Every quarter in the financial world, one of the most hotly anticipated events is Berkshire Hathaway's (BRK.A 0.24%)(BRK.B 0.38%) latest 13F release. This regulatory document details the holdings of investment managers, and as such provides the perfect snapshot of Berkshire's equity portfolio. It also provides clues as to the current thinking of Berkshire leader Warren Buffett.
That nearly $300 billion portfolio, combined with a solid lineup of privately owned businesses, makes Berkshire quite the formidable presence. But does it make the company's shares a buy these days, particularly considering the latest intriguing moves revealed in the new 13F?
NYSE: BRK.B
Key Data Points
No longer banking on banks?
A popular sport with investors, analysts, and general Buffett-watchers alike is comparing Berkshire's freshest 13F with its predecessor. Much is made of shifts within the portfolio, and this latest edition is revealing, as ever.
To me, the most striking trend is the continued sell-off of finance sector stocks, particularly banks. Berkshire continued to divest chunks of its still-massive holding in Bank of America, hewing off roughly 15% of its stake in the fourth quarter.
This was the latest in a series of sales, although Berkshire still has a large position in the incumbent lender worth more than $31 billion. That gives it a stake of just under 9% in the bank.
Smaller positions in other financial companies -- specifically Citigroup, Capital One Financial, and Brazilian fintech Nu Holdings -- also got the chop. The Citigroup stake was reduced by a whopping 73%-plus, Capital One saw an 18% trimming, and Nu is now 53% smaller than it was at the end of the third quarter.
While Berkshire remains heavily invested in the finance sector, with Bank of America being its No. 3 overall equity holding in terms of market value, it's clearly getting more picky about it. Combined and following those sell-offs, Citigroup, Capital One, and Nu comprise barely over 1% of the total equity holdings. Its long-standing positions in American Express and Visa didn't change quarter to quarter.
During the fourth quarter, Berkshire added only one entirely new holding, liquor conglomerate Constellation Brands. That stake is worth over $1.2 billion, giving Buffett and his team a more than 3% stake in the company. That isn't huge by Berkshire standards, as Constellation forms a mere 0.3% of the overall equity portfolio.
Berkshire also added to new buy-ins from the third quarter, namely Domino's Pizza and Pool. Three longer-term holdings that also saw boosts were satellite broadcaster SiriusXM Holdings, energy sector mainstay Occidental Petroleum, and electronic document management company Verisign.
Nimble and smart moves
Berkshire's moves are like the arrangement of tea leaf sediment in a cup; every observer can tease out different meanings from them.
These latest changes, combined with a big move Buffett and company made in Q3 of last year -- more than doubling down on its short-term investments in U.S. government Treasury bills -- make it look like the team remains cautious about the economy. There's a "wait until the storm passes" quality to this, a temporary play in an extremely safe asset that will produce near-guaranteed interest income.
The buy-in of Constellation and the other additions suggest Buffett is guardedly sticking to one of the habits he's most comfortable with: Owning shares of companies with imposing economic moats.
Personally, I doubt an old-fashioned pizza restaurant chain is going to suddenly explode with growth soon. That said, Domino's is basically the only major nationwide U.S. operator in the business that has been prominent for decades. Constellation has similarly unexciting prospects, I believe, yet it's a big gorilla in the booze business. Pool, SiriusXM, and Verisign are also unique in their own ways.
So allow me to finally answer the (nearly $300 billion) question. Does all this make Berkshire stock a buy? I believe it does. As of the end of Q3, Buffett and the gang were armed with a staggering $320 billion-plus in cash and T-bills, giving it a mighty hoard with which to rapidly pounce on undervalued stocks.
I feel the recent adds to the equity holdings should mostly maintain their value, even if the market trades down some. Meanwhile, the other part of Berkshire's business (the companies it owns that don't trade publicly) look set to continue thriving, as ever. I like the company's recent direction, and I feel it's well-placed to grab potential bargains in the equity market. I'd be a buyer of the stock.
