FRI, AUG 04, 2023
Buffett: Berkshire still buying billions in U.S. debt despite downgrade
Fitch's downgrade of its rating on U.S. government debt late Tuesday helped send stocks lower in Wednesday's trading, but it isn't reducing Berkshire Hathaway's strong appetite for yields near 5 1/2 percent being offered by short-term Treasury notes.
Warren Buffett told CNBC's Becky Quick (off camera) on Wednesday that his company "bought $10 billion in U.S. Treasurys last Monday. We bought $10 billion in Treasurys this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month" T-bills.
"There are some things people shouldn't worry about. This is one."
As it lowered its rating on U.S. debt to AA+ from AAA, Fitch cited “expected fiscal deterioration over the next three years” and increasing borrowing.
It also pointed a finger at Congress, saying "the repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management."
Buffett thinks the rating agency's concerns are valid and he doesn't agree with everything Washington is doing, but he doesn't think Fitch's move will change anyone's mind when it comes to investing.
"The dollar is the reserve currency of the world, and everybody knows it."
While investor Bill Ackman says he is betting that the price of 30-year Treasurys will go down, he, like Buffett, is using short-term bills as cash management.
In response to Ackman's post, Elon Musk replied, "Yeah, short term T-bills are a no-brainer."
Berkshire's Class A shares close at record high
After a series of 52-week highs, Berkshire Hathaway's Class A shares (the ones that go for hundreds of thousands of dollars each) managed to close at a record-high $541,000 per share on Thursday.
That tops the previous high of $539,180 set on March 28, 2022.
But, so far, that's the only new record.
The A shares traded as high as $541,774 today, falling short of the intraday high of $544,389 they hit on March 29, 2022, before dropping to end the day at $533.600.
And the B shares failed to top either their all-time closing high of $359.57 on March 28 or their intraday high of $362.10 on March 29.
They traded as high as $355.11 today and the week's closing high was $353.81 yesterday.
The A shares are up 14.2% so far this year, while the B shares have gained 13.3%.
Berkshire earnings will be released Saturday morning
Berkshire Hathaway says it will be posting its second quarter earnings release and 10-Q quarterly report Saturday morning (August 5) at around 7 am Central Time on its website, www.berkshirehathaway.com.
Andrew Bary at Barrons writes that along with the operating profits (an 11.5% decline is expected), investors will be looking to see whether Berkshire has made any changes to its holdings of Apple and Chevron stock.
While the company will not be filing its 13-F portfolio snapshot for the second quarter until the middle of this month, its 10-Q typically reveals the market value of its five largest stock holdings. (At the end of March, they were, in alphabetical order, American Express, Apple, Bank of America, Coca-Cola, and Chevron.)
Its first quarter report showed a reduction of about 20% in its Chevron stake.
Another point of interest will be how much of its own stock Berkshire repurchased.
Bary says UBS analyst Brian Meredith expects $2.2 billion in buybacks, a reduction from $4.4 billion in the first quarter, but a faster pace than last year when Berkshire bought back $7.9 billion over the entire year.
We'll also see whether Berkshire added or subtracted from the $130.6 billion in cash it reported holding as of March 31.
Occidental may have to pause paying back its expensive Berkshire loan
Occidental Petroleum CEO Vicki Hollub speaks at the Milken Institute Global Conference in Beverly Hills, CA on April 29, 2019. REUTERS/Lucy Nicholson/File Photo
CEO Vicki Hollub said on the call that redemptions will continue later this year or next year if oil prices remain consistently above $75 a barrel.
At the Berkshire annual meeting in May, Buffett said, "In the last few months, they’ve reduced our preferred, which we don’t like, obviously. But we’d be disappointed in them if they didn’t reduce it. It’s intelligent from their standpoint."
At that same meeting, he said Berkshire will "not be making any offer for control of Occidental," even as it has a built a common stock stake that has gone a bit above 25%.
He also called Hollub an "extraordinary manager."
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Operating from a “Norman Rockwell frame of mind” (1998)
BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Aug. 4, 2023
Berkshire's top holdings of disclosed publicly-traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.
Holdings are as of March 31, 2023 as reported in Berkshire Hathaway’s 13F filing on May 15, 2023, except for:
The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.
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Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website.
-- Alex Crippen, Editor, Warren Buffett Watch
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