LATEST: Warren Buffett sold 7 stocks. Follow?
For nearly 60 years (6 decades), $Berkshire Hathaway(BRK.B)$ legendary CEO Warren Buffett has been running circles around Wall Street's flagship index, the S&P 500.
Since taking the reins as CEO, the "Oracle of Omaha" has overseen an aggregate return in his company's Class A shares of 4,927,141%, as of closing bell on 8 Mar 2024.
That compares to a total return, including dividends paid, of around 33,500% for the S&P 500 over the same period, is an amazing feat.
Riding Warren Buffett's coattails has been a moneymaking strategy for decades, which is made all the easier thanks to Form 13F filings with the Securities and Exchange Commission (SEC).
13F :
Is a quarterly mandatory filing for money managers overseeing at least $100 million in assets under management.
Provides a snapshot of what Wall Street's smartest and most successful investors are buying and selling.
Most investors are intrigued to see what Mr Buffett and his investment aides, Ted Weschler and Todd Combs, have been buying.
Understanding why Buffett and his team are selling certain stocks can be just as insightful.
Looking at Berkshire's latest 13F, Warren Buffett and his team are selling 7 US stocks.
Due to real estate challenge, will cover 3 of 7 offloaded stocks here.
1. $Paramount Global(PARA)$:
30,408,484 shares sold (63,322,491 shares remaining)
First sizable holding that found itself on the chopping block during the December-ended quarter is media company Paramount Global.
Berkshire pared down nearly 30% of its position, which had stood at north of 93 million shares.
Catalyst for dumping, looks to be Paramount's undesirable balance sheet.
More specifically, Paramount is lugging around $14.6 Billion in long-term debt.
Compared to having just $2.46 Billion in cash and cash equivalents, as of the end of 2023.
Debt is 5.93x more than cash, heavily lop-sided, based on simple Mathematics.
With (a) cord-cutting ongoing and (b) Paramount's streaming segment still losing money, investors (including Buffett) have begun to lose patience.
Objectively, Paramount's streaming segment losses are lessening due to higher subscription prices being passed along to users.
Furthermore, legacy media companies tend to enjoy a resurgence in ad spending during major election years.
Although Paramount Global clearly has concerns to address, things may not be as dire as its poor stock performance would suggest.
Perhaps this explains why Berkshire is retaining remainder 70% of its original holdings?
2. $HP Inc(HPQ)$.
79,666,320 shares sold (22,852,715 shares remaining)
Another high-profile name that took a big haircut in Berkshire Hathaway's investment portfolio during Q4 2023 is personal computing and printing services provider Hewlett-Packared (HP).
Buffett and his aides dumped close to 78% of Berkshire's stake, compared to what was held on 30 Sep 2023.
Main impetus behind this selling activity may have to do with the sluggishness of personal computer (PC) sales.
Though PC sales surged during the initial stages of the COVID-19 pandemic, they've meaningfully retraced with most employees returning to the office.
With no sales growth forecast for 2024, HP's 3.6% dividend yield simply is not enough of a lure to keep Buffett and his team interested.
HP also looks like a perfect example of a "fair company at a wonderful price" that Buffett would prefer to avoid.
Meaning?
Although HP stock can be purchased for a mere 8x forward year earnings, the company's growth days are long gone.
Now reliant on relatively low-margin products and printing services, HP lacks the needle-moving results Berkshire's brightest minds desire.
3. $Apple(AAPL)$.
10,000,382 shares sold (905,560,000 shares remaining)
The most surprising selling activity during Q4 2023 was the roughly 10 million shares, the team at Berkshire has parted ways with.
All the while, keep in mind and perspective that the 10 million shares sold only reduced Berkshire's stake in its top holding by a mere 1.1%.
It is unlikely that Mr Buffett has changed his tune on what he has previously referred Apple to as "a better business than any we own."
Apple's physical product innovation has led the way for more than a decade, with the company now also emphasizing high-margin subscription services.
Keep in mind that Apple has repurchased $650.9 Billion of its own common stock since the start of 2013, that is tops among public companies.
The most logical reason for the pared down in Apple’s stake is to offset realized investment losses from (a) Paramount Global and (b) HP.
Berkshire Hathaway is sitting on an estimated $119 Billion in unrealized gains on its Apple stock.
My viewpoints: (mine & mine only)
This post is a timely reminder that it is very important to review and reassess one’s stock portfolio on a regular basis.
While diversification is a “necessity” to spread out the risk, keeping it within a distilled finite number of picked stocks is also equally important.
Imagine the amount of time expended on in-depth analysis of each stock, multiply that by the number of stocks in one’s holdings can amount to a lot of time.
Not forgetting, regular readings of all things related and unrelated to US stocks eg. US economy (inflation, recession, stagflation etc..), US policies, Jobs openings etc..
Last but certainly not least, a quickie assessment is to look hard at (a) a company’s long term debt versus (b) its available cash and cash equivalent - mapping them against the current socio-economic situation and then take a decisive action.
As an investor, we need to learn to cut the umbilical cord (cut losses) or procrastinate until the paper-loss becomes zero value. Agree?
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