Warren Buffett is Selling Stocks and the Reasons Behind it are Terrifying
If you have been following financial news, you would know that Warren Buffett continues to be a huge seller of stocks this year. In this video, we are going to look at the 10 stocks Warren Buffett is selling and the four stocks he is buying. Make sure to stick around to the end because we are going to discuss the surprising reasons Warren Buffett is selling billions of dollars in stocks.
Let's jump right in. It is no secret that the stock market is at record highs. That has many well-respected investors calling this market a bubble. Just this past week, Warren Buffett's company, Berkshire Hathaway, released its highly anticipated 13F filing for Q2 2021, which is for the three months from April to June. For those of you who don't know, a 13F is an SEC filing that details what stocks a fund or company bought and sold, right down to the specific number of shares that were bought or sold. Buffett continues to be a net seller of stocks, selling billions of dollars more of stocks than he has been buying over the past year.
In this video, we are going to look at all the stocks Warren Buffett has recently sold as well as a few stocks he has bought. Let's start with the stocks Warren Buffett is selling. What is really surprising to me is just how short of an amount of time some of these positions have been in the portfolio. Some stocks are being sold that were just purchased months ago. This is especially surprising considering Buffett is known as the king of long-term investing and has been known to frequently have stocks in his portfolio for decades at a time.
Buffett exited three positions entirely. The first is Axalta Coating Systems, ticker symbol AXTA. Axalta Coating Systems is an American company specializing in paint coatings for a wide variety of industrial applications, materials, and sectors such as automotive paints. AXTA was a small 0.15 percent of Berkshire's portfolio and was a stake that was established in Q2 2015 at prices between $28 and $36. He purchased about 16 more shares the following quarter at prices between $24.50 and $33.50. However, last quarter saw Buffett selling about 40 percent of his shares. This quarter, he completely eliminated his stake at prices between $29.50 and $33.75.
The other stock Buffett exited entirely was Biogen Inc, ticker symbol BIIB. Biogen Inc is an American multinational biotechnology company based in Cambridge, Massachusetts, specializing in the discovery, development, and delivery of therapies for the treatment of neurological diseases to patients. Biogen had $14 billion dollars of revenue in 2019, and the stock currently trades around $340. The extremely small stake in BIIB was disposed of entirely during the quarter. Additionally, Buffett nearly exited his entire stake in Liberty Global by selling nearly 3.4 million shares. Liberty Global is a multinational telecommunications company. The company had an annual revenue of $11.5 billion dollars in 2019, with operations in six countries and twenty thousand six hundred employees.
This position was originally established in Q4 2013 at prices between $37.50 and $44.50, adjusted for stock splits, and was increased the following two quarters at prices between $38.50 and $46 dollars. Buffett further increased his stake at prices between $30.50 and $50 dollars. However, last quarter Buffett sold about 60 percent of his shares at prices between $23.50 and $26.75, and this quarter he almost sold his entire stake at prices between $5 and $28.50. The stock is now trading at around $28.
In addition to selling out of these three stocks entirely, Buffett also sold some stocks of seven different companies in his portfolio. Buffett sold 798 thousand shares, or about half a percent of his holdings in U.S. Bancorp, ticker symbol USB. U.S. Bancorp is an American bank holding company and is the fifth largest banking company in America. The company provides banking, investment, mortgage trust, and payment services products to individuals, businesses, government entities, and other financial institutions. This stock has been in the portfolio since 2006.
The size of the original position was tripled during the 2007-2009 timeframe. It was then kept relatively steady until the second quarter of 2013 when about 17 million shares were purchased at prices between $32 and $36. In the first half of 2018, the position further increased by about 16 percent at prices between $49.58, and that was followed by a 25 percent increase at prices between $50 and $55. The stock is now trading at around $56, and Berkshire's cost basis is about $38, meaning he made a significant gain selling these shares. Berkshire controls about 10 percent of the business. Buffett has been selling small amounts of this stock over the past three quarters in order to keep his ownership stake under 10 percent as required by law.
The next stock Buffett sold is General Motors. Buffett sold 7 million shares of the company or more than 10 percent of his total stake. General Motors is an American automotive manufacturer based in Detroit, Michigan. As of 2021, General Motors is ranked number 22 on the Fortune 500 rankings of the largest United States corporations by total revenue. The position was first purchased in Q1 2012 at prices between $21 and $30. By Q3 2017, the position size had increased by around six times, up from 10 million shares to over 60 million shares. Following this, Buffett continued to purchase and sell shares in the company. The last two quarters have seen about a 17 percent reduction at prices between $50.50 and $64. The stock currently trades at $50.47, and Berkshire's cost basis on GM is about $31, so it seems like he made a substantial gain on this sale.
Buffett has also sold more than 500,000 shares of Chevron, ticker symbol CVX, or roughly 2 percent of his total position in the company. Chevron is an energy company and is the third largest oil company in America. Chevron is engaged in every aspect of the oil and natural gas industries, including hydrocarbon exploration and production, refining, marketing and transport, chemicals manufacturing and sales, and power generation. Chevron is one of the world’s largest companies. As of March 2020, it ranked 15th in the Fortune 500 with a yearly revenue of an astonishing $146.5 billion dollars. The position was originally purchased in Q3 2020 at prices between $72 and $91 and increased by about 10 percent the next quarter. Last quarter and this quarter, Buffett sold about 50 percent of his stake at prices between $85 and $112. The stock currently trades at about $101.
