Berkshire Stock Buys Still Get a Buffett Bounce—but Maybe Not the Expected Results

Text size

Warren Buffett is justifiably renowned as a stockpicker. But following

Berkshire Hathaway

into new equity holdings is no sure thing. This past week, Berkshire disclosed it had bought $900 million of

Capital One Financial

shares. Capital One rose 13.5% to $98 on the week—a “Buffett bounce.”

Capital One may be a winner—or not. In early 2022, Berkshire bought

Paramount Global
,

Citigroup
,
and

HP
.
All three now are likely below Berkshire’s cost, Barron’s estimates—particularly Paramount, off some 50% from early 2022 levels. Berkshire bought $8 billion of

Verizon Communications

in late 2020, then sold it at a loss in 2022. In contrast, Berkshire is ahead on its $20 billion

Chevron

and $12 billion

Occidental Petroleum

stakes.

Berkshire has recently seen more rapid trading in its $350 billion portfolio. In late 2020, it acquired shares in

Merck
,

Bristol Myers Squibb
,
and

AbbVie
.
Those were reasonably well timed, but Berkshire sold them. It also bought and quickly ditched a stake in

Taiwan Semiconductor

; Buffett wasn’t comfortable with Taiwan’s geopolitical risk. Berkshire has scored with five Japanese trading companies that Buffett began accumulating in 2020.

Another issue: Who’s buying? Buffett runs some 90% of the portfolio, with managers Todd Combs and Ted Weschler handling the rest. Berkshire doesn’t disclose holdings by manager, but the largest and longest-standing ones are probably mostly Buffett’s. Positions under $3 billion go to Combs and Weschler. While Buffett likes to say his favorite holding period is forever, few new investments besides

Apple

seem to qualify.

Write to Andrew Bary at [email protected]

Last Week

The X-Date Cometh

China’s industrial and retail output fell at the start of the second quarter, and U.S. retail sales rose in April, though big-ticket home spending softened. The debt ceiling hung over everything: Treasury yields spiked as the deadline—the June 1 X-date—neared. Stocks rose on optimism over a deal, then fell as talks broke down. For the week, the

Dow Jones Industrial Average
gained 0.38%, to 33,426.63; the

S&P 500
rose 1.65%, to 4191.98; and the

Nasdaq Composite
surged 3.04%, to 12,657.90.

Earnings Beat: Retail Edition

Home Depot

beat on earnings, but felt the pinch as consumers reduced home renovations, and warned on the year. Target and

TJX

beat, but offered weak guidance.

Walmart

beat and raised guidance. Reporting this coming week:

Costco
,

Best Buy
,
and

Lowe’s
.

Chasing a Debt Deal

Outlines of a debt-ceiling plan emerged before a Tuesday meeting at the White House between President Biden and congressional leaders. It ended on a cautiously optimistic tone as Biden left for the G-7 meeting in Japan, cutting short the trip to return Sunday. Talks seemed to progress, only to hit a “pause” Friday, a possible negotiating ploy. Meanwhile, along the southern border, the turmoil predicted after the lifting of Trump-era Title 42 failed to materialize, with migrant flows falling.

Ukraine Rearms

Ukraine President Zelensky rounded up military assistance in a trip around Europe. Germany agreed to provide his country with $3 billion in military aid, and the U.K. offered cruise missiles and drones. Russia continued missile and drone attacks. In one night, Ukraine said its Patriot air defense systems shot down 18 Russian missiles, including six hypersonic rockets; in another, it felled 29 of 30 missiles.

Sam Zell, 1941-2023

Sam Zell, Chicago real estate impresario and pioneer of real estate investments trusts at Equity Office Properties, died at 81. Zell’s Polish parents fled to the U.S. in World War II. He was known as the “grave dancer” for his skill as a distressed investor.

Annals of Deal Making

KKR
’s
Envision Healthcare, which provides emergency room and surgical center staffing, declared bankruptcy. KKR took Envision private five years ago. A complex restructuring involving lenders including Blackstone, Eaton Vance, Pimco, Centerbridge, and Angelo Gordon has already been negotiated…Pipeline operator

Oneok

said it is buying

Magellan Midstream Partners

for $14 billion, plus $5 billion in debt, creating a 25,000-mile oil and gas network between North Dakota and Texas…Australia’s

Newcrest Mining

approved a $19 billion takeover bid from U.S.-based Newmont…As expected, Vice Media declared bankruptcy, but it has a buyer: creditors including Fortress Investment Group and Soros Fund Management, for $225 million plus liabilities…Despite regulatory blocks in the U.S. and U.K., the EU allowed

Microsoft
’s

Activision Blizzard

deal to move forward…The Federal Trade Commission sought to block

Amgen
’s
$28 billion acquisition of

Horizon Therapeutics
.

Write to Robert Teitelman at [email protected]