FRI, SEP 29, 2023

WARREN BUFFETT WATCH

HP sales continue, sparking speculation it may be more than a trim

Berkshire Hathaway's September selling of HP shares continued this week on Monday through Wednesday, reducing its stake by another 4.6 million shares.

That's in addition to the three days of selling on Wednesday through Friday of last week, making it six straight days that Berkshire has been shedding shares.

The streak could turn out to be even longer. We won't know until early next week because the company has two business days to disclose its HP moves to the SEC.

It only has to do that because it still had a stake of more than 10% of HP's outstanding shares. It's gone from 12.1% to 10.7%.

If it falls below 10%, Berkshire will no longer have to disclose every transaction.

Since the sales began on September 11, Berkshire has sold a total of 14.9 million shares for more than $407 million, reducing its holdings by 12.3%.

As of Wednesday, it still owned 106 million shares, valued at $2.7 billion based on today's closing price of $25.70.

It remains HP's biggest shareholder, although it is quickly approaching the Vanguard Group's 104 million shares.

It remains to be seen whether Berkshire is just trimming or planning a larger reduction, or perhaps complete elimination, of its losing bet on the maker of personal computers and printers.

It bought the bulk of its stake, 104.6 million shares, during last year's first quarter. Since the end of that period, HP stock has dropped by more than a third.

Even before this week's sales, Gordon Haskett's Don Bilson was pointing out that Berkshire continued to sell even as the stock's price continued to fall, leading him to believe this is the start of major move.

The average selling price was $28.80 for the first three days of sales and $26.98 for last week's reduction.

Bilson says that "lowers the floor on the price that Buffett is willing to take to exit this losing bet."

And now, the floor has dropped some more. The average selling price this week was $25.94.

Berkshire's rally to all-time highs prompts analyst downgrade

One of the few Wall Street analysts who follows the company has downgraded Berkshire Hathaway to a "hold" rating from a "buy."

Edward Jones' James Shanahan also removed the Class B shares from the firm's U.S. stock focus list, just after they hit new highs in the middle of this month.

Shanahan believes the rally has run its course.

CNBC.com quotes him as saying in a note, "BRK shares have significantly outperformed financial services peers over the past six months, supported by a relatively strong earnings outlook. We continue to expect solid earnings from BRK’s diverse group of operating companies. In our view, however, the current share price reflects these positives."

At today's $350.30 close, the B shares are down 6.2% from their all-time intraday high of $373.34 on September 19.

For the year, they are up 13.4%, modestly outperforming the benchmark S&P index's YTD gain of 11.7% without dividends.

It's a closer contest when dividends are included in the S&P returns, bringing them up to 13.1%.

BUFFETT AROUND THE INTERNET

Some links may require a subscription

CNBC.com Pro (subscription): Why Warren Buffett thinks interest rates exert a huge gravitational pull on asset values

CNBC Delivering Alpha (video): Billionaire investor Bill Ackman: I’m a Warren Buffett devotee

HIGHLIGHTS FROM THE ARCHIVE

‘Diversification is for the know-nothing investor’ (2008)

Warren Buffett and Charlie Munger explain why they think diversifying their investments can cause professional investors to waste “the opportunity of a lifetime.”

BERKSHIRE STOCK WATCH

BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Sep. 29, 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 June 30, 2023 as reported in Berkshire Hathaway’s 13F filing on August 14, 2023, except for:

Mitsubishi and Mitsui, which are as of June 12, 2023. Tokyo Stock Exchange prices are converted to U.S. dollars from Japanese yen.

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

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

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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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