Apple continues to do well in the market, but Warren Buffett’s Berkshire Hathaway is not getting any boost as a result and the fabled investor is now looking at what could be his worst year’s performance in decades in 2019.
Berkshire’s quarterly fund managers filing with the US Securities and Exchange Commission detailing movements in the company’s huge portfolio shows that while it sold some Apple shares in the September quarter, its share of Apple’s share register rose.
The value of the Apple investment rose by more than $US6 billion in the September quarter (up 13%) and has continued to surge since then.
Apple shares are up a massive 68.5% year to date (the S&P 500 is up 24%) but Berkshire share have only risen 7.6% – that’s a serious underperformance.
Apple shares have in fact set seven record closing highs this month. It ended Friday at another high of $US265.93.
In its 13F fund manager’s filing with the Securities and Exchange Commission last Thursday, Berkshire revealed it has sold 750,650 Apple shares to reduce its stake to 248,838,679 shares as at the end of September, from 249,589,329 shares at the end of June.
But because of its current buyback, Apple’s shares outstanding fell to 4,443,265,000 shares from 4,519,1800,000 at the end of June. That meant Berkshire’s ownership stake increased to 5.60% from 5.52%, making Berkshire the second-largest Apple shareholder after giant fund manager, Vanguard.
The value of the holding in Apple represented 26.0% of the total value of Berkshire’s equity holdings, which was $US214.67 billion on September 30, compared with 23.7% of the total on June 30. It has risen since then.
The value of Berkshire’s Apple holding at September 30 was $US55.73 billion from $US49.40 billion as of June 30. As of last Friday Berkshire’s stake (assuming no more sales) was worth $US66.17 billion.
This is a bit of an anomaly – Berkshire shares should have risen by more than they have (7.6% to last Friday) to follow the rise in the value of Apple shares (let alone the rest of the portfolio).
Berkshire’s September quarter financial report revealed solid gains by most businesses and another rise in its huge cash float.
But the reality is that unless there is a big surge in the value of Berkshire shares in the next six weeks, Warren Buffett is facing one of the worst annual performances in his company’s long history.
Berkshire revealed a new investment in RH (formley) Restoration Hardware.
Berkshire owned about 1.21 million RH shares worth $US206.3 million as of September 30. RH’s share price has more than doubled since the end of May.
Berkshire also said it owned 7.47 million common shares of Occidental Petroleum Corp at September 30, less than two months after purchasing $US10 billion of preferred stock to help that company buy rival Anadarko Petroleum Corp.
Berkshire’s major holdings at the end of September were American Express Company worth $US14.5 billion; Apple at $US40.3 billion; Bank of America at $US22.6 billion; The Coca-Cola Company at $US18.9 billion; and Wells Fargo & Company at $US20.7 billion.
Berkshire’s continuing underperformance is further underlined by the fact that including Apple’s all its key holdings have outperformed Berkshire shares this year.
Bank of America shares are up 33.6%, Wells Fargo, 16.7%, Coca Cola, 11.2%, Amex, 26%. Shares in JPMorgan a smaller holding, have risen nearly 33% so far this year.
Perhaps the huge cash pile of more than $US200 billion that continues to burn a hole in Berkshire’s share market performance.
But whatever it is Buffett’s explanation in the 4th quarter and annual report late next February will be interesting.
