Tags: Warren Buffett | Berkshire Hathaway | Apple | stock

Buffett Dumps Wal-Mart Stock, Builds Airline and Apple Bets

Buffett Dumps Wal-Mart Stock, Builds Airline and Apple Bets

Tuesday, 14 February 2017 09:37 PM

Warren Buffett's Berkshire Hathaway Inc. was an aggressive buyer of stocks in last year's fourth quarter, nearly quadrupling its stake in Apple Inc. and increasing its stake sevenfold in the four biggest U.S. airlines. Berkshire dumped nearly all of its Wal-Mart Stores Inc. holdings.

In a regulatory filing, Berkshire reported owning 57.4 million shares of Apple as of Dec. 31, which would now be worth $7.74 billion, up from just from 15.2 million shares in the iPhone maker three months earlier.

Berkshire also reported a $9.3 billion airline stake, with investments topping $2.1 billion in each of American Airlines Group Inc., Delta Air Lines Inc., Southwest Airlines Co. and United Continental Holdings Inc.

It also disclosed new stakes in satellite radio company Sirius XM Holdings Inc. and seed company Monsanto Co., which is being bought by Germany's Bayer AG.

Though it is unclear who make which investments, the filing appears to reflect much of the $12 billion of stock that Buffett said he had bought between the Nov. 8 Presidential election and the end of January.

Larger Berkshire investments such as Wells Fargo & Co., Coca-Cola Co. and International Business Machines Corp. are normally Buffett's, but the 86-year-old billionaire has given his deputies Todd Combs and Ted Weschler more to invest over the years.

Berkshire's initial investment in Apple got attention last year, given Buffett's usual aversion to technology companies - apart from IBM - which he considers outside his zone of competence.

The new, larger stake makes Berkshire one of Apple's 10 biggest investors.

"I'm stunned to see the size of that Apple position," said Thomas Russo, who oversees $11 billion of assets, including 12 percent in Berkshire, at Gardner Russo & Gardner in Lancaster, Pennsylvania.

Berkshire did not respond to a request for comment.

The Omaha, Nebraska-based conglomerate also owns roughly 90 companies such as the BNSF railroad, Geico car insurance and Dairy Queen ice cream.

Its Class A shares closed on Tuesday up $2,078.95 at $250,419, a record high closing price and less than 0.2 percentage points below its all-time high on Dec. 14.

APPLE BECOMES CORE HOLDING

The plunge into Apple appears particularly well-timed.

Shares of Apple closed on Tuesday up $1.73 at $135.02, also a record closing high.

Assuming Berkshire has not sold its stake, Apple's 16.6 percent gain this year would leave it with a $1.1 billion paper profit in 2017 alone.

It had been widely believed that Berkshire's initial investment came from Combs or Weschler.

But their decisions have sometimes influenced Buffett, as when Berkshire last year paid $32.1 billion for aircraft parts maker Precision Castparts Corp., once a Combs investment.

"It's quite possible that Warren woke up and began to understand the virtues of Apple that he had been neglecting or, like with Precision Castparts, Todd or Ted had an affinity for Apple that sparked interest from Warren," Russo said.

Combs and Weschler are the leading candidates to eventually succeed Buffett as Berkshire's chief investment officer.

The airline investments, meanwhile, suggest that Buffett has overcome his two-decade aversion to the sector after an unhappy - though, he has said, profitable - investment in US Air Group.

Buffett told talk show host Charlie Rose in an interview last month that it was "in large part" his decision to dive back into airlines.

"The industry was once balkanized, but now it is bulking up, and has come to realize that an empty seat is a perishable asset," Russo said. "More planes are traveling more full."

Shares of American, Delta, Southwest and United, as well as Apple, Monsanto and Sirius, rose in after-hours trading.

Such increases often occur when investors perceive that Berkshire has given a company its imprimatur.

Monsanto and Sirius did not immediately respond to requests for comment.

To make room for new investments, Berkshire appeared to have shed a $1.8 billion stake in agricultural equipment maker Deere & Co. and nearly all of what remained from a more than decade-old stake in retailer Wal-Mart Stores Inc.

The billionaire further reduced his holding in Wal-Mart, cutting it to less than 2 million shares as of Dec. 31. That compares with more than 60 million in 2014. Buffett has said online retailers such as Amazon.com Inc. present an increasing threat to the big-box retailer.

Berkshire also reported owning about 167 million shares of Sirius XM Holdings Inc., valued at about $740 million at the end of 2016. The satellite radio provider is controlled by billionaire John Malone.

Even as Berkshire’s stock picks are closely watched by investors, they’ve become less important to the company’s overall performance. During the past two decades, Buffett has focused more on acquisitions than picking stocks.

Berkshire’s dozens of subsidiaries include auto insurer Geico, Dairy Queen, Fruit of the Loom and railroad BNSF. Early last year, Buffett completed one of his biggest acquisitions, the $37 billion buyout of Precision Castparts Corp., a supplier to the aerospace industry.

© 2021 Thomson/Reuters. All rights reserved.


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Warren Buffett's Berkshire Hathaway Inc. sharply increased bets on airlines and iPhone maker Apple Inc. in the fourth quarter, while taking a stake in seed company Monsanto Co. and dumping nearly all of its Wal-Mart Stores Inc. holdings.
Warren Buffett, Berkshire Hathaway, Apple, stock
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2017-37-14
Tuesday, 14 February 2017 09:37 PM
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