Warren Buffett Just Sold One Of His Biggest Stocks.

Well, it's that time of year again. The 13F filings are out, which means we get to peek inside the portfolios of the world's best investors. If we look to the biggest, best investor of them all, Mr. Warren Buffett, there was some very intriguing activity in his filing this time around. His filing confirmed that he has sold his stake in Activision Blizzard.

Now, if you have a keen eye, you could have already figured this out, as Berkshire did already state this in a prior SEC filing, and it did the news rounds at the time. But now we see it popping up in what was definitely the biggest takeaway from his 13F filing. Warren Buffett first bought Activision Blizzard in Q1 of 2022 after Microsoft announced that they were looking to acquire the company to add yet another set of big-name video game titles to their Xbox business.

At the time, Buffett called this a workout or a risky arbitrage play, where he was not necessarily buying Activision for the business itself, but rather holding it because there was significant money to be made if the acquisition went through. Microsoft announced they were going to buy Activision for $95 a share. At that point, Activision becomes a different kind of security. There are securities whose value depends not on what the market price does but whether a given corporate event occurs.

So anyway, we now own nine and a half percent of Activision. If the deal goes through, we make some money, and if the deal doesn't go through, who knows what happens? At the time, Activision shares were trading for roughly $81, but Microsoft's proposal would see them buy all the shares from investors for $95. This represented a potential 17% upside if the deal went through, and that's what Buffett jumped on. It's a good chunk of change for a simple acquisition going through.

Although, as we know now, the deal ended up meeting heavy resistance from both the FTC in the U.S. and the Competition and Markets Authority in the UK, a debate which has still not been resolved. While Activision Blizzard shares have more recently closed up to $90, a.k.a. punters are predicting a much higher probability that the deal will get done.

Now it seems Warren Buffett wasn't interested in sticking around to find out. His 13F filing shows he decided to sell 70% of the Activision Blizzard shares Berkshire owned during Q2. For those paying attention, he kind of already hinted that this might have been on the cards. Listen to what he said three months ago back at the Berkshire Hathaway shareholder meeting: "Since the UK regulator has blocked its acquisition by Microsoft, Berkshire reduced or sold its stake. Well, I think in terms of what we do with stocks, we don't give information except one required, which is in the 13F, for whatever we file. But I would say this: I think Microsoft has been remarkably willing to cooperate with governing bodies, and they want to do the deal, and they met the opposition that seems to me more than halfway."

"But that doesn't mean that it gets done. If a given country, in this case the UK, wants to market, they're in a better position to block it than the United States. I don't know how it turns out, but if it doesn't go through, I don't think it's through any shortcoming by either Microsoft or Activision. Not everything that should happen does happen — but that's life in the big city, sure."

I would say, and, uh, what we do will depend on a lot of things. What we now know exactly what Buffett did: he sold. If you look at the Activision share price from when he bought versus when he sold, the crazy thing is Buffett probably didn't even lose money. If he bought after the Microsoft announcement, he would have paid roughly $80 per share, but across Q2, the lowest the stock got was roughly $76.

So, it's crazy that the 17% spread between the share price and the proposed acquisition price back in Q1 2022 almost acted like a little margin of safety where, even after the FTC and the CMA announced they would look to block the acquisition, Buffett was still able to get out of the position relatively unscathed.

But hold on a second! I know what you're probably thinking right now: Buffett only sold 70% of his stake. Why am I making these grand conclusions that he sold out? Didn't he still hold some shares? Well, the answer is no; he no longer holds any shares, but Berkshire Hathaway still does. Why? Well, because of Ted or Todd. Remember, when looking at Berkshire Hathaway, there are three people represented in the 13F: there's Warren Buffett, then there's Todd Combs and Ted Weschler.

Warren Buffett makes the big behemoth investments, and Ted and Todd both manage roughly $15 billion each. Now, Buffett started buying Activision back in Q1 of 2022, right? Well, have a look at this: Berkshire Hathaway actually bought 14,658,121 Activision shares in Q4 of 2021. So, either Ted or Todd already built a position in the company for different reasons the quarter before the Microsoft announcement.

Fast forward to today, look at their current 13F filing: they hold exactly 14,658,121 Activision shares now. A.k.a. Ted or Todd are still holding onto their shares, but Buffett has decided to sell his position. So, with that said, we come to the end of Warren Buffett's involvement with the Activision Blizzard saga.

It'd be interesting to note that despite this not going as smoothly as he expected, he probably didn't lose money. Although, if you are still a shareholder yourself in Activision Blizzard, I wouldn't necessarily come to the conclusion that the Microsoft-Activision merger won't go through now just because Warren Buffett sold. Warren Buffett mainly just exits when he no longer knows what the outcome will be, but in all honesty, since he left the position, the market has become increasingly sure that this acquisition will go through.

The stock price has now closed up to around $90, so about a five percent spread, a lot closer to the $95 per share offer from Microsoft. But with that said, let's move on to some of the other notable stories from Buffett's 13F. Berkshire also reduced 7% in Chevron, which is actually quite a substantial move considering that position is around $20 billion. I'm not exactly sure why; we know that Buffett doesn't usually trim positions, so maybe this is to do with tax management or maybe he's just clearing some profit off the table.

Remember, it was in Q1 of last year that Buffett bought really heavily into Chevron, and the stock is up roughly 25% from that quarter to last quarter. So, he could just be locking in some profit on some of those shares or even some of the shares he bought earlier than that. Berkshire also continued their buying spree of Occidental Petroleum with another sixth-largest position in the Berkshire portfolio.

He's bought OXY shares now in five out of the last six quarters, and get this: he owns more than 25% of the entire company now. I've covered this one in more depth previously, so I won't go too much into it now. The short version of the story is Buffett looked into the company and was very impressed with the management. He noted the CEO, Vicki Hollub, was doing exactly what Buffett would do with the company, and he jumped in as he thought the business was high quality and a better place to park his money than simply keeping it in cash or treasury bonds.

Also worth noting, the business is paying solid dividends and returning value to continuing shareholders via share buybacks, and as we know, Buffett is a bit of a sucker for extra money in his pocket for doing absolutely nothing. I also want to reiterate that Buffett's movements in the oil stocks do not represent his prediction on where he thinks oil prices are headed in the short term. A lot of people saw him buy into the oil companies and took this as a big bet on high oil prