The Oracle of Omaha, as he's familiarly known, has grown his net worth from $10,000 in the 1950s to nearly $93 billion as of Feb. 16. For shareholders, Buffett has created well over $400 billion in value, with Berkshire's stock averaging an annual return of 20.3% for a 55-year stretch between 1964 and 2019. Figures like these have Wall Street and retail investors paying close attention to every move made by Buffett and his investing lieutenants, Todd Combs and Ted Weschler.
Buffett's portfolio featured a lot of selling activity in 2020
On Tuesday, Feb. 16, the investing community received its latest look under the hood via a 13F filing with the Securities and Exchange Commission (SEC). Investment firms with over $100 million in assets under management are required to file a 13F approximately 45 days after the preceding quarter ends. Though the portfolio snapshot Wall Street and investors receive is dated (as of Dec. 31, 2020, in this instance), it can indicate what the brightest minds on Wall Street are doing with their money.
In the case of Warren Buffett, the prevailing theme in 2020 was sell, sell, and sell! Looking back on Berkshire Hathaway's four 13F filings with the SEC, Buffett's company completely disposed of or reduced its stake in 37 companies last year.
Berkshire completely exited the following 15 positions at some point in 2020:
- American Airlines Group
- Delta Air Lines
- United Airlines
- Southwest Airlines
- Goldman Sachs
- Travelers Companies
- Costco Wholesale
- Restaurant Brands International
- Phillips 66
- Occidental Petroleum
- Barrick Gold
- M&T Bank
- PNC Financial Services
- JPMorgan Chase
- Pfizer (PFE 1.50%)
Berkshire exited the bottom five -- Barrick, M&T, PNC, JPMorgan Chase, and Pfizer -- during the fourth quarter. Notably, Barrick Gold and Pfizer were held for mere months before they were given the heave-ho.
Meanwhile, the following 22 stocks were reduced at some point last year:
- General Motors
- Wells Fargo (WFC -1.01%)
- Synchrony Financial
- U.S. Bancorp (USB -0.68%)
- Bank of NY Mellon
- Sirius XM
- Teva Pharmaceutical Industries
- Charter Communications
- Suncor Energy
- Axalta Coating Systems
- Liberty Global (Class A)
- Liberty SiriusXM Group (Class A)
- Liberty SiriusXM Group (Class C)
- Liberty Latin America (Class A)
- Liberty Latin America (Class C)
The fourth quarter saw Berkshire Hathaway reduce its stakes in Apple, Wells Fargo, General Motors, U.S. Bancorp, Suncor Energy, and Liberty Latin America (Class C).
Combs and Weschler are clearly running the show
Historically, the Oracle of Omaha has been a passive investor. Buffett prefers to know the ins and outs of a business and tends to hang on for years, if not decades, if he chooses to take a position. Further, when Buffett buys into or sells out of a company, he does so relatively quickly, within the span of a couple of quarters. In other words, he doesn't try to time the market or pare down positions by small percentages with no intent to exit.
What we've witnessed over the past year doesn't resemble a Warren Buffett-run portfolio. Rather, this has all the hallmarks of Combs and Weschler taking on a larger role in day-to-day trading activity. I say "trading" rather than investing because positions like Barrick Gold and Pfizer were held for mere months before being discarded. Pharmaceutical stock Pfizer is an extreme case. It was added to during the third quarter and exited at some point in the fourth. Apparently, Combs and Weschler's plan to play the pandemic healthcare stock bump didn't include one of the two companies gaining emergency use authorization for its coronavirus disease 2019 (COVID-19) vaccine.
Mind you, Buffett hasn't disappeared. He's still making his presence known in Berkshire Hathaway's portfolio, as evidenced by the large reduction in Wells Fargo and the sales of PNC Financial, JPMorgan Chase, and M&T Bank. Buffett has been paring down a massive position in Wells Fargo for the better part of three years, following the revelation that certain bank employees had opened 3.5 million unauthorized accounts at the branch level as part of an aggressive cross-selling campaign. Buffett is a firm believer in earning the trust of customers or shareholders, which Wells Fargo's previous management team did not do.
Buffett has always been a huge fan of bank stocks, and he seems to be consolidating his love of the industry into three key names: Bank of America (BAC -1.02%), American Express (AXP -1.46%), and U.S. Bancorp. Keep in mind that the reductions in U.S. Bancorp have strictly been to keep Berkshire Hathaway under the 10% ownership stake limit that could get it classified as a bank holding company. Bank of America is Berkshire's second-largest holding and the most interest-sensitive of all big banks. As for AmEx, it's a clear leader among affluent clientele, which should allow it to navigate economic downturns better than its peers. Finally, U.S. Bancorp is leading the charge on the efficiency front, and has done an exceptional job of getting customers to bank digitally.
Ultimately, Buffett still has the final say on dealmaking, share buybacks, and large share purchases and sales within Berkshire Hathaway's portfolio. Still, the composition of Berkshire's portfolio is increasingly going to be dictated by what Combs and Weschler are fancying at any given time. That's a big departure from the past five decades, and something investors will have to come to terms with.