Berkshire sells $7 billion of financial stocks

Berkshire Hathaway's stock portfolio disclosure this evening (Friday) shows a big reduction for financial stocks, led by a 61% plunge in the number of JPMorgan Chase shares and a 25% drop for Wells Fargo.

At today's closing prices, the JPM stake sold by Berkshire would be worth $3.6 billion and the jettisoned WFC shares would be worth $2.2 billion. 

After selling more than 10 million Goldman Sachs shares during the first quarter, Berkshire shed at least 1.9 million more in the second quarter. (Around 431 thousand shares have been held by a Berkshire subsidiary that has not yet filed its Q2 disclosure, so we don't know if they remain or not. Berkshire's primary 13F filing does not include any GS stock.)

Despite all the selling of financials, Berkshire has not given up entirely on the sector given its recent Bank of America purchases. (See below).

But the roughly $2.1 billion in BAC buys is significantly smaller than the $7 billion in sales of other financials in Q2.

Occidental Petroleum shares eliminated

Berkshire's 13F filing shows it held no Occidental Petroleum shares as of June 30.

At the end of the first quarter on March 31, Berkshire had 18.9 million shares.

But it added another 17.2 million more in early April, when OXY used common stock instead of cash to pay its dividend on Berkshire's $10 billion loan (in the form of preferred shares) from April of last year.

As a result, Berkshire actually sold roughly 36.2 million shares currently worth around $530 million.

Occidental has been struggling amid the pandemic-fueled plunge in oil prices, and Berkshire's sale could be seen as a sign of concern over the company's future prospects as it, in effect, converts the shares it's getting into the cash it was supposed to receive.

One positive for Berkshire, however, is that when OXY uses its shares instead of cash to pay the dividend, the current value of the stock has to be more than the cash due.  

Did Buffett really go for the gold?

The one new stake in tonight's 13F is drawing a lot of attention because to some it appears to some to be a major turnaround for Buffett.

During the second quarter, Berkshire added 21 million shares of Barrick Gold, worth around $565 million at today's close.

For years, Buffett has been an outspoken critic of gold as an investment because, as he said at the 2011 Berkshire annual meeting, he prefers "productive assets" rather than something "you hope someone will pay you more for later on." 

While it's possible that Buffett could be making a distinction between the future prospects for the company as opposed to the commodity it produces, given the relatively small size of the stake, it is much more likely an independent decision to buy made by one of Buffett's portfolio managers, Todd Combs or Ted Weschler. 

Big Berkshire Buybacks

Predictions of a big Berkshire stock buyback in the second quarter proved to be correct. As it released its quarterly results last weekend, Berkshire revealed it had repurchased $5.1 billion of its own stock in May and June. 

That's a bit more than all the Berkshire buybacks last year.

Despite those buybacks, Berkshire's cash position increased to a record $147 billion.

At the same time, Q2 operating profits fell 10% as the COVID-19 pandemic hit Berkshire's subsidiaries. One prominent victim: Precision Castparts, where, as a Bloomberg headline put it, "Buffett's Grim View of Air Travel (Was) Realized in $10 Billion Charge."

Bank of America Streak Ends

After 12 straight days, Berkshire Hathaway's streak of adding to its Bank of America stake ended a week ago Tuesday.

There have been no SEC filings since August 4. Berkshire is required to disclose any stock moves for BAC because it owns more than 10% of the bank.

From July 22 through August 4, Berkshire paid almost $2.1 billion for just more than 85 million shares. That's an average price of $24.33.

On MarketsInsider, Will Ashworth of InvestorPlace writes that with BAC as their second-biggest holding after Apple, he thinks Buffett and his investment managers "have run out of good ideas."

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BERKSHIRE STOCK WATCH

BERKSHIRE'S TOP STOCK HOLDINGS - August 14, 2020

Berkshire's top stock holdings by market value, based on today's closing prices. The number of shares held is as of June 30, 2020, as disclosed in the company's August 14 13F SEC filing, except for Bank of America, which is as of August 4, 2020.

In addition, for the following stocks, portions of the holdings are as of March 31, 2020, as listed in New England Asset Management’s 13F filing on May 15, 2020: Apple, Bank of America, U.S. Bancorp, Wells Fargo.  As of the time of publication, a 13F had not yet been filed for Q2.

The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.

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-- Alex Crippen, Editor, Warren Buffett Watch