During the Global Financial Crisis, Warren Buffett made headlines with some huge investments in high quality but distressed companies, including Mars, Goldman Sachs, Bank of America, and Dow Chemical. But so far, it’s been radio silence from the Oracle of Omaha, with an absence of any significant deals to be announced thus far, despite their US$128b cash pile.

So what is Buffett up to? The upcoming Berkshire Hathaway Annual Shareholder Meeting in Omaha (this year, devoid of any actual shareholders, bar Buffett and Munger themselves) will no doubt shed some more light on his thinking, but for now, what can we learn about Berkshire’s actions from other sources?

What was Berkshire doing before the sell off?

US regulations require hedge funds or institutions that manage more than US$100m to file a quarterly “13F” report, which tells us about significant changes in their investments. Sadly, these are only required to be filed 45 days after the end of the quarter, so the information can be quite dated by the time its released. Regardless, it’s interest to see what adjustments were being made in the months before COVID-19 took off. Please note that some of these trades may have been instigated by one of Buffett’s lieutenants, not Buffett himself.

Phillips 66 – Sold 95.6%

An American energy company that was spun out of ConocoPhillips. This was a relatively small position by Berkshire’s standards, representing a mere half a billion dollars worth of stock.

The Travelers Companies – Sold 94.8%

Another relatively small (approx. US$800m) position that was almost completely exited. Despite the name, this company is not in the travel industry. It’s actually a property casualty insurance company based out of New York.

Goldman Sachs – Sold 34.6%

This was a pretty important sale to note. Berkshire’s position in Goldman was a big one, representing nearly US$3B before these sales. The stock sold represents around US$1.4B. A trade this large would almost certainly have been handled by Buffett himself.

Wells Fargo – Sold 14.6%

While the percentage of the overall holding sold here was smaller than with Goldmans, the dollar value of the trade was significantly larger. Berkshire’s holding in Wells Fargo was worth nearly US$20B before this sale, with it being reduced by around US$3B by this big trade. Again, a trade this size likely has Buffett’s personal stamp on it.

Kroger – New purchase

A well timed (if lucky) purchase no doubt, Kroger is one of the largest supermarket chains in the USA. While a US$550M purchase of stock is hardly enough to make a huge dent in the Berkshire portfolio, it’s a large enough purchase that it was probably at least reviewed, if not personally championed, by Buffett. Given Buffett’s penchant for ‘boring’ businesses, I’m inclined to think this was probably Buffett’s idea.

Biogen – New purchase

At just US$192m worth of stock, it’s probably not worth spending much time on this one. A purchase this size could have been handled by one of Buffett’s lieutenants.

Suncor Energy – Increase position

Another small one. A US$152m purchase of a Canadian oil producer, taking the position to around half a billion US dollars.

Restoration Hardware Holdings – Increase position

Don’t let the name deceive you, this is no Bunnings or Home Hardware. Instead of power tools, garden soil and timber, you’ll find US$5000+ leather couches and US$4000+ dining tables. The position was increased by around US$158m to US$365m.

Occidental Petroleum – Increase position

In hindsight, Q4 last year was probably not the best time to be adding US$448m to a position in an oil company, but really, who could’ve predicted the sudden absence of demand for oil at that stage?

Straight from the horse’s mouth

While Buffett and Munger avoid discussing whether they’re buying or selling particular stocks, there’s still much to be gained from looking at their latest comments.

In a recent interview in The Wall Street Journal, Munger said,

“We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity. We’re not playing, ‘Oh goody, goody, everything’s going to hell, let’s plunge 100% of the reserves .’”

Munger admitted that there were not hordes of executives at the door, begging for capital. Even the airlines had not been calling Buffett for help.

He also said the Berkshire itself would close some of their businesses and never reopen them. So much for a V-shaped recovery.

On the topic of the economy, Munger didn’t seem very positive. While he said he doesn’t expect a repeat of the Great Depression in terms of timescale, he did say that “we may have a different kind of a mess. All this money-printing may start bothering us.” He added, “it’s quite possible that never again—not again in a long time—will we have a level of employment again like we just lost. We may never get that back for all practical purposes.”

Separately, in an interview with Yahoo Finance in early March, Buffett said,

“I won’t be selling airline stocks.”

But don’t always trust what Buffett says…

Berkshire selling airline stocks

While institutions have 45 days after the end of the quarter to file those 13F reports we discussed earlier, for significant shareholders (over 10% of issued capital), they have to inform the market more promptly of any changes to their holdings.

In early April, regulatory filings show that Berkshire sold 2.3m shares (US$74m) of Southwest Airlines. This is over 4% of the holding. Buffett has previously said that he personally manages the airline holdings, so we know this was his doing. Interestingly, the remaining holding is just under 10% of the company, meaning that they no longer need to inform the market promptly if they make further sales.

It doesn’t stop there though. Berkshire also sold 13 million shares (US$314m) worth of Delta Airlines, around 18% of its holding. This also took Berkshire under the 10% limit, but took them well under that limit, so it appears he was more eager to offload Delta.

The best opportunity to learn what Buffett and Munger are thinking

The Berkshire Hathaway AGM is coming up this weekend, and as the subtitle suggests, it’s the best opportunity each year to get an idea what the duo are thinking. This year’s AGM should be a unique one, with shareholders not invited to attend in person. Thankfully, Yahoo Finance run an excellent livestream, which you can tune into from 4am this Sunday Melbourne/Sydney time. Access the stream here, where you can set a reminder for yourself.

If you don’t feel like getting up on Sunday morning to watch the show, click the “Follow” button below, and you’ll be notified when I post my coverage of the event next week.

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Carlos Membreno

I thought the selling of the airline stocks by Berkshire was to stay under to 10% limit

Sam Mead

Thanks Patrick

Patrick Poke

Hi Carlos. Sort of. He was already well over the 10% limit, so he was bound to report any trades in those airlines. He undertook some fairly large sales, bringing their holding under the 10% limit, presumably so that they don't have to report any future sales until their file their 13F after the EOQ.

David Vial

Munger not attending the AGM I believe

Carlos Cobelas

Sounds to me like Buffett lied about not selling airline stocks. Why he bought them in the first place still staggers me.

Wayne Terry

World clock is converting 4pm ET to 6am here. Is 4am Sunday Morning correct?