Another interesting change of tack for Warren Buffett and his fund management team at Berkshire Hathaway with the discovery of a taste for retailing and biotech pharmaceuticals, a few more General Motors shares and importantly a big sell down in two key bank holdings.
All this and a market-beating 32% annual leap in the value of the huge Berkshire investment portfolio to more than $US242 billion at December 31 last year, from a depressed $US183 billion a year earlier.
The December 2018 quarter saw a wide market slide (until the final fortnight of the year which slashed the value of the Berkshire portfolio by 20%. A year later and the value of the portfolio jumped 13%, capping one of the best 12 months in recent years for the company and Buffett.
Investors seem to have ignored that surge – Berkshire shares rose only 10.9% in 2019, 20.6 percentage points lower than the total return for the S&P 500.
Next Saturday we’ll see the true state of the company’s performance and what is expected to be a record profit (because US accounting rules say companies must take paper gains and losses into the statutory profit lines in their accounts).
Buffett’s annual shareholder letter – the most anticipated communication from any listed company anywhere, will also be issued and so will more details of the way the share portfolio performed.
The quarterly 13F report on Friday night (fund managers with $US100 million or more invested in the US markets have to issue reports detailing their positions and quarterly changes in holdings and value 45 days after the end of the quarter) revealed that Berkshire had made a big move into the share register of Kroger Co, the biggest supermarket chain in the US.
The filing revealed that Berkshire had bought a $US549.1 million stake in Kroger (December 31 valuation) through an 18.94 million shareholding.
That adds to stakes in other big retailers such as Amazon and as well as a slew of supermarket suppliers such as Kraft Heinz, Mondolex, Coca Cola and companies in his own group, eg Seer’s Candies and Dairy Queen. Amazon controls Wholefoods, a major competitor to Krogers, especially in New York and parts of Texas.
Reuters pointed out that this investment has come as “any smaller (US) chains have fared worse, and Earth Fare, Fairway and Lucky’s have sought bankruptcy protection this year. Kroger had invested in Lucky’s.”
Berkshire also said it bought a new 648,000 share stake in drugmaker Biogen Inc worth $US192.4 million and added around 2.7 million shares to its holding in General Motors
And it significantly reduced its stakes in two major banks, Wells Fargo & Co and Goldman Sachs Group Inc.
Berkshire sold more than 86 million shares, or 21%, of its Wells Fargo stake, as the bank tries to restore its reputation following scandals over its mistreatment of customers and staff.
Berkshire’s Wells Fargo stake fell 15% in the quarter to 323.2 million shares worth $US17.4 billion, trailing its stakes in Bank of America Corp and American Express Co.
At one stage the stake in Wells Fargo was one of Buffett’s core holdings (the stake started in 1989), along with one in IBM. IBM has gone and Wells Fargo is now on the way out.
The Goldman stake shrank 35% to 12 million shares worth $US2.8 billion. That stake had its origins in Buffett’s lucrative foray into Goldman preferred stock during the GFC as Berkshire supported the then struggling Wall Street giant.
Kroger shares rose 5.8% and Biogen rose 2.6% in after-hours trading, a sign of investor regard for Buffett.
And Apple remains the top stock in Buffett’s portfolio with a value of $US72 billion, up 29% in the final quarter of 2019.
