Buffett cashes in on crisis-era GE shares

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 15, 2017).

Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) is getting out of one of America's oldest companies: General Electric Co (NYSE:GE).

The billionaire investor's firm sold 10.6 million GE shares in the second quarter, a stake that would have been worth an estimated $315 million as of June 30, according to a regulatory filing. Berkshire received most of the shares in 2013 after the investor lent roughly $3 billion to GE in October 2008 during the depths of the financial crisis.

In addition to the shares, Berkshire received hundreds of millions in dividends from GE over several years. All told, Mr. Buffett's $3 billion crisis-era investment generated a profit of more than $1 billion. Berkshire's decision to cash out its GE stake came in the same quarter that the conglomerate announced it was changing leaders, with Jeff Immelt stepping aside as chief executive after 16 years and handing over the job to one of his lieutenants, John Flannery.

Mr. Immelt had been under pressure from activist investor Trian Fund Management to cut costs and analysts have expressed concerns the company will need to lower its profit targets.

GE shares have slumped this year, dropping nearly 20%, compared with a 10% gain in the S&P 500 index. It is the worst performing member of the Dow Jones Industrial Average year to date. Last week, Mr. Flannery disclosed he had increased his personal investment by buying $2.7 million worth of GE shares in his 401(k) plan.

GE declined to comment on Mr. Buffett's disclosure. The company is the second U.S. blue chip that Mr. Buffett has recently exited. The billionaire sold off the majority of his long-held stake in Wal-Mart Stores Inc. late last year.

The holdings were disclosed Monday in a 13F filing with the Securities and Exchange Commission, a quarterly requirement for investors managing more than $100 million.

The GE deal was one of a series of transactions Mr. Buffett made during the 2008 financial crisis, including separate investments with Bank of America Corp. and Goldman Sachs Group Inc. He continues to own stakes in both of those financial giants.

Also in the second quarter, Berkshire bought shares of Synchrony Financial, GE's former consumer finance unit, and added to positions in Bank of New York Mellon Corp and Apple Inc.

A seemingly unending rally in U.S. stocks got a mixed forecast from some of the world's most well-known investors, their filings suggest.

David Tepper's Appaloosa Management sold its entire stake in the SPDR S&P 500 exchange-traded fund in the quarter. That ETF aims to track the performance of the broader market. Appaloosa had more than $350 million in the ETF at one point in the quarter.

At the same time, George Soros purchased a new stake in the PowerShares QQQ Trust in the quarter worth more than $1 billion. That index tracks the Nasdaq-100 index with broad market positions and a focus on large technology firms.

Founded by Mr. Soros in 1969, the New York City firm manages the Soros family fortune, although much of the money is distributed to other hedge funds and investment firms. The S&P 500 has risen steadily for several years and is up more than 10% this year.

Also in Monday's filing, hedge fund Viking Global Investors disclosed it had purchased 12.3 million shares of Wells Fargo & Co. in the second quarter. The Wells Fargo investment was worth about $680 million at the time of purchase.

A spokeswoman for the firm, founded by Norwegian billionaire Andreas Halvorsen, declined to comment beyond the filing.

Wells Fargo has spent most of the past year trying to put a sales-practice scandal behind it. The bank's CEO John Stumpf retired abruptly following the scandal. The firm has paid a fine and faces numerous federal and state inquiries into its sales-practices issues, including from the Justice Department. The bank has said it is cooperating with those inquiries.

But the bank's troubles picked up in recent weeks over problems in its consumer-lending unit relating to auto-insurance policies involving many borrowers and issues with other auto-related products. The Wall Street Journal also reported last week that the bank is expected to shake up its board in the coming weeks. Shares of Wells Fargo are up 9.6% over the past year.

--Emily Glazer contributed to this article.

(END) Dow Jones Newswires

August 15, 2017 02:48 ET (06:48 GMT)