As Buffett has done in the past, sometimes he purchases a group of companies that all operate in the same industry. He does this to make a bet on the future potential of a particular industry without having to pick any particular company to be the big winner in the industry. That's what Buffett did when last year he purchased AbbVie Inc, ticker symbol ABBV, Merck & Company, ticker symbol MRK, and Bristol Myers Squibb, ticker symbol BMY. These companies are all pharmaceutical companies whose basic business models are to research, develop, manufacture, and market pharmaceuticals. Berkshire added these three picks from the big pharma sector in Q3 2020. He bought around $1.8 billion dollars of stock in each of these three companies that quarter.
The ABBV position was further increased in Q4 2020 at prices between about $81 and $109. However, the last two quarters have seen about a 20 percent reduction in shares at prices between $102 and $117. The MRK stake saw a 28 percent increase in shares during Q4 2020. However, in the last two quarters, Buffett has sold about 70 percent of his stake at prices between $69 and $81. Bristol Myers Squibb is a position that saw about a 10 percent increase in Q4 2020. The last two quarters have seen about a 20 percent selling at prices between $59 and $67.
For context, Berkshire's overall cost basis on ABBV is about $91 per share, MRK is about $83 per share, and on Bristol Myers Squibb, it is about $60 per share. Buffett also sold over one million shares, or roughly 20 percent of his total stake in the company Marsh & McLennan, ticker symbol MMC. Marsh & McLennan is a global professional services firm headquartered in New York City, with businesses in insurance brokerage, risk management, reinsurance services, talent management, investment advisory, and management consulting. The position in MMC was originally established in Q3 2020 at prices between $107 and $119. There is about a 25 percent stake increase in Q4 2020 at similar prices. This was followed by another increase last quarter. This quarter, however, saw an absolute turn. Buffett sold about 20 percent of his shares at prices between $122 and $142.
Now let's move on to the four stocks that Buffett added to, including the one new stock in the portfolio. But before we do that, make sure to like this video and subscribe to the Investor Center if you aren't already. My goal is to make you a better investor by studying the world's greatest investors. Now, let's get back into the video.
The only new name to appear in Buffett's portfolio is Organon and Company, ticker symbol OGN. But before you get too excited, OGN is a minutely small 0.2 percent of the portfolio and wasn't directly purchased by Buffett. Instead, the stock came about as the result of a spin-off of Organon from Merck in May. Merck shareholders got one share of Organon for every 10 shares of Merck held. OGN shares started trading at around $33 and currently trade at around $35.
Buffett has also been purchasing Kroger, ticker symbol KR. Kroger is the United States' largest supermarket by revenue and the second largest general retailer. KR is about 0.81% of the portfolio, a position established in Q4 2019 at prices between $24.29. The last five quarters have seen a wild 225 percent stake increase at prices between $30 and $40. The stock currently trades at $45.44.
As the third purchase, Buffett has been making RH Inc, or ticker symbol RH, is an upscale American home furnishings company headquartered in California. The company sells its merchandise through its retail stores, catalogs, and online. At 0.42 percent of the portfolio, the RH position was established in Q3 2019 at prices between $119 and $174. It has increased by about 40 percent the following quarters at prices between $165 and $242. The stock is now trading at an astonishing $688. Berkshire controls about 9 percent of the business.
Lastly, Buffett has been purchasing Aon plc, ticker symbol AON. Aon is a British multinational professional services firm that sells a range of financial products, including insurance, pension administration, and health insurance plans. The company has a market cap of around $60 billion and a P/E ratio of 30. Aon makes up 0.36 percent of the portfolio. This position was established last quarter at prices between $202 and $234. This quarter saw about a 7 percent increase at prices between $230 and $259. The stock currently trades well above those ranges at $281.
If you have been following this channel for any time at all, you know I am a huge fan of Warren Buffett. I have read everything he has ever written and have probably watched nearly every interview he has given. Based on this, I have identified two reasons why Warren Buffett is selling stocks. The first reason is pretty straightforward: he believes the stocks that he sold are overvalued and therefore are no longer attractive investments. This is obvious, and you don't have to be a genius to figure this one out.
The second reason, however, isn't as obvious. He may believe the cash he made from selling the shares in his portfolio can be used in better ways. Despite being well known for investing in the stock market, Buffett's main priority is buying entire businesses for his company, Berkshire Hathaway. Since these opportunities are rare and can use tens of billions of dollars, if not more, Buffett always wants to keep a lot of cash easily available to make these purchases. Also, it may come as a surprise to many that Buffett's favorite stock over the past year has been his own. If you want to learn more about Buffett spending billions of dollars repurchasing Berkshire shares, you can watch the video I made about it here.
He spent over six billion dollars this past quarter repurchasing shares of Berkshire Hathaway. He may be trimming his portfolio because that cash can be used in a way that is more beneficial to long-term holders of Berkshire Hathaway stock, and that is buying back shares in Berkshire.
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