It's now roughly the same size as the Chevron position, according to the 13F.
A couple of other changes really stand out to me in this latest report. Perhaps the most notable is the revelation that Berkshire continued to divest its holdings in its biotech stocks during the three months to the end of June.
In 2020, Berkshire built holdings in three biotech stocks: Biogen Inc. (BIIB, Financial), Merck & Co. (MRK, Financial) and Bristol-Myers Squibb (BMY, Financial). These positions were all worth around $1 billion at the time of the deals.
I have previously speculated that these holdings may have signified Buffett was interested in the biotechnology sector and could have been encouraged by his close friend Bill Gates (Trades, Portfolio). Gates has a tremendous amount of experience in healthcare, both through his own interests and those of his foundation.
But it now seems as if this was just a short-term trade. Berkshire has entirely divested its Biogen Inc. holding, while the holding in Merck has been cut in half and the holding in Bristol-Myers has been reduced by around a third.
If I had to speculate why Berkshire and Co. been selling these holdings, I'd say either something has changed, or it had to sell to free up cash. Considering the fact that the group has more than $140 billion of cash on hand, I think it is unlikely to be the latter.
The other trade that stands out to me is a small $47 million holding in Organon & Co (OGN, Financial). This was a new addition according to the 13F. The company was spun out of Merck during the second quarter.