So where did big Wozza (AKA The Sage of Omaha, or Warren Buffett) direct his billions into the US stockmarket in the September quarter?
The latest filing by his Berkshire Hathaway company about its $US127 billion portfolio shows no clear trend – perhaps though a liking for, oil, telcos and some TV, or perhaps a dislike of some, but not all cable TV.
Certainly he’s sticking with IBM, perhaps his biggest loser at the moment, having topped up his holding. General Motors saw a top up as well, but a partial sale of the holding in Goldman Sachs and Wal-Mart.
Perhaps the most interesting move was his return to Phillips 66, the oil refiner group after exiting it earlier in the year. Berkshire said that in August it bought 10% of Phillips 66 and now held a 61.5 million stake.
And he added to the existing holding in Canadian oil sands group, SunCor by buying 7.6 million shares and now held a 30 million stake.
Some of the investment decisions were made by Buffett, personally, others by his two main fund managers, Todd Combs and Ted Weschler.
In an appearance on CNBC Buffett revealed that he had sold part of the Goldman Sachs stake (13%) and 7% of his holding in Wal-Mart Stores to raise cash to help pay for his biggest ever deal, the $US32 billion (including debt) buy of Precision Cast Parts Corp.
It is interesting though that he didn’t sell shares in other long held stocks to raise cash, such as his best performer, the giant US retail bank, Wells Fargo. The sale of stakes in Goldman Sachs and Wal-Mart could be interpreted as a judgement that the two companies and their industries (investment-focused banking and retailing) face tougher times. The IBM stake could not be sold because it would crystalise losses of more than $US2 billion.
In the latest Securities and Exchange Commission filing, Berkshire said it now owned 10.96 million Goldman shares worth about $US1.9 billion as of, down from 12.63 million shares worth $US2.64 billion three months earlier. It also had 56.1 million Wal-Mart shares, selling 4.2 million in the quarter..
Buffett also told CNBC he was selling investments in reinsurers Munich Re and Swiss Re, and not selling securities as a result of Friday’s attacks in Paris. The sales in the reinsurers though are part of a switch in reinsurance strategy as Buffett and his managers now believe this sector of insurance is in for tough times in coming years.
He also controls one of the world’s biggest reinsurance groups in General Re and associated companies. The most interesting deal in reinsurance though he did in the quarter was the stake in Insurance Australia Group and a 20% quota share arrangement for the next five years. That is seen as being more profitable for Berkshire than a straight reinsurance contract each year.
Wells Fargo & Co remained Berkshire’s biggest stock holding, worth roughly $US24.1 billion, followed by Kraft Heinz Co at $US23 billion.
H.J. Heinz Co’s purchase in July of Kraft Foods Group Inc changed Berkshire’s 52.5% stake in Heinz into a 26.8% stake in Kraft Heinz, which generated a ‘paper’ profit of more than $US4 billion in the September quarter.
Berkshire also increased its investments in cable TV operator Charter Communications (1.76 million) and automaker General Motors Co (9 million shares). Charter is controlled by John Malone, the legendary US cable mogul. Berkshire showed a taste for other Malone stakes, picking up extra A and C class shares in Malone’s Liberty Media in the quarter.
It reported a new 59.32 million share stake in AT&T Inc which bought DirecTV during the quarter. Berkshire had a stake in DirectV. That was the only wholly new stake revealed in the quarter. But Berkshire also quit all its stake in the troubled Viacom cable group (MYV, Nick Jr) controlled by Sumner Redstone.
It had a stake of 5.6 million shares at the end of June. The IBM stake was topped up by 1.4 million shares, even though it reported another weak quarter of revenue and profits. A big sale was the disposal of 78% of its stake in construction group, Chicago Bridge and Iron in the quarter – from 9.32 million shares at June 30 to just over 1.98 million at the end of September.
