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Warren Buffett, CEO of Berkshire Hathaway, said his company often buys equities before a market hits bottom.
AFP via Getty Images
When asked about
Berkshire Hathaway
’s
investment success at the company’s annual meeting in April, CEO Warren Buffett said Berkshire is often early. He pointed to the company’s large equity purchases in late 2008, months before the stock market bottomed in March 2009.
“We have not been good at timing, we’ve been reasonably good in figuring out when we were getting enough for our money,” Buffett said.
Berkshire Hathaway (Ticker BRK/A, BRK/B) has been an active buyer of stocks this year, mostly in the first quarter when it purchased over $50 billion.
Some of those purchases now appear to be in the red, notably
Citigroup
(C),
Paramount Global
(PARA), and printer and PC maker
HP
(
HPQ
), Barron’s estimates. This means investors can buy these stocks for less than what Buffett or his two investment lieutenants, Todd Combs and Ted Weschler, paid for the shares.
Barron’s estimates that Berkshire paid an average of about $35 a share for HP, against its closing Monday price of $26.94 and around $58 a share for Citigroup, versus a current price of $48.26. We estimate Berkshire paid an average of about $32 a share for Paramount, the parent of CBS, against Monday’s close of $23.10. Berkshire had no immediate comment.
Berkshire owns about $2.6 billion of Citigroup; $1.8 billion of Paramount and $3.3 billion of HP, based on its reported holdings on June 30.
Berkshire’s average cost for these three investments hasn’t been disclosed but Barron’s is estimating them based on their average prices from Feb. 22 to March 15 when Berkshire did the bulk of its buying in the first quarter. Buffett referred to that window at the annual meeting, saying Berkshire took advantage of the market decline during that three-week period to aggressively purchase stocks.
Berkshire’s big purchases of
Occidental Petroleum
(OXY) are in the black this year. Berkshire began buying in early 2022 and steadily added to its holdings into early August with the company now owning 188 million Occidental shares, a 20% stake, worth $12 billion. Barron’s estimates, based on Berkshire’s filings, that the company paid about $54 a share for the bulk of its holding in the big energy producer. Occidental closed Monday at $64.68 a share.
Berkshire bought most of its large stake in
Chevron
(CVX) in the first quarter, paying what we estimate is around $155 a share in those three months, against a current price of nearly $157. Berkshire now owns about $25 billion of Chevron.
Berkshire appears to be in the red in its holding of
Activision Blizzard
(ATVI), which it bought heavily in the first quarter at what we estimate is around $80 a share, against Monday’s close of about $76.
Buffett said at the annual meeting that he bought Activision this year in the wake of
Microsoft
’s
January deal to buy the videogame maker for $69 billion, or $95 a share. Either Combs or Weschler had bought a smaller position in late 2021.
Buffett’s view was that the Activision arbitrage spread was attractive. The wide spread—now about $19 a share—reflects antitrust concerns. He told Berkshire holders that he didn’t know how antitrust regulars will act but “one thing we do know is Microsoft has the money.” Berkshire owns about $6 billion of Activision.
Buffett hasn’t said whether he or Combs or Weschler bought the HP, Paramount or Citigroup investments. Combs and Weschler run about 10% of Berkshire’s equity portfolio, which totaled about $340 billion on June 30.
Berkshire’s larger holdings of $5 billion or more tend to be Buffett’s while smaller ones in the $1 billion to $3 billion range often are from Combs and Weschler.
Some investors think Berkshire’s holdings in such stocks as General Motors (GM),
Amazon.com
(AMZN),
Charter Communications
(CHTR),
Snowflake
(SNOW) and
DaVita
(DVA) likely were initiated by Combs or Weschler.
On timing, Buffett said at the meeting that he’s often happy if a stock goes down after Berkshire initially buys it so he can purchase more and that he “totally missed” the big market opportunity in March 2020 when the market plummeted before climbing to new heights. Berkshire was a light buyer of stocks in 2020.
Berkshire also has done more trading of its stockholdings in recent years—contrary to Buffett’s oft-stated view that his favorite holding period is forever.
Berkshire sold out of its airline holdings in the second quarter of 2020 and dumped most of its stakes in
Wells Fargo
(WFC),
JPMorgan Chase
(JPM) and
Goldman Sachs
(GS) in 2020. The bank-stock sales weren’t well timed. And Berkshire has sold out of some drug stocks including
AbbVie
(ABBV) and Merck (MRK) that it bought in late 2020.
Write to Andrew Bary at [email protected]
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