Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) made some interesting changes to its portfolio in the second quarter of 2022. I say "Buffett's Berkshire" because it is not entirely clear if the Oracle of Omaha made all of the trades himself or if they were directed by one or both of the corporation's portfolio managers, Todd Combs and Ted Weschler.
For background, Buffett has previously said that his portfolio managers have free reign over any position that is worth less than $1 billion. Any position worth more than $1 billion has to get his clearance. However, the Oracle has been giving these managers more leeway over the years as he has started to take a step back from managing Berkshire and begins the handover toward the next generation.
As well as this factor, I also need to point out that the positions detailed on Berkshire's 13F only show U.S. equity holdings. They do not give us any insight into international positions, cash or other asset classes. Also, the 13F holdings are a snapshot of the quarter's end only, and it is possible that Berkshire's equity holdings have already changed since then. Still, the 13Fs can be a good starting point for further research.
Berkshire's notable position changes
I think the company's most notable position change during the three months to the end of June was the final divestment of the Verizon Communications (VZ, Financial) stake. As this was a multi-billion-dollar top 10 position, I think it is incredibly likely Buffett himself initiated the trade. He first started buying in the third quarter of 2020 and continued buying until the first quarter of 2021, taking the position up to 3.4% of the overall portfolio, acquiring 159 million shares. Reports suggest the average price paid was in the high $50s.
Berkshire dumped virtually all of this position in the first quarter of 2022 and finally exited the holding entirely in the second quarter in the low $50s. The fact that the Oracle has sold the investment so quickly could indicate that he thinks the company's outlook has deteriorated, or the investment thesis has changed.
No new positions were added to the portfolio in the three months to the end of June, although the corporation did add to some holdings, notably holdings of Chevron (CVX, Financial), Apple (AAPL, Financial) and Occidental Petroleum (OXY, Financial). These positions now account for 7.8%, 3.1% and 40.8% of the portfolio. Chevron is the fourth largest holding after recent acquisitions and Occidental Petroleum is the seventh largest, while Apple naturally still holds the top spot.
Further SEC filings have shown that Berkshire has continued to increase its position in Occidental after the end of the second quarter. After investing more than 20% in the company, speculation is rife that the conglomerate will make an offer for the entire business.
Buffett also increased his position in the merger arbitrage trade Activision Blizzard (ATVI, Financial) by 6.4% in the quarter. We know this is one of the Oracle's trades as he spoke about it at Berkshire's annual meeting. The group now has a total of $5.3 billion invested in the video game maker, which is in the process of being acquired by Microsoft (MSFT, Financial).
The most significant position increase overall was in Ally Financial (ALLY, Financial). Berkshire boosted its holdings of this company by 234% in the second quarter. Still, even after these deals, it is a relatively small position, accounting for just 0.33% of the portfolio. The holding is worth just over $1 billion at current prices, which suggests this might be a Combs or Weschler holding. Both of these fund managers have a lot of experience in the financial sector, and they have been behind some of the portfolio's financial sector trades in the past.
Berkshire also increased its portfolio holding in fellow insurance group Markel (MKL, Financial) by just over 11% in the quarter. This is still a modest position, worth just $605 million (suggesting it is a portfolio manager holding).
