Recently, famed investor Warren Buffett and his company, Berkshire Hathaway (BRK.A 0.89%) (BRK.B 0.76%), released their latest 13F filing, disclosing what the conglomerate bought and sold in its equities portfolio during the fourth quarter of 2021. Widely considered one of the greatest investors of all time, it's a good idea to see what stocks Buffett is buying and selling and also try to figure out how he is thinking about their long-term outlooks.
As a reminder, Buffett, who is now over the age of 90, is no longer the only stock picker at Berkshire Hathaway, so not every pick is his, but as the CEO and chairman of the company he still plays an active role in a lot of Berkshire's moves. Here are two stocks Buffett and Berkshire sold in the fourth quarter and some discussion about possible reasons why they were sold.
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1. Visa
In the fourth quarter of 2021, Berkshire trimmed its stake in the large payment processor Visa (V 0.77%) by more than 13%, selling about 1.27 million shares. Visa stock got off to a slow start this year but has been rolling since the company reported earnings results for the first fiscal quarter of 2022, which is the quarter ending Dec. 31, 2021. Visa reported earnings per share (EPS) of $1.83 for the quarter on net revenue of $7.1 billion, beating analyst estimates. Total payment volumes continued to trend nicely, while international payment volumes continued to recover as well.
Visa's CFO Vasant Prabhu said on the company's recent earnings call that while there has been a modest impact on cross-border volume from the omicron coronavirus variant in recent months, management expects the recovery to resume in February. Prabhu said the current fiscal year is off to a strong start and that he expects growth this year to be higher than pre-pandemic levels as cross-border volumes continue to recover. Perhaps Buffett and Berkshire see competition being a problem in the future. They may also foresee a post-pandemic world that relies less on travel. But right now, it's hard to see a future where Visa becomes irrelevant. Another possibility is that Buffett and Berkshire simply didn't like their total exposure in the space, which brings us to the next stock Berkshire sold.
2. Mastercard
Buffett and Berkshire also reduced their position in another large payment rail and Visa's main competitor, Mastercard (MA 0.20%). Berkshire during the fourth quarter sold more than 302,000 shares of Mastercard, reducing the company's stake by about 7%. This leads me to believe that Buffett and Berkshire may have more concern about the company's overall exposure to the two largest payment rails and growing competition from technology like the blockchain. Mastercard recently reported diluted EPS of $2.41 in the fourth quarter of 2021 on net revenue of $5.2 billion, also beating analyst estimates. Similar to Visa's latest earnings report, Mastercard reported that both gross dollar volume and cross-border volume had grown nicely on a year-over-year basis and suggested that a nice recovery continues to develop.
Analysts also upped their price targets on Visa and Mastercard following their latest earnings beats, largely citing optimism that cross-border volume, which is heavily tied to spending on things like international travel, can return to pre-pandemic levels this year. Visa and Mastercard are also both well-positioned to take advantage as more payments convert from cash to digital. While there is a lot of competition out there from alternative payment options, big dominant players like Visa and Mastercard should be able to buy the technology they need or develop it in-house to keep pace. Still, the payments space could certainly change dramatically in the future, so it is something to evaluate as you assess these two stocks.
