Many giants of the investment world downsized their Herculean holdings in the latest round
of portfolio updates. The tallest of the investment titans ranks among those who sold many stocks.
Warren Buffett reduced holdings or completely exited his position in 13 unlucky stocks.
The notorious number associated with fear and coincidentally reflects that economic
emotion in this situation. I already covered why one of the world’s wealthiest men is
also one of the weariest in my last video covering Buffett’s portfolio update you
can watch here. Let me bring new viewers to speed: Buffett gave a strong warning about
inflation at the last Berkshire shareholder meeting earlier this month and people listened
with perched, panicked ears. His exact words were “We are seeing very substantial inflation,”
“It’s very interesting. We are raising prices. People are raising prices to us and
with a holding kept list for Berkshire at 14.65 million shares. Although Merk and Company
(ticker symbol MRK) predicates on boosting, Berkshire reduced its position by about 10.82
million shares. There’s no way to sugarcoat Berkshire selling over 9.53 million shares
of Axalta Coating Systems (ticker symbol AXTA). Believe it or not, you can hold shares in
Sirius XM Holdings Incorporated (ticker symbol SIRI). Well, Buffett got “stern” with
the company, selling over 6.34 million shares. I can’t see Buffett tuning into Sirius in
a General Motors vehicle, given he also reduced his position in the famed automaker GM by
5.5 million shares. Berkshire’s shares in StoneCo (ticker symbol STNE) sank like a stone
(or bad GM tire), with over 3.7 million shares sold. AbbVie Inc bit some Burkshire dust too,
as about 2.66 million shares got sold. Bristol-Myers Squibb (ticker symbol BMY) experienced a decrease
of about 2.3 million shares. U.S. BanCorp (ticker symbol USB, but don’t confuse USB
profits for USB ports :) ) ranks Last in shares sold, but first in overall portfolio percentage
relative to the stocks we’ve talked about. Regardless, it’s worth noting Berkshire
essentially sold 1.45 million shares of the stock.
So, that rundown answers what Buffett is selling. The harder yet more important question is
why? Well, obviously I’m not Warren Buffett (or maybe I am and am just disguising myself
with an accent), but I’ll take an educated-but-unprofessional stab at answering why too.
Before jumping into the reasons, just wanna say I love all you guys who have continuously
supported my content and my channel over the last couple of months. The growth we have
had is just insane to me and it would not have been possible without all you guys, so
thank you so much for giving me your time and just know I will always try my best to
make valuable content so your time isn’t considered a waste after watching my videos.
Let’s start with the sun going down on Suncor. SunCor is Canada’s largest oil sand producer
and one of the largest in the world. For those curious, according to SunCor, oil sands are
a mixture of bitumen, sand, fine clays, silts and water. Because it does not flow like conventional
crude oil, it must be mined or heated underground before it can be processed. SunCor also held
the distinction of being the last remaining Canadian company in Buffett’s portfolio.
He sold several during the lockout, reportedly out of esg reasons, largely stemming from
fears over Canada’s ability to handle lockdown.
ESG stands for environmental, social and governance. When we think of investor psychology, we typically
think of classic Wall Street Walters with the Boomer mentality of all profitability
all the time and cold, hard cash ruling the hot buys. Times change. According to the Corporate
Finance Institute, Morgan Stanley Bank recently conducted a survey that found that nearly
90 percent of millennial investors were interested in pursuing investments that more closely
reflect the values they hold. Still, even an old-timer like Buffett pays attention to
these crucial factors in business and investing.
Although Buffett’s decision proves right most of the time, many experts think Buffett
might be wrong here. The stock’s one-year return is up almost 22 percent, considerably
outperforming the s&p. As the company grows, analysts anticipate dividends will grow with
it. Regarding business practices, Yahoo Finance reports that Suncor is teaming up with ATCO
on a project that’s expected to cut Alberta’s emissions by about two million tonnes (every
year) and produce about 300,000 tonnes of green hydrogen to meet the energy needs of
Canadian consumers. The project is a major step in the right direction — i.e., a cleaner
and greener energy sector in Canada. The project, which might go live as early
as 2028, might not offset the “heavy carbon” burden of oil sands that Suncor bears. But
it shows that the company is exploring possibilities and expanding its product portfolio and operational
capabilities, which might stay relevant in a relatively oil-less future.
The end of the Synchrony holding is much simpler. One of Buffett’s core principles is investing
in simple business models that confidently project longevity in bad conditions or bad
leadership transitions. He’s a fan of the growing credit card business, as shown by
his $21 billion-dollars worth of American Express shares, which is the third-largest
position in Berkshire’s portfolio. Buffet also invests in Visa and MasterCard. Synchrony
seemed on its way to hitting a big peak when Buffett opened his position in 2017, but he
has clearly placed his big bet on American Express being the credit king as consumer
confidence and money circulated/expendable funds increase with people vaccinating and
the economy reopening.
