The moment the market has been waiting for has finally come: Berkshire Hathaway just reported its first 13F filing under the leadership of new CEO Greg Abel. The 13F is a report of a company's trades in a given quarter.
The report demonstrated that Abel is developing his own flavor of the Berkshire Hathaway investing philosophy. Abel dumped a bunch of smaller positions, coming through on his promise to concentrate the portfolio into a smaller number of high-conviction stocks, and he bought two new stocks while adding to and reducing a few other positions.
One of the new positions is in department store giant Macy's (M +0.19%). Macy's has certainly seen better days, and its stock sits 38% below its level a decade ago. What does Abel see here?
The return of the department store
Like many of Buffett's favorite stocks, Macy's has been around for a long time. It first opened its doors in 1858. The company has struggled to stay relevant, though, in a changing retail environment. Department stores have been on the decline in the age of e-commerce, and Macy's has been developing its online presence while slimming down its real estate portfolio.
Image source: Macy's.
There has been some progress, and trends might be shifting. Customers still like walking into stores, and most retailers have an omnichannel strategy to drive sales from multiple sources. According to a Harvard Business Review study, a physical store has three primary functions today: serving as a logistics network, providing an experience, and building brand presence.
New CEO Tony Springs has created Macy's "Bold New Chapter" as his turnaround strategy, and it meets these goals by investing in high-performing locations and reducing investments elsewhere. It's closing 150 stores by the end of the year while focusing on 350 top performers, leaning into luxury and "reimagining" them as experience hubs.
Is a comeback happening?
The company has been demonstrating progress, with a 1.8% year-over-year increase in comparable sales in the 2025 fiscal fourth quarter (ended Jan. 31). It also exceeded guidance on total revenue and earnings per share (EPS). However, expectations haven't been so high. In fact, Wall Street expects EPS to decline this year.
One of the features Buffett has always looked for in a stock is deep value. Macy's doesn't look like one, trading at 8 times trailing-12-month earnings. That's cheap, but in the context of declining earnings, it makes the stock look more like a value trap.
NYSE: M
Key Data Points
If Macy's continues its progress, the stock will reflect that, especially at this price. It also pays a dividend that yields an attractive 4% at the current price. A good dividend yield is another feature Buffett loves.
With its low price, high dividend yield, and established business, Macy's is the typical Berkshire Hathaway pick. Individual investors who aren't backed by a team of full-time professionals and a multibillion-dollar portfolio might want to wait to see more progress here, but dividend investors can feel comfortable locking in the excellent yield.
