As I recently speculated, Warren Buffett (Trades, Portfolio) was busy using some of his enormous cash pile at Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) to increase the size of his equity portfolio during the fourth quarter of last year.
At the last count, Berkshire's cash pile was in excess of $100 billion, and in the third quarter of 2018, we know he used around $12 billion to boost the value of his investments in companies like Apple (AAPL, Financial) and Bank of America (BAC, Financial) and initiate to a new position in JPMorgan (JPM, Financial).
The Oracle of Omaha spent a few more billion dollars buying stocks in the fourth quarter according to Berkshire Hathaway's latest 13F filing.
Marginal changes
Buffett increased his position in Bank of America slightly, by around 2.2% to just under 900 million shares, making the stake worth $22.1 billion.
It also seems he marginally reduced Berkshire Hathaway's investment in consumer electronics giant Apple during the fourth quarter. Although some news outlets are reporting this as a big event, I think it is somewhat of a non-event, because the reduction is equivalent to just 1.1% of the overall holding, which considering the total position is worth $39.4 billion (250 million shares) is more of a rounding error that substantial portfolio change.
Berkshire also reduced its holding of shares in Wells Fargo (WFC, Financial) by 3.5%, although once again I think this is more of a housekeeping measure than anything else. There are limits on how much stock any one investor can own in financial companies, and Berkshire is close to the 10% limit in Wells Fargo.
Buying financials
Other portfolio additions include a 41% hike in Berkshire's ownership of JPMorgan. This position is now worth just under $5 billion, around 50 million shares. As I have covered before, Buffett has owned JPMorgan in his personal portfolio for a long time and highly respects the way Jamie Diamond runs the business. With this being the case, it is not surprising to see that he has taken advantage of recent market volatility to increase his stake in the business.
Berkshire also increased its holdings of General Motors (GM, Financial), PNC Financial Services (PNC, Financial) and Travelers Companies (TRV, Financial). These last two were only added to the portfolio in the second half of last year, and due to their size are more likely to be positions initiated by Buffett's lieutenants Todd Combs and Ted Weschler.
It is likely that this duo also decided to buy Red Hat (RHT, Financial), Suncor Energy (SU, Financial) and StoneCo (STNE) for the Berkshire Hathaway portfolio in the fourth quarter of last year. Together these three positions are worth around $1.2 billion, so they are relatively small additions (the overall equity portfolio is worth around $180 billion). Still, they provide a fascinating insight into the way these two investment managers, who will eventually take over from Warren Buffett (Trades, Portfolio) as the conglomerate's chief stock pickers, think. Ret Hat seems to have been an arbitrage opportunity.
Selling stocks
Moving on to the sales, it is notable that Berkshire Hathaway decided to reduce its position in Southwest Airlines (LUV) and United Continental Holdings (UAL). The holdings were cut back by around 2.1% and 15.6% respectively during the quarter. Berkshire Hathaway also reduced its holding in Phillips 66 by 23% to approximately $1 billion.
The biggest and most surprising change to the portfolio in the quarter was the sale of Oracle Corp. (ORCL). If there's one thing Warren Buffett (Trades, Portfolio) is known for, it is his ultra-long-term holding periods. He has even remarked before that if he buys a stock, he wants to hold it forever.
Therefore, it is surprising to see that after only a few months in Berkshire Hathaway's portfolio, the conglomerate decided to dump its 41 million shares in Oracle. This position was worth around $2 billion. Without further information, I don't want to speculate on why the Oracle of Omaha decided to take this action and looking at Oracle's price chart; it is difficult to tell whether or not Berkshire was able to sell at a profit.
Those are the most important moves in the Berkshire Hathaway portfolio during the fourth quarter of 2018. However, as I have noted before, it is likely that the company's most prominent stock acquisition in the last three months of 2018 was its own shares.
Disclosure: The author owns shares in Berkshire Hathaway.
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