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Buffett's Berkshire Slashes Goldman Stake; Exits Phillips 66, Travelers

Buffett's Berkshire Slashes Goldman Stake; Exits Phillips 66, Travelers

(Mohamed Ahmed Soliman | Dreamstime.com)

By    |   Sunday, 17 May 2020 06:32 AM

Warren Buffett's Berkshire Hathaway Inc. said it has sold much of its stake in Goldman Sachs Group Inc., despite the billionaire's assurance that the banking sector was not a "primary worry" for him during the coronavirus pandemic.

In a regulatory filing detailing its U.S.-listed investments as of March 31, Berkshire said its Goldman (GS) stake fell 84% to 1.9 million shares, from 12 million at year-end, with the stake's market value dropping to $297 million from $2.76 billion.

Goldman's stock price fell about 33% during the quarter, and some of Berkshire's selling appears to have occurred after the slide began.

Berkshire sold its remaining small stakes in the insurer Travelers Cos. and oil refiner Phillips 66, and tweaked several holdings. Its stake in Wells Fargo & Co. was unchanged, though the stock's price fell 47%.

The company cut its investment in JPMorgan Chase & Co. by 3% in the first quarter. Buffett’s company has been a big investor in banks in the past, normally trying to keep many of those stakes below a 10% level often scrutinized by regulators.

Buffett’s company exited a bet on Travelers Cos. and a wager on Phillips 66, a holding that had been valued at more than $25 million at the end of the year. Buffett’s long had ties to the oil refiner, even agreeing in 2013 to swap some shares for full ownership of a pipeline-services business.

Berkshire cut its investment in Amazon.com Inc. by just 0.7% in the first quarter. The Amazon wager was a newer bet, disclosed in 2019 ahead of Berkshire’s annual meeting. The retailer has warned that it’s been spending more to maintain operations during the pandemic, moves that could weigh on profit.

Berkshire did end up boosting one bank bet with an increased stake in PNC Financial Services Group Inc. In recent years, Buffett’s company has built stakes in a range of U.S. lenders, including PNC and Bank of America Corp.

A request for comment to Buffett's assistant was not immediately returned. Berkshire has more than 90 operating units including Geico, the BNSF railroad, Dairy Queen ice cream and its namesake energy business.

Investors monitor Berkshire's quarterly filings to see where Buffett and his portfolio managers Ted Weschler and Todd Combs see value. Buffett normally directs larger investments such as Apple Inc.

The Goldman stake originated in a $5 billion preferred stock investment at the height of the 2008 financial crisis, in a vote of confidence by Buffett for the Wall Street bank.

Berkshire's selling was disclosed after Buffett said at the May 2 annual shareholders' meeting of his Omaha, Nebraska-based conglomerate that banks were now well-capitalized and capable of weathering economic distress from the pandemic.

"If problems become severe enough in an economy, even strong banks can be under a lot of stress, and we'll be very glad we've got the Federal Reserve system standing behind them," he said.

"Overall the banking system is not going to be the problem," he added. "They are not a primary worry of mine at all."

Berkshire remains a major shareholder in American Express, Bank of America, Bank of New York Mellon , JPMorgan Chase, PNC Financial, US Bancorp and Wells Fargo.

Maeve DuVally, a Goldman spokeswoman, declined immediate comment.

Doug Kass, managing partner at Seabreeze Capital Investment Inc, called the Goldman stock sale "not surprising," following Berkshire's sale of 6.3 million Goldman shares in the fourth quarter.

Berkshire ended March with a record $137.3 billion of cash, disappointing investors unhappy with the low yields it generates for the company. The cash stake likely rose in April as Berkshire sold its entire stakes in the four largest U.S. airlines: American, Delta, Southwest and United. 

Material from Bloomberg and Reuters has been used in this report.

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Warren Buffett's Berkshire Hathaway Inc. said it has sold much of its stake in Goldman Sachs Group Inc., despite the billionaire's assurance that the banking sector was not a "primary worry" for him during the coronavirus pandemic.
buffett, berkshire, goldman, stake, shares
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2020-32-17
Sunday, 17 May 2020 06:32 AM
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