For nearly six decades, Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has been running circles around Wall Street’s flagship index, the S&P 500. Since taking the reins as CEO, the aptly dubbed “Oracle of Omaha” has overseen an aggregate return in his company’s Class A shares of 4,927,141%, as of the closing bell on March 8, 2024. That compares to a total return, including dividends paid, of around 33,500% for the S&P 500 over the same period.
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. A 13F provides a snapshot of what Wall Street’s smartest and most successful investors are buying and selling, and is a required quarterly filing for money managers overseeing at least $100 million in assets under management.
Although most investors are intrigued to see what the Oracle of Omaha 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.
Based on Berkshire’s most recent 13F, Warren Buffett and his team are selling seven stocks.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
1. Paramount Global: 30,408,484 shares sold (63,322,491 shares remaining)
The first sizable holding that found itself on the chopping block during the December-ended quarter is media companyParamount Global(NASDAQ: PARA). Buffett’s company pared down nearly a third of its position, which had stood at north of 93 million shares.
The catalyst for dumping more than 30 million shares looks to be Paramount’s undesirable balance sheet. More specifically, the company is lugging around $14.6 billion in long-term debt, compared to just $2.46 billion in cash and cash equivalents, as of the end of 2023. With cord-cutting ongoing and Paramount’s streaming segment still losing money, investors (including Buffett) have begun to lose patience.
The other side of the coin is that Paramount’s streaming segment losses are lessening thanks to higher subscription prices being passed along to users. Further, 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.
2. HP: 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 the fourth quarter is personal computing and printing services provider HP(NYSE: HPQ). Buffett and his aides dumped close to 78% of Berkshire’s stake, compared to what was held on Sept. 30, 2023.
The 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 the current year, HP’s 3.6% dividend yield simply isn’t 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. Although HP stock can be purchased for a mere 8 times 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: 10,000,382 shares sold (905,560,000 shares remaining)
Perhaps the most surprising selling activity during the fourth quarter was the roughly 10 million shares Buffett and his investing “lieutenants” parted ways with in tech stock Apple(NASDAQ: AAPL). Keep in mind that selling 10 million shares only reduced Berkshire’s stake in its top holding by 1.1%.
Chances are the Oracle of Omaha hasn’t changed his tune on what he previously referred 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. To boot, Apple has repurchased $650.9 billion of its own common stock since the start of 2013, which is tops among public companies.
The most logical reason Buffett and his investing crew pared down their Apple stake is to offset realized investment losses from Paramount Global and HP. Buffett’s company is sitting on an estimated $119 billion in unrealized gains on its Apple stock.
Markel’s rising premium-to-book value is probably why this “mini-Berkshire” was shown the door. MKL Price to Book Value data by YCharts.
4. Markel Group: 158,715 shares sold (entire position sold)
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