Berkshire Hathaway’s second quarter portfolio snapshot included two new small stakes that sent the companies’ stocks sharply higher, more sales than purchases, and an intriguing round number.
Is a number with a lot of zeroes a clue to what Buffett is thinking?
Berkshire Hathaway’s second quarter portfolio snapshot included two new small stakes that sent shares of the newcomers sharply higher, more sales than purchases, and an intriguing round number.
The biggest Q2 move, by far, was Berkshire’s nearly 50% slashing of its enormous Apple position, which removed $82 billion worth of stock from its portfolio.
Berkshire’s 10-Q report, released almost two weeks ago, listed the value of its Apple position as of June 30 ($84.2 billion), so we already knew approximately how many shares had been sold.
What we didn’t know until Wednesday night when Berkshire filed its 13F report is the exact number of Apple shares that remained in the portfolio: 400 million. That matches the number of shares in Berkshire’s long-time, unchanged position in Coca-Cola.
It’s a very round number that has some Berkshire watchers speculating it’s a signal Buffett doesn’t plan to sell any more Apple.
Reductions over the past three quarters have taken the stake down 56% from 915,560,382 shares as of September 30 last year.
CNBC.com quotes University of Maryland Finance Professor David Kass as saying, “Just as Coca-Cola is a ‘permanent’ holding for Buffett, so may be Apple.”
Glenview Trust’s Bill Stone, however, sees a coincidence, not a plan. “I don’t think Buffett thinks that way.”
Whether more cuts are coming or not, and we probably won’t know either way for another three months when the Q3 snapshot is released, Buffett has made it pretty clear he has no intention of getting out of the stock altogether anytime soon.
In May, he told shareholders, “We will end up — unless something dramatically happens that really changes capital allocation and strategy — we will have Apple as our largest investment.”
Berkshire adds beauty and aircraft parts
The new stakes in Heico, which makes jet engine and aircraft component replacement parts, and Ulta Beauty, which sells beauty products and services, sent both stocks higher, but the “Berkshire bump” lasted longer for Ulta.
Heico’s Class A shares, the variety Berkshire purchased, were up as much as 8.3% yesterday (the first day of trading after the stake was revealed), before losing almost all of the gain and closing up just 1% at $186.64.
They have gained 31.4% year-to-date.
Ulta shares reacted significantly more positively, rallying as much as 13.4% Thursday and holding on to most of the gains to close up 11.2%.
Today, they added another 3.1% to finish at $377.23, up 17.1% for the week.
They had been struggling, and are still down 23.0% for the year, amid cooling demand for its products and strong competition from rival Sephora, which is owned by LVMH.
By its standards, Berkshire’s stakes in Heico (now $195 million) and Ulta ($260 million) are small and almost certainly the work of Ted Weschler or Todd Combs. Combined, they are just 0.15% of the portfolio’s value.
Sirius XM gets brief boost
Berkshire increased its stake in Sirius XM Holdings by 262%, but that worked out to an increase in value of a modest $272 million.
SIRI shares gained as much as 12.4% Thursday before closing with a 3.8% increase at $3.02. Today they fell 0.8% to $3.00, ending the week 4.6% lower.
Because Berkshire also owns $2.3 billion worth of those tracking stocks, Barron’s estimates that after the merger it will be Sirius XM’s biggest shareholder with a 29% stake.
It notes that Warren Buffett is said to be a big fan of the satellite radio service’s “Siriusly Sinatra” channel, although the Sirius position is thought to be Weschler’s work.
Snowflake melts away
After Apple, Snowflake was Berkshire’s biggest second quarter sale.
It eliminated its entire 6.1 million share stake in the cloud data company, which would have been valued at $827 million as of June 30.
Despite news of Berkshire’s sale and a cut yesterday in Wells Fargo’s price target to $130 from $200, the stock closed Thursday down only 0.2% and picked up 0.8% today to end the week up 2.9%.
Other moves
Chubb stake increased by 4.3% to 27 million shares, adding $283 million to its value. Berkshire accumulated almost 26 million shares in secret over three quarters before disclosing the purchases in its Q1 snapshot three months ago.
Louisiana-Pacific stake decreased by almost 10%, cutting its value by $52 million.
Floor & Decor was cut by almost 17%, a $80 million reduction.
T-Mobile stake was cut by 11%, dropping its value by $100 million.
In keeping with Berkshire’s move away from financials ($3.8 billion of Bank of America sales in July were not included in the Q2 snapshot), its Capital One Financial holding dropped by 21%, a $367 million reduction in value.
