Buffett doubles down on banks as Berkshire trims Apple stake

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15 Feb 2019

NEW YORK (Feb 15): Warren Buffett’s Berkshire Hathaway Inc took advantage of a plunge in bank stocks to pile even further into his bet on financials, while trimming a giant stake in Apple Inc.

Berkshire spent the last half of the year snapping up more shares of banks and insurers, moves that made the company a major shareholder in four of the five largest US banks. The Omaha, Nebraska-based conglomerate boosted its stake in JPMorgan Chase & Co and Bank of America Corp in the last three months of the year.

Key Insights

Berkshire reduced its Apple stake by 1% in a period that marked its first holiday quarter sales decline in 18 years and saw shares plunge 30% . It’s still the biggest holding in Buffett’s portfolio, and the stock has rebounded about 8% this year.

Buffett didn’t enjoy his time investing in International Business Machines Corp, but he may have made quite a haul on its latest purchase.

Berkshire owned 4.2 million shares of Red Hat Inc at year-end, though it’s unclear if they were bought before IBM’s purchase of the company sent the stock up 45% on Oct 29.

Berkshire also boosted its stakes in regional lenders, including PNC Financial Services Group Inc and US Bancorp. That could be a bet on consolidation in the industry, as this month’s announced merger between SunTrust Banks Inc and BB&T Corp has led to speculation that more deals are coming.

Market Reaction

Oracle shares dropped 1.3% at 4:56pm in New York, after the end of regular US trading. Apple was down as well, losing about 0.5%.

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Buffett had long praised JPMorgan’s Jamie Dimon even as Berkshire Hathaway didn’t invest in the stock. Berkshire eventually plowed in when the timing aligned, according to Vice Chairman Charles Munger. “As investment has gotten harder and the banks have done better and better, we’ve finally reached a crossing point where he was willing to act,” Munger said Thursday in an interview after the Daily Journal Corp meeting in Los Angeles.

Berkshire’s dalliance with Oracle Corp was short-lived. After taking a US$2.1 billion stake in the software firm in the third quarter, Berkshire had sold out by year-end. Buffett has typically taken a more cautious approach to technology companies, given his lack of familiarity with the space.
Buffett likes to take advantage of what he views as fear in the markets, and that certainly hit banks last quarter. The S&P 500 Financials Index dropped 14% in the fourth quarter, the worst period in more than seven years.

– Bloomberg

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