Berkshire Hathaway‘s record quarterly equity purchases of $51.1 billion in the first quarter, including large buys of
Western Petroleum, probably went up to the biggest news in the company’s profit report and 10-Q, released on Saturday.
The company’s equity sales of $9.7 billion in the period disclosed in the 10-Q understandably generated less attention. Berkshire Hathaway (ticker:BRK.A, BRK.B) hasn’t disclosed the stocks it sold, and CEO Warren Buffett didn’t discuss the topic at the company’s shareholder meeting Saturday in Omaha.
There are indications that
Verizon Communications (VZ) was the focus of that selling.
Berkshire also appears to have been a buyer of about $10 billion of financial stocks in the quarter, based on information in the company’s 10-Q. That would reverse Buffett’s big sale of such financials as
JP Morgan Chase (JPM),
Goldman Sachs Group (GS), and
Wells Fargo (WFC) in 2020 and 2021. Berkshire’s entire equity portfolio, led by
Apple (AAPL), totals $390 billion.
There will be more clarity in mid-May on what Berkshire bought and sold in the first quarter when it reports its quarterly equity holdings as of March 31 on a form 13-F with the SEC.
Barron’s analysis of Berkshire’s 10-Q suggests that the company may have sold all or most of its stake in Verizon in the first quarter.
Here’s why: Berkshire said it incurred $739 million of realized losses on equity sales in the first quarter. Berkshire held a stake of nearly 159 million shares of Verizon at year-end 2021, worth $8.3 billion. The stake had a cost basis of $9.4 billion, or about $59 a share.
Verizon traded in the first quarter mostly in a range of $53 to $54 a share. That means that if Berkshire sold all of the Verizon stake, it would have realized an estimated loss of about $800 million. A full sale at $54 a share would have netted Berkshire about $8.6 billion.
Verizon notably was the only one of the 15 largest Berkshire equity holdings at year-end 2021 listed in Buffett’s annual letter in which the company had a loss relative to its cost. Most of the Verizon stake was bought in 2020.
Here is the language from the 10-Q: “Taxable investment gains/losses on equity securities sold in the first quarter, which is generally the difference between sales proceeds and the original cost basis of the securities sold, were losses of $739 million in 2022 and earnings of $1.8 billion in 2021.”
If Buffett sold Verizon, it looks like a good move, since the stock now trades at $46. Berkshire had no immediate comment.
Berkshire’s 10-Q shows that the company’s cost basis in financial stocks was up by $9.6 billion in the first quarter. This likely means Berkshire bought about $9.6 billion in financials.
Buffett’s big buy in the first quarter was Chevron (CVX). Berkshire bought about 121 million shares to lift its stake to roughly 159 million shares, worth $25.9 billion. It isn’t clear what Berkshire paid for the additional Chevron shares given that the stock rallied to $162 a share from $117 in the period. At the average price in the period, Berkshire would have paid about $17 billion.
Berkshire bought about $7 billion of Occidental Petroleum (OXY) in the quarter, $4 billion of HP (HPQ), and about $600 million of Apple.
Buffett said at the meeting Saturday that Berkshire owns about 9.5% of
Activision Blizzard (ATVI) – roughly 74 million shares – now worth about $5.6 billion. It isn’t clear how much of Berkshire’s purchases were made in the first quarter. Berkshire had owned about 15 million shares at year-end.
Based on Buffett’s comments at the meeting, the Activision purchases may have occurred mostly in April. He said that he didn’t view Activision’s stock price of around $82 after
Microsoft announced its deal to buy the videogame maker for $68.7 billion in January as being particularly attractive as an arbitrage situation.
Microsoft is paying $95 a share. Activision traded around $80 until April and finished Friday at $75.60. It’s up 3% Monday on news of the Berkshire purchase but still trades at a discount of about 19% to the deal price, reflecting antitrust concerns.
Buffett also said at the meeting that Berkshire had bought shares in three German companies in the first quarter, but didn’t disclose the names.
Write to Andrew Bary at firstname.lastname@example.org