I think Buffett’s decline in Wells Fargo shares is simply a matter of loving Bank of
America more. I just talked about American Express ranking third-largest of Berkshire’s
curren positions. Well, Bank of America ranks second and is a big reason why Buffett has
made so much money this year. One thing BOA has over Wells Fargo is a strong nationalistic
connection that dates to America’s beginnings. Beyond a steep history dating back to colonial
days, The bank is fittingly the largest in the nation. According to the company, it has
more than $2.5 trillion in assets. The bank serves more than 65 million customers across
the country and actually is in the top 15 in worldwide market cap. Wells Fargo is huge
too and stands to gain significantly for the same core reasons Bank of America does that
I just discussed with credit card companies. Wells Fargo still faces heat from asset growth
restrictions and a fine of $3 billion dollars for compliance failures, including Wells Fargo
potentially creating millions of fake accounts. The heat is cooling down and the Fed has lifted
certain restrictions, but Buffett sides with Bank of America for now.
Chevron shows a classic case of Buffett playing the investment game like a poker game.Top
players in both know when to hold and know when to fold. Early in the year, Texas’
winter storms drove gas prices up as demand and a shortened supply of energy impacted
a major refinery. Crude oil prices rose almost 20 percent over the winter in concert with
Chevron’s stock price increasing double digits at the time. The rise continued, as
Chevron’s share price is up over 28 percent year-to-date, its dividend remains strong.
However, the company’s earnings per share leave some improvement to be desired, the
inevitable rise in energy and gas prices if inflation hits faces the brick wall of consumers
being more cautious with consumption in the face of an elastic good and rising costs in
their daily lives such as that. Buffett is probably trying to time well here.
I’m not too aware of Liberty Global Pic at all, but we all know Buffett never was
the biggest fan of big pharma stocks and we know Johnson & Johnson’s vaccine struggles
during the events of Quarter 1. Merck and Company is a big distribution partner with
Johnson & Johnson. The vaccine’s ability to be a one-and-done shot sparked optimism,
but a 66 percent effectiveness put doses on hold. Fortunately for the company and Berkshire’s
portfolio, the FDA and CDC recommended ending the pause in April. Regardless, it’s no
surprise given the previous months’ pessimism and Buffett’s lack of historical liking
of the pharmaceutical industry that Buffett sold shares in Merck and Company for this
round.
Axalta’s analytics both human and metrics-wise appear to be mixed. There is concern over
volume trading trends and lagging share price growth compared to the industry as a whole,
but Axalta enjoys a reputation for innovation, has rebounded in many respects since the start
of the year and just named a new board of directors member named Tyrone Michael Jordan.
A leader with Michael Jordan in his name has to be a slam dunk, but Mr. Jordan does bring
serious credentials that support even further innovations. He was the former President & Chief
Operating Officer of DURA Automotive Systems, a tier one supplier of mechatronic control
systems for hybrid/electric vehicle systems.
Why so serious with the Sirius cuts? One can argue that the Oracle of Omaha is concerned
about auto ownership trends, as Sirius XM needs a thriving network of drivers tuning
in through their factory-installed satellite receivers. In times of an economic downturn,
we can easily expect customers to cancel their satellite radio subscriptions as a cost-cutting
measure. Of course, the counter to that could be with people returning to their commutes
and going out more, subscriptions that were dormant or canceled could pick up again in
the near future. Another wave that hits Sirius is the weak radio advertising market could
also be weighing on the upside of Sirius XM in the near term.
I admit I know much more about Stone Cold Steve Austin than I do StoneCo. That said,
do i have an explanation for why Buffett diminished his position? Oh hell yeah! StoneCo fits the
growth stock profile like a glove. When the glove doesn’t fit, you must quit investing
as much. StoneCo suffers the same bearish fate the majority of pure growth stocks in
these cautious economic conditions that cause a flight to value stocks. As such, the stock’s
valued dwindled all year, down over 25 percent year-to-date as of this video, barring a weird
comeback.StoneCo being a fintech stock doesn’t help when that isn’t Berkshire’s forte.
Bristol-Myers Squibb gained serious traction off the heels of an acquisition of Celgene,
which is believed to be a big part of Buffett's attraction to the stock. The deal brought
in a pair of blockbuster multiple myeloma treatments: Pomalyst and Revlimid. Big acquisitions
and big treatment drugs are the calling cards of this well-known Big Pharma player. In many
ways, the stock checks off classic Buffett boxes, so I think this is just further adjusting
as a cooldown effect sinks in.
I don’t think there’s anything negative to see with the reduction in BanCorp position.
As I mentioned earlier, it’s still the eighth-largest position in the overall portfolio at a market
value near $7.2 billion dollars. This is the fifth-largest U.S. banking institution. In
fact, I believe the holding is a microcosm of everything I explained regarding Buffett’s
love for Bank of America.
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