At a time when Warren Buffett has again showed he’s ahead of the pack by slowing his stockmarket share purchases this year, he and his managers have positioned themselves for a key role in what is regarded as the world’s biggest neobank and its impending multi-billion-dollar float.
In June Berkshire invested $US500 million in the 8th funding round for Nubank – that was the largest investment in the Brazilian-based bank which has $US5 billion in assets and a reported 40 million customers across much of South America, starting with Brazil.
Now Nubank, whose legal name is Nu Pagamentos, is reportedly looking to list on Nasdaq in New York in a $US2 billion deal that will value the company at $US40 billion. Nubank is reputedly the world’s biggest neobank.
It’s a return to banking for Buffett and a speculative investment at that – in late 2020 and early this year Buffett sold out of or cut holdings in a few banks like Goldman Sachs, Wells Fargo and JP Morgan and consolidated his attention on one – Bank of America where Berkshire is now the largest single shareholder.
It’s not known how much equity Buffett’s half a billion has given him in Nubank, but it is suggested the holding could end up worth billions of dollars and leave Berkshire as the largest single shareholder in a financial group already a success online. Buffett and Berkshire’s presence as shareholders will make any market float far more respectable for investors around the globe if it happens as reports suggest it will shortly.
With its latest raisings, Nubank’s eighth fundraising effort reached $US1.15 billion, the largest round ever raised by a technology company in Latin America. Berkshire’s money is the largest single investment so far for the company which has raised $US2 billion in his brief life.
That is also one of the largest single investments made by Berkshire in the past year outside of stockmarket deals (such as spending $US7 billion buying shareholders in the five top Japanese trading houses) or buying oil assets from Dominion Energy in a $US10 billion purchase.
Nubank is a tech stock – a fintech – and Buffett’s last foray in the tech sector came last year when he bought $US250 million of shares in cloud computing group, Snowflake and then more shares from a founder just before the IPO. For an outlay of around $US400 million the Snowflake punt is now worth more than $US1.7 billion and so far Buffett hasn’t sold.
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The Nubank deal wasn’t included in Warren Buffett’s Berkshire Hathaway’s latest fund managers quarterly filing this week. That report confirmed that Buffett and his managers again did more selling than buying as they reduced holdings in some key companies and sold out of three.
But at the same time Berkshire maintained its five pillar investments led by Apple and – as we pointed out earlier this month – Buffett is buying billions of dollars in Berkshire shares.
Buffett and Berkshire have made more sales than purchases of non-Berkshire stock so far this year and up to the end of July had repurchased close to $US15 billion worth of Berkshire shares. Sales exceeded purchases in the June quarter by $US1.1 billion (excluding the buyback).
And if there was one message from the filing for investors and his legion of supporters, is that Buffett has gone off most pharmaceutical companies, selling a $US180 million holding in Biogen and reducing or trimming holdings in down a stake in Merck and several others.
Berkshire’s 13F filing (Fund Manager’s report) to the US Securities and Exchange Commission reveals the company added to just three existing stakes while acquiring a “new” position thanks to a spinoff
Buffett and his key investment managers also trimmed eight other positions in its portfolio which was worth $US293 billion at the end of June, up from $US202.4 billion a year earlier and $US270 billion at the end of the March.
The company’s largest holdings were $US124.3 billion in Apple and $US42.6 billion in Bank of America, America’s second biggest bank.
Berkshire’s legendary cash ‘float’ totalled $US144.1 billion of cash and equivalents at the end of June.
Berkshire sold all its $US411 million worth of shares in chemicals company Axalta Coating Systems, drugmaker Biogen and US broadband specialist Liberty Global (which is part of John Malone’s sprawling media and entertainment empire).
Buffett also slashed the C-listed shares of Liberty Global by nearly 75% cutting what was a long-held stake to a just a handful of shares.
Berkshire also reported lowered its stakes in oil major Chevron Corp, General Motors, insurance broker Marsh & McLennan Cos and US Bancorp.
Berkshire also revealed the company cut its Merck holdings by 51% – a rapid about-face as Buffett has now more than halved his stake in the blue-chip drugmaker since first taking a position late last year.
Berkshire picked up shares in the Merck spin-off Organon, a women’s health specialist company. The stake was worth just on $US45.7 million at the end of June.
Merck shareholders received a special distribution: one-tenth of a share of OGN common stock for each Merck share they owned.
Berkshire also reduced Berkshire’s investments in Abbvie Inc and Bristol-Myers Squibb Co.
Buffett kept adding Kroger shares to Berkshire’s holdings, increasing its stake in the big US supermarket chain by 21% over the three-month period. He now owns a little more than 61 million shares worth $US2.4 billion. That purchase was contrary to the accepted belief that Amazon and Walmart had made life too tough for their supermarket rivals.
So far, Berkshire has been a net seller of stocks in 2021, including in the second quarter when it sold $US1.1 billion more stocks than it bought.
That suggests Buffett and his two investment managers Todd Combs and Ted Weschler remain wary of market values as stock prices regularly set new highs.
Berkshire has instead bought back about $US14.3 billion of its own stock between January and late July though its share price also set records, and now sits just 2% below its May 7 peak
The S&P 500 is up nearly 19.3% (and reached numerous records) so far in 2021 but unlike 2019 and 2020, Berkshire shares so far has outperformed with a gain of more than 25%.
That buyback has no doubt keep the value of Berkshire shares looking good.
The 13F does not include international stocks, only US shares.
The holding doesn’t therefore cover Berkshire’s biggest international bet – the $US7 billion purchase of about 5% of five Japanese trading companies a year ago 2020: Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co, and Sumitomo Corp.
That deal has more than paid off with gains ranging from 15% in the past year for Sumitomo, to 46% for Mitsui and 42% for Mitsubishi.
Buffett indicated that these were intended to be long-term holdings, and Berkshire may increase its stake to up to 9.9% in each. It might already have, in fact, but so far there has been no update.
