HomeInvestment Guidance from Berkshire Hathaway

Investment Guidance from Berkshire Hathaway

Warren Buffett is the world’s most famous investor. His record is nothing less than impressive, compounding double-digit growth year after year for tens of years. In his 90s, he is viewed as a market guru, and his investment decisions are closely watched by market participants. 

Buffett’s investment vehicle, Berkshire Hathaway, just disclosed the changes it had made during the Q4 of 2020. The decisions to add or to reduce exposure to existing companies or even to sell some other companies often lead for other market participants as they indicate what Buffett thinks of the economy and the potential ahead.

Berkshire No Longer Invests in Pfizer, Barrick, JP Morgan

One of the first things that strike the eye is that Berkshire Hathaway did not report positions in Pfizer, Barrick, or JP Morgan. Effectively, the investments were liquidated.

Mocked by many because he sold airline stakes right at last year’s bottom, Buffett responded with an investment in Barrick gold, a gold miner, albeit the investment was rather symbolic. Since then, the price of gold was unable to remain above $2,000, and it only corrected, reaching below $1,800 recently. Therefore, liquidating the gold position makes sense. However, the decision to cut the exposure to gold may also tell us that Buffett does not see risks ahead as he saw last summer. In other words, the uncertainty generated by the pandemic may have dissipated a bit, and thus Berkshire does not need a hedge anymore.

Other positions liquidated were Pfizer, M&T Bank, PNC Financial Services, and JP Morgan Chase. We note here that Berkshire liquidated the financials in the portfolio. It also reduced its exposure to names like Apple, Liberty LiLAC Group, Suncor Energy, or Wells Fargo. The investment in the latter was reduced by over 58%, in another sign that the financial sector is not attractive for Berkshire anymore.

Verizon, Chevron, Marsh&McLennan – New Additions to Berkshire’s Portfolio

Berkshire is known for its dividend-paying investments. Utilities, like companies in the telecom industry, are known for having a long history of dividend payments. As such, Verizon’s investment is not surprising. What’s interesting is that Berkshire doubles down with a 117.23% increase in its T-Mobile US investment. Therefore, we may say that by dropping the financials, Berkshire reoriented towards utilities via the telecom companies mentioned.

Finally, Berkshire also added an investment in Chevron and Merck – energy and logistics, in a bet that the world’s economy will bounce stronger than expected. As always, the moves in Berkshire’s portfolio are surprising, as well as their timing, and nevertheless interesting.

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