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3 Moves Warren Buffett Has Made So Far in the Coronavirus Crash

By Matthew Frankel, CFP® – Updated Apr 13, 2020 at 8:03AM

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Here are three things we know Berkshire Hathaway has done in recent weeks.

Warren Buffett is famous for deploying Berkshire Hathaway's (BRK.A -1.32%) (BRK.B -1.29%) capital into excellent long-term investment opportunities during tough times. However, to the surprise of many investors, the Oracle of Omaha has been extremely quiet so far.

That's not to say that Buffett and his team aren't making moves. We won't know how much of Berkshire's capital has been deployed into the stock market until the company's first-quarter earnings are released in a few weeks, and we won't know the specific stock purchases Buffett and his stock-pickers have chosen to make until the company's next 13-F filing, which isn't due until May 15.

On the other hand, there are a few moves Buffett has made in recent weeks that we do know about. Here are three things we know for a fact that have changed with Berkshire's stock portfolio and overall financial situation, and what they might mean.

Warren Buffett smiling for reporters.

Image source: The Motley Fool.

Berkshire Hathaway sold some of its airline stocks

Two of the moves Buffett recently made involve selling stocks. We recently learned through SEC filings that Berkshire sold stocks in the past several weeks.

First, we learned that Berkshire sold some of its airline stocks. According to the filing, Berkshire sold almost 13 million shares of Delta (DAL -3.45%) and 2.3 million shares of Southwest Airlines (LUV -2.12%). The total proceeds from the airline stock sales came to $388 million.

It may be easy to think Buffett is losing faith in his airline investments. Most are sharply lower as a result of the COVID-19 pandemic, and these companies are essentially transporting almost no passengers right now.

However, it's important to mention that these sales were relatively small parts of the company's airline investments and could have simply been for regulatory reasons. Without getting too deep into the reasons, it's more of a regulatory burden to own more than 10% of any publicly traded company. In fact, the only reason Berkshire was required to disclose the sales is that it owned more than 10% of each airline before selling shares. After the sales, Berkshire owns a bit less than 10% of each, so these could have been purely to achieve this goal. Once the company's 13-F is released in a month or so, we'll see if the other airline positions were trimmed back as well, and then we'll have a better idea if Buffett is losing faith in the airlines.

Berkshire sold shares of this bank stock

Just a few days after we learned that Buffett and company had unloaded some of Berkshire's airline stocks, we also found out that Berkshire sold about 860,000 of its shares in Bank of New York Mellon (BNY -1.71%), raising about $30 million. 

I wouldn't read too much into this one either. After all, $30 million in shares is really a drop in the bucket when you consider Berkshire still owns about $3.3 billion worth of the bank. So Berkshire sold about 1% of its holdings in the bank.

Furthermore, this was a regulatory sale more than anything else. Before the sale, Berkshire owned just over 10% of the bank, so this move probably dropped the stake below that important threshold.

Berkshire has been raising even more cash, and you won't believe the terms

Berkshire Hathaway had a massive cash hoard of roughly $128 billion at the end of 2019, so you might think the last thing Buffett and his team would need to do is raise money. But that seems to be exactly what's happening. 

Specifically, Berkshire has been tapping into the overseas debt markets. In early March, Berkshire sold Euro-denominated bonds totaling nearly $1.1 billion in U.S. dollars. Because of the extremely low-interest environment in Europe, Berkshire's bonds have a 0% coupon interest rate and mature in 2025. Then in early April, Berkshire offered another $1.8 billion in bonds in Japan.

Is Buffett loading his elephant gun?

There's no way to know for sure what Berkshire's motivation for raising more capital is. Maybe Buffett is finally planning to make a large purchase, as he's been waiting to do for years but high valuations stood in the way. Or maybe Buffett, or someone else at Berkshire, just believes that even if they could take that capital and earn a small return on it, borrowing at 0% interest or close to it is a no-brainer.

As mentioned, we've yet to hear of any major moves Berkshire has made or is planning to make in the midst of the coronavirus pandemic. But don't make the mistake of thinking that just because nothing has been revealed publicly, there's nothing going on behind the scenes.

My prediction is that the exact opposite is true. Buffett loves to put money to work during market crashes, and he's never had this kind of cash hoard to work with in a bear market before.

Matthew Frankel, CFP owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$399,127.75 (-1.32%) $-5,357.50
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$264.32 (-1.29%) $-3.45
Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
LUV
$31.37 (-2.12%) $0.68
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$28.02 (-3.45%) $-1.00
BlackRock New York Municipal Income Trust Stock Quote
BlackRock New York Municipal Income Trust
BNY
$9.77 (-1.71%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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