In the third quarter of 2018, Warren Buffett (Trades, Portfolio) went on a shopping spree.
He spent more than $12 billion of Berkshire Hathaway cash pile acquiring stocks during the three months, adding substantially to positions in some of his favorite companies including Bank of America (BAC, Financial) and U.S. Bancorp (USB, Financial).
I believe these trading patterns can tell us something about what the Oracle of Omaha has been buying over the past four months as well.
Building the portfolio
At the end of the third quarter of 2018, Berkshire Hathaway had around $100 billion in cash to spend on acquisitions and stock purchases. The company hasn't completed any significant acquisitions over the past four months. But, it is incredibly likely that the Oracle has been spending a substantial amount of his cash pile increasing existing holdings or even buying new positions for the Berkshire Hathaway portfolio.
At the end of September 2018, the S&P 500 was trading over 2,900, and since then, it has fallen as far as 2,320 and is currently trading around 2,680. As a rough guide as to whether or not Warren Buffett (Trades, Portfolio) might be buying stocks, the fact that the index has fallen so substantially over the past four months seems to imply that he has been.
Share price declines in individual positions have been even more pronounced. Take Bank of America for example. At the end of the third quarter, around 11.7% of the Berkshire Hathaway was portfolio was invested in this banking group, a position worth just under $26 billion.
But it increased its position in the bank by 29% between July and September of 2018 when the stock was trading between $28 and $23 per share. Between October and the end of December, the stock traded between $31 and just under $23. If Buffett liked Bank of America at $30, he definitely wants it at $23.
Goldman Sachs (GS, Financial) was another position he increased substantially during the third quarter. He raised his holdings by 39%, and while this is still a small portion of the overall portfolio -- accounting for around 1.9% of assets -- it was still worth $4.1 billion at the end of September.
During the quarter, the stock traded between $220 per share and $240. At the end of 2018, it fell as low as $153 and today is still changing hands for less than $200.
JPMorgan (JPM, Financial) was a new position that entered the Berkshire Hathaway portfolio last year. Between July and September, Berkshire acquired 35.6 million shares in the bank, building a position worth roughly $4 billion. The stock was changing hands for an average of $115 in August. It fell below $95 per share towards the end of December.
Then there is Apple (AAPL, Financial). Currently, the most significant position in the Berkshire Hathaway portfolio, shares in this tech giant fell as low as $140 towards the end of 2018. Throughout the first half of 2018, they never fell below $150, and in this period Buffett was a significant buyer.
Looking at this data, it is reasonable to assume that Buffett has been buying stocks aggressively over the past few months.
There is one company missing from the list above list above, and that is Berkshire Hathaway itself.
In the third quarter of 2018, Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) repurchased nearly $1 billion of its own shares, the first time the company has repurchased its stock in several years. In this three-month period, A-shares shares in the conglomerate traded in a range of $280,000 to $330,000. They traded in virtually the same range during the last quarter of the year, falling as low as $280,000 at the end of 2018.
Buffett has got where he is today by acting aggressively when opportunities present themselves, and I am going to go out on a limb and say that he moved quickly to take advantage of Mr. Market's volatile nature in the fourth quarter. I wouldn't be surprised if Berkshire spent more money buying back its own shares during these three months than it did on any other investment.
Disclosure: The author owns shares in Berkshire Hathaway.
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