Warren Buffett’s Berkshire Hathaway has stunned investors by revealing a shock $US4 billion investment in one of the world’s biggest computer chip makers, TSMC, or Taiwan Semiconductor Manufacturing Co – a purchase that puts the world’s most-followed investor directly on the frontline of rising tensions between China, Taiwan and the US.
The purchase emerged in the third quarter fund manager’s report from Berkshire Hathaway filed with US regulators after trading had ended on Monday.
Just as no analyst or other investor picked the move into oil and gas by Berkshire and Buffett earlier this year with billions of dollars invested in the shares of Chevron and Occidental Petroleum, no one predicted this plunge into what is not just a leading-edge technology but also smack bang into one of the world’s tensest geopolitical situations.
Berkshire picked up nearly 60 million shares of Taiwan Semiconductor worth more than $US4.1 billion, according to Berkshire’s latest 13F statement filed late Monday.
Like oil and gas, high end technology stocks such as chipmakers are an area that Berkshire has steered away from – it has preferred users such as Apple and Amazon, to name a couple of high-profile investments.
The move has also amazed US analysts that Buffett, an acknowledged booster of American business, has not instead invested in US chip groups like Intel, Nvidia, Qualcomm and AMD.
It has also avoided buying into the Japanese chipmaking sector – which would have been geopolitically safer, but plunged into a major stock in Taiwan, the world’s second ‘hottest spot’ after Ukraine.
But there’s more because, in effect, Berkshire has doubled its exposure to the tense China-US relations over China’s ambitions for Taiwan because of its huge holding in Apple.
Another Taiwanese company, Foxconn (or Hon Hai Precision Industry), is Apple’s main assembler in China (iPhones especially) and elsewhere (such as India).
And then there’s another China-sensitive investment – BYD, the big electric vehicle and battery group which is on track to not only be China’s, but the world’s biggest EV group by the middle of 2023, if not sooner.
Berkshire confirmed earlier filings that it had sold more BYD shares in the quarter. Berkshire said it now owns a little over 182 million BYD shares, down from 225 million when it started selling off the stock in August.
Previously, Buffett hadn’t touched the investment he paid $US232 million for in 2008. Buffett’s company now holds 16.6% of the Hong Kong-issued shares of BYD.
Buffett and Berkshire have, in the past, ignored geopolitical factors, or stayed away from sensitive areas – but not TSMC.
The quarterly report showed Berkshire spent another $US9 billion buying shares in the three months to September and raised $US5.3 billion by quitting shares in some leading financials like US Bancorp and Bank of New York.
That meant it invested a net $US3.7 billion in publicly traded equities.
Amid the third quarter slump and volatility, Berkshire recorded a $US10.5 billion loss on its share portfolio and its cash hoard grew from $US105.4 billion at the end of June to $US109 billion at the end of September.
In October, it closed the $US11.6 billion purchase of insurance and investor, Alleghany Corp and its $US20 billion plus pile of shares and cash.
At the same time the company has slashed its share buybacks to $US1 billion in the third quarter, taking the total so far this year to around $US5.25 billion (there were more purchases in early October), a quarter of the $US20.2 billion repurchased in the same period of 2021.
Besides TMSC, Berkshire also reported small initial positions in two other stocks during the third quarter bear market – building materials group Louisiana Pacific (LPX) and Jefferies Financial Group (JEF, a broker and investment bank) .
It bought 5.8 million shares of LPX stock worth nearly $US297 million and roughly 433,000 shares of JEF stock worth nearly $US13 million.
During the quarter, Berkshire lifted its existing holdings in several stocks: Occidental Petroleum by 22%; Paramount Global by 16%; Celanese by 6%; RH (formerly Restoration Hardware) by 8%; and Chevron by 2%.
It more than doubled its holding in Liberty SiriusXM Group from just over 20 million to more than 43 million shares – a big move for a company involved in old fashioned radio, the Live Nation events operation and F1 motor racing.
As previously disclosed, Berkshire bought more than 35.8 million additional shares of Occidental shares in a concerted buying campaign. It also picked up more than 12.7 million Paramount shares.
It sold out of Store Capital completely in the quarter and reduced existing holdings in several stocks: in U.S. Bancorp by 55%; Bank of New York Mellon by 14%; Activision Blizzard by 12%; General Motors by 5%; and Kroger by 4%.
In addition to Chevron and Occidental, Berkshire’s top stock holding by market value were Number 1, Apple, then Bank of America. Amex, Coca Cola and kraft Heinz remain top holdings as well.
A smaller but notable holding is Amazon (10.66 million shares), whose sharemarket value has halved in the past four months. Buffett held onto the stake.
The $US9 billion plunge took the total invested in markets so far this year by Berkshire to $US66 billion – most of it in Chevron and Occidental Petroleum. That is one of Berkshire’s most active 9-month periods for stock buying and selling in decades.
