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]
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