Warren Buffett is a living, breathing billionaire, but he’s also a leading economic indicator. So after his Berkshire Hathaway Inc. dumped almost $13 billion of stocks in the throes of the Covid-19 crisis, investors were beside themselves. They’ll now be quite relieved to see that his company is back in buying mode, making the biggest outlay for equity purchases in a year.
And he’s not just making oddball bets, like Japanese trading houses and, yikes, gold. A filing late Monday showed that in the latest period Berkshire Hathaway bought a handful of U.S. pharmaceutical giants: AbbVie Inc., Bristol-Myers Squibb Co., Merck & Co. and Pfizer Inc. It also purchased a new stake in T-Mobile US Inc., the wireless carrier with the most enviable spectrum position heading into 5G, and Snowflake Inc., one of the hottest tech IPOs of the year. They’re part of the net $4.8 billion Berkshire spent buying equities during the period; it spent an additional $9 billion buying up its own shares.
The disclosure of Berkshire’s Pfizer holding — valued at $138 million as of Monday’s close — comes a week after the drugmaker announced that its Covid-19 vaccine has been more than 90% effective in preventing cases of the virus. Following up on the good news, Moderna Inc., another company in the Covid-19 vaccine race, said Monday that its formulation was 94.5% effective. Even so, my colleague Max Nisen tells me that Buffett’s pharma bets likely aren’t entirely vaccine-related, as that logic only really works for Pfizer. Instead, Buffett — or one of his investing deputies — probably sees broader value in the pharma space, which had been somewhat beaten down heading into the U.S. election on fears of a “blue wave” that would produce profit-crimping policies. Those fears aren’t quite so intense without Democrats taking control of the Senate, or at least not yet.
Berkshire continued its banking purge — further reducing its stakes in JPMorgan Chase & Co., PNC Financial Services Group Inc. and Wells Fargo & Co. It also exited a $1.3 billion position in Costco Wholesale Corp., which I guess means Buffett didn’t take my suggestion to outright acquire the retailer for his next “elephant-sized” deal. But shares of Costco have risen 7% to an all-time high since the third quarter ended, and it just declared a whopping $10-a-share special dividend. Buffett is going to be hitting the See’s candies hard tonight!
But it sure is good to see the investor, well, investing again. Right before the pandemic hit, Buffett said in a TV interview that he’s been a net buyer of stocks every year since he was 11 years old; he’s 90 now. It's incredible how a virus — and the mishandling thereof — rattled his optimism in a way that wars, terrorist attacks and other recessions didn’t. The U.S. isn’t out of the woods yet, but there are reasons to be hopeful, and that seems to be what Buffett’s latest moves are suggesting.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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