Warren Buffett’s Berkshire Hathaway once again was a net seller of stocks in the last quarter. Despite the market correction, Buffett remained patient in search of his ideal investment opportunity. Surprisingly, not even small purchases were made during this time.
Some observers may have noticed the inclusion of new stocks such as Liberty SiriusXM and Atlanta Braves in Berkshire’s holdings. However, these additions were actually a result of the restructuring of Liberty Media, which distributed shares in these new entities. As a result, they do not qualify as new investments by Berkshire Hathaway.
In essence, the third quarter saw Berkshire Hathaway making zero stock purchases, with all the focus being on selling. The most significant of these sales was Activision Blizzard, amounting to a substantial $1.2 billion, primarily driven by Microsoft’s offer to acquire the company.
In addition to Activision Blizzard, Berkshire completely divested from seven other stocks, including General Motors, Celanese, Johnson & Johnson, Procter & Gamble, Mondelez, and UPS.
Furthermore, Berkshire reduced its holdings in several other companies, such as HP Inc (-15%), Chevron (-10%), Markel (-66%), Globe Life (-67%), Aon (-5%), and Amazon (-5%).
In total, Berkshire Hathaway sold approximately $5.6 billion worth of stock during this period. While this figure may seem significant, it represents only a small fraction of their equity portfolio, which stands at $318.6 billion. In percentage terms, it amounts to just 2%. Thus, the selling wasn’t aggressive.
Additionally, Berkshire Hathaway currently maintains a substantial cash reserve of $157 billion.
These could raise questions among investors about Buffett’s sentiment regarding the market – is he bearish? Many may wonder if he possesses insights that others do not, leading to a more cautious approach to their own investments.
It’s important to remember that individual investors are not in the same league as Warren Buffett in terms of capital and scale. Buffett’s investment strategy typically involves making substantial bets on a select few high-conviction companies, often referred to as “fat pitches.”
Apple is a prime example of this, where Buffett first bought it in 2016 and now it constitutes nearly half of Berkshire Hathaway’s portfolio. Many of Buffett’s recent investments have been relatively small in comparison. In other words, Buffett hasn’t swung his bat for the last seven years and counting.
Given the size of Berkshire Hathaway’s holdings, finding such opportunities becomes increasingly challenging. There are only 75 companies in the world with $150B or more market capitalization. His investment options are severely narrow.
For the rest of us, without the constraints of managing such vast capital, there may be investment opportunities that we can explore that Buffett cannot. Therefore, Buffett’s recent inaction should not necessarily influence our own investment decisions.
Moreover, the current high interest rates may provide an additional incentive for Buffett to remain in cash, as it allows him to collect billions in interest payments while awaiting the fat pitch.
