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All Contents © 2019The Kiplinger Washington Editors
By Dan Burrows, Contributing Writer
| May 18, 2018
Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK.B), absolutely adores Apple (AAPL). Indeed, the world’s greatest value investor upped his company’s stake in the iPhone-maker by 45% during the quarter ended March 31.
Although the big increase in Berkshire’s investment in Apple grabbed all the headlines, it wasn’t the only important news to come out of the holding company’s latest regulatory filings. (Large investors such as Berkshire Hathaway are required to disclose their holdings to the Securities and Exchange Commission every three months.)
It’s always of interest to see what stocks Warren Buffett is interested in. So, today we are examining seven of the most significant changes to Berkshire Hathaway’s portfolio during the first quarter of 2018. Keep in mind that bigger investments are thought to be made by Warren Buffett himself, while smaller positions are handled by lieutenants Ted Weschler and Todd Combs.
With that caveat in mind, here are the seven most significant changes made by Warren Buffett so far this year.
Data is as of May 16, 2018. Sources: Berkshire Hathaway’s SEC Form 13F filed May 15, 2018, for the reporting period ended March 31, 2018; Fintel Financial Intelligence; and S&P Global Market Intelligence.
Action: Added to stake
Shares held: 239.5 million (+44.9% from Q4)
Value: $45.1 billion
Uncle Warren can’t get enough of Apple (AAPL, $188.18).
Berkshire Hathaway bought another 74.2 million shares in the technology giant during the first quarter of 2018. Berkshire now owns 4.9% of Apple’s outstanding shares, making it the company’s third-largest shareholder after Vanguard Group and BlackRock (BLK), according to data from S&P Global Market Intelligence.
Look for Warren Buffett to pick up even more Apple stock in the future. “I’d love to own 100% of it,” he told CNBC on May 7. “We like very much the economics of their activities. We like very much the management and the way they think.”
Shares held: 40.5 million (+114.8% from Q4)
Value: $846.5 million
Warren Buffett more than doubled his stake in Teva Pharmaceuticals (TEVA, $20.88) during the first three months of the year. Berkshire Hathaway is now the Israeli drugmaker’s third-largest stockholder, owning almost 4% of the outstanding shares.
Teva is a relatively new bet for Warren Buffett. Berkshire first took a stake in the company at the end of 2017. As Kiplinger noted at the time, Teva offered a classic value situation after shares fell 70% from their mid-2015 peak.
Analysts note that Teva has been cutting costs, which should allow it to boost free cash flow and reduce debt.
Shares held: 19 million shares (+62.3% from Q4)
Value: $2.4 billion
Warren Buffett increased Berkshire Hathaway’s ownership interest in Monsanto (MON, $125.44) as it moves closer to a complete takeover by Germany’s Bayer AG (BAYRY). The Department of Justice is expected to approve Bayer’s $62.5 billion deal for the America seeds and agrochemicals giant by the end of May. The combined company will control more than a quarter of the global seed and pesticides market.
Berkshire is currently Monsanto’s fourth-largest shareholder with a stake of 4.3% in the firm. Only Vanguard, BlackRock and State Street (STT) own more of the company’s stock.
Action: Exited stake
Shares held: 0 (-100% from Q4)
Although Warren Buffett says his preferred holding period is “forever,” as Kiplinger has noted, he’s usually pretty quick to admit his mistakes.
In the case of International Business Machines (IBM, $144.63), he made a doozy.
Buffett raised some eyebrows when he first bought about $10 billion worth of IBM back in 2011 because he usually avoided technology stocks. He should have remained tech-averse. By the end of 2016, Berkshire owned 81.2 million shares, or 8.5% of Big Blue. But IBM’s struggles in the age of cloud computing led to years of declining sales and a falling share price, too. Buffett pared the position over the last couple years, finally dumping the last 2 million shares of it in the first quarter of 2018.
Warren Buffett’s love of newspapers is well-known. Berkshire Hathaway was a major shareholder in the old Washington Post Co. and still owns The Buffalo (N.Y.) News outright. So the company’s exit from its position in Graham Holdings (GHC, $606.20), the former owner of the Washington Post, is something like the end of an era.
In 2014, the companies announced a plan in which Berkshire would give back almost its entire stake in Graham in exchange for some assets and cash. “While this transaction will greatly reduce our position in Graham Holdings, our admiration for the company and its management is undiminished,” Buffett said at the time.
With the sale of the remaining 107,575 token shares at the beginning of 2018, Buffett’s 44-year association with the company is truly at an end.
Action: Trimmed stake
Shares held: 45.7 million (-43.4% from Q4)
Value: $5.4 billion
Berkshire Hathaway sold a whopping 35 million shares in Phillips 66 (PSX, $117.38), reducing its stake by more than 40% over the course of the first quarter. But it’s not like Warren Buffett is down on the oil refiner and marketer. Far from it. He announced the sale months ago and it was made simply to avoid triggering a regulatory headache.
Indeed, the purchaser of the stock – for $3.3 billion – was none other than Phillips 66.
“Phillips 66 is a great company with a diversified downstream portfolio and a strong management team,” Buffett said in February. “This transaction was solely motivated by our desire to eliminate the regulatory requirements that come with ownership levels above 10%.”
Berkshire remains PSX’s largest investor, holding 9.8% of the outstanding shares.
Shares held: 3.7 million shares (-4.6% from Q4)
Value: $142.5 million
Berkshire Hathaway pared its position in French pharmaceutical giant Sanofi (SNY, $38.50) by 177,512 shares, cutting its stake by 4.6% in the first quarter. Berkshire has been a stockholder in SNY since 2006, and owns just 0.15% of the drugmaker’s American Depositary Receipts, according to S&P Global Market Intelligence.
Sanofi’s best-selling drugs include Lantus, which helps control blood sugar levels, and Plavix, a blood-thinner.
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