A month and a half after the second quarter came to an end, we're finally getting a look at how Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) stock portfolio changed. It turns out that while Warren Buffett and his team didn't initiate any new stock positions, there was still a substantial amount of buying and selling taking place.
I won't keep you in suspense. Here's a rundown of all of the stocks Berkshire Hathaway's stock-pickers bought and sold during the second quarter of 2018.
What stocks did Berkshire Hathaway buy in the second quarter?
When Berkshire released its second-quarter earnings report a couple of weeks ago, I predicted that we'd learn that this was a pretty active quarter for the company's stock portfolio. That appears to be the case.
While Buffett and his stock-pickers didn't initiate any new positions during the quarter, there were substantial additions to nine of the company's existing investments. Here's a chart of the quarter's buying activity.
It was already suspected that Berkshire's massive Apple stake had gotten even larger. Not only did comments from Buffett and Vice Chairman Charlie Munger indicate that they'd like to own more Apple stock, but in the company's earnings report, Berkshire stated the approximate value of its largest six stock positions as of the quarter's end. A simple calculation based on Apple's share price on the last day of the second quarter showed that Berkshire owned substantially more shares, and now we know exactly how many.
Another interesting observation is that Berkshire added nearly $1.2 billion to three of its bank investments. Berkshire's portfolio is rather bank-heavy, and with the financial sector being one of the market's worst performers of 2018, it's not a big surprise that Buffett and his team may have wanted to add to some of their banking positions at perceived discounts. I've written recently that Goldman Sachs in particular looks attractive at its current valuation, and it's well-known that Buffett regards U.S. Bancorp and Bank of New York Mellon as two of the best-run banks in the nation.
Finally, it appears that Buffett is starting to pick favorites in the airline industry after opening similarly sized positions in the four largest U.S. airlines in 2016. During the second quarter, Berkshire increased its stakes in Southwest Airlines and Delta Air Lines by 18% each, while trimming its stakes in the other two. There has been speculation that Buffett may try to acquire Southwest Airlines in its entirety, and this addition is likely to add to the rumors.
What stocks did Berkshire sell?
On the other side of the equation, Berkshire sold a few stocks as well. One position is gone from the portfolio entirely, and another five have been reduced.
The Verisk sale was an extremely small position as far as Berkshire goes, so it's not that significant of a development. However, there are a couple of important things to notice here.
First, the unloading of nearly one-fourth of the company's Phillips 66 stake was by far the biggest news of the quarter, in terms of sales. This is rather surprising, as it comes on the heels of an even larger sale in the first quarter which Buffett claimed was purely to reduce the stake for regulatory reasons.
When that transaction was announced in February, Buffett said in a statement that Berkshire planned to continue to hold Phillips 66 stock for the long term. So such a substantial reduction during the very next quarter was unexpected.
Another important thing to note is that while the sale of roughly 4.5 million Wells Fargo shares may appear to be a large sale, it's really quite insignificant. Berkshire has been unloading small amounts of Wells Fargo stock for some time now, but it's not because of the bank's recent scandals or any other reason having to do with the business. Instead, Berkshire needs to keep its Wells Fargo stake under 10% of the outstanding stock, so it periodically needs to sell some of its shares to do so.
One other "sale"
In addition to these stocks, there's another position that has disappeared from Berkshire's portfolio, although we already knew about it. During the second quarter, Berkshire holding Monsanto completed its sale to Bayer, and Berkshire received about $2.4 billion for its shares.
In fact, the Monsanto sale was the primary reason Berkshire's cash stockpile grew during the quarter. Berkshire now holds about $111 billion in cash, and the increase from the first quarter was almost exactly the same size as the influx of cash from the Monsanto stake.
How much did Berkshire spend on stock investments?
In all, Berkshire's spent just over $5 billion on stock purchases during the second quarter and sold $1.95 billion worth of stock. While these figures are based on the current market values of each stock and we don't know exactly what Berkshire paid or received for each one, it's fair to say that Berkshire was a net buyer of stocks during the second quarter to the tune of about $3 billion.
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Matthew Frankel, CFP® owns shares of Apple, Berkshire Hathaway (B shares), and General Motors. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Verisk Analytics and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Berkshire Hathaway (B shares) and Southwest Airlines. The Motley Fool has a disclosure policy.