FRI, NOV 10, 2023
Buffett accused of hypocrisy for personally owning some stocks also in Berkshire's portfolio
Warren Buffett "has sometimes said one thing in public and done another in private" by selling stocks from his personal portfolio that Berkshire Hathaway has also bought or sold around the same time, according to a report published Thursday by ProPublica, which describes itself as a "nonprofit newsroom that investigates abuses of power."
It says Buffett's sales "may violate Berkshire’s ethics policies, authored by Buffett himself, which require 'all actual and anticipated securities transactions of Berkshire' be publicly disclosed before Berkshire employees can trade the stocks personally."
It also notes that Buffett said at the 2012 Berkshire annual meeting that "I can't be buying what Berkshire is buying."
(He was explaining why he had bought JPMorgan shares for his personal account at the same time Berkshire was building its position in rival bank Wells Fargo.
"The truth is I like Wells Fargo better than I like J.P. Morgan but I — but I also — we bought, and we’re buying, Wells Fargo stock, and that takes me out of the business of buying Wells Fargo. So therefore, I go into something that I don’t like quite as well but that I still like very much."
He said he also sometimes buys "into tiny little companies" that are too small to have a meaningful impact at Berkshire.
"But my best ideas are all in Berkshire. That I can promise you...")
From "roughly two decades of Buffett's personal trades that were included in a leak of IRS data" it obtained previously, ProPublica identified "at least three occasions" when Buffett "traded stocks in his personal account in the same quarter or the quarter before Berkshire bought or sold shares of the same companies, doing so before the conglomerate’s moves were disclosed to the public."
Buffett sold $20 million of Wells Fargo shares in April of 2009 a few days after the stock jumped in response to Fortune publishing an interview in which he praised the bank's business model.
Buffett sold $35 million of Johnson & Johnson shares in October of 2012, after Berkshire disclosed it had also sold some J&J stock but before it continued to reduce its holdings in the following two quarters. ProPublica suggests that may violate a Berkshire policy prohibiting trading of any stock when the company is "actively considering altering its own position" in the same stock.
Buffett sold $25 million of Walmart stock in August 2009 as Berkshire almost doubled its stake in the retailer during the same quarter. ProPublica says, "It’s unclear which transaction came first, but no matter the order of events, it raises the question of why Buffett made one choice for his own portfolio and the opposite choice for Berkshire’s investors."
ProPublica says the IRS records show at least $466 million in personal stock sales between 2000 and 2019, "a relatively modest sum" for Buffett, and notes there were "vastly more trades" in bonds than stocks.
(The total of $80 million for the three sales detailed in the story is less than one-tenth of one percent of his current estimated net worth of $117 billion, which is almost all from the Berkshire shares he owns.)
But it also points out the IRS records only show sales, "so the portfolio is likely larger."
In his "Squawk Box" report on ProPublica's accusations, co-anchor Andrew Ross Sorkin said he was surprised to learn that Buffett owned some stocks that were also in Berkshire's portfolio, calling it an "unattractive story."
He also noted he doesn't know "whether these were things that he bought years ago before the company ever owned them and then was selling them."
"Was he selling them because his view was ... if Berkshire is not going to own them, I shouldn't own them, either?
"It's kind of hard to know what to think of this in this moment."
In 2011, Berkshire executive David Sokol, who had been seen as a possible successor to Buffett as CEO, suddenly resigned after buying shares in Lubrizol two months before Berkshire acquired it. He was accused by Berkshire of making "incomplete disclosures" about the purchases, which Buffett called "inexplicable and inexcusable."
During a CNBC "Squawk Box" interview on March 31, 2011, David Sokol said he didn't have any role in Berkshire's decision to buy Lubrizol and didn't think Buffett would be interested in it. While he insisted he didn't do anything wrong, he said that in hindsight he should not have mentioned his own interest in the company to Buffett.
ProPublica says Buffett did not respond to written questions about his trades, and the company has not provided any comment to CNBC about the story.
Chevron stock sales continue into third consecutive quarter
Berkshire's stake in oil giant Chevron continued to shrink in the third quarter with the sale of approximately 13 million shares, a reduction of around 10% from the end of the second quarter in June.
Since its peak of almost 170 million shares a year ago at the end of the third quarter, Berkshire's position has dropped by around 35%.
This year's Q3 figure is an approximation based on Berkshire's disclosure in its latest 10-Q that it held $18.6 billion of Chevron as of September 30 when the stock closed at $168.62. (Today it hit a 52-week low below $142.)
In a footnote, the company lists the market values of its five largest equity holdings that make up 75% of its portfolio: American Express, Apple, Bank of America, Coca-Cola, and Chevron. The other four market values showed no significant change in those holdings.
But the 10-Q also reveals that Berkshire sold nearly $7 billion of equities during the period while buying only $1.7 billion worth.
We'll get details on Chevron and what was added to or subtracted from Berkshire's stock portfolio late Tuesday when it discloses its positions as of the end of third quarter.
Also in the 10-Q:
- Underwriting earnings of $1.1 billion at GEICO helped Berkshire's operating earnings increase by 40.6% to $10.8 billion.
- Berkshire's cash jumped to a record $157.2 billion amid a lack of attractive acquisition options and with a big boost from $126.4 billion of short-term Treasury bills that are benefiting from high interest rates.
- As Berkshire's stock price hit new highs, Berkshire bought back only $1.1 billion of its shares. So far this year, the total is around $7 billion.
Buffett passes charity lunch baton to Saleforce's Marc Benioff
Photos: CNBC | REUTERS/Andrew Kelly
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BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Nov. 10, 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:
The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.
CORRECTION, QUESTIONS OR COMMENTS
Correction: Berkshire received Occidental Petroleum preferred shares in 2019, not 2009, as I typoed in the October 27 newsletter.
Please send any questions or comments about the newsletter to me at email@example.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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