Stock Analyst Update

Berkshire Picks Up Red Hat and Suncor, Dumps Oracle

Greggory Warren, CFA

There were a few surprises in wide-moat Berkshire Hathaway's (BRK.A)/(BRK.B) fourth-quarter 13-F filing. While we expected to see some buying activity given the sell-off in the equity markets during the period, we were surprised by the scale and the scope of the purchases. Berkshire's biggest buy involved JPMorgan Chase (JPM) , with the insurer spending an estimated $1.5 billion to increase its stake in the bank by 40%. The firm also increased its stake in  PNC Financial (PNC) by 36%, acquiring another 2.2 million shares of the bank for an estimated $275 million, and made smaller additions to US Bancorp (USB), Bank of New York Mellon (BK) , and Bank of America (BAC). Berkshire increased its stake in Travelers (TRV) by 68%, picking up 2.4 million shares for an estimate $300 million, and lifted its stake in General Motors (GM) by 38%, acquiring another 19.8 million shares for an estimated $665 million. 

The company made three new money purchases during the quarter, picking up 4.2 million shares of  Red Hat (RHT) (for an estimated $650 million), 10.8 million shares of  Suncor Energy (SU) (for an estimated $360 million), and 14.2 million shares of StoneCo (STNE), which had its initial public offering in late October (for an estimated $345 million). These purchases were offset in a large part by the elimination of Berkshire's stake in Oracle (ORCL) (netting an estimated $2.1 billion), as well as sales of shares of  Wells Fargo (WFC) ($770 million),  Apple (AAPL) ($555 million), Phillips 66 (PSX) ($350 million), United Continental (UAL) ($350 million), Charter Communications (CHTR) ($90 million), and Southwest Airlines (LUV) ($65 million), some of which--Wells Fargo and the airlines--were ongoing adjustments to keep Berkshire's total ownership stake below 10%. With a few exceptions-- American Express (AXP), Kraft Heinz (KHC),  Moody's (MCO), DaVita (DVA), and USG USG (to name a few)--the insurer is looking to avoid owning 10% or more of an investee's shares, purely to limit regulatory complications, especially with bank holdings. As some of these companies buy back stock, Berkshire is forced to trim its positions. 

Greggory Warren, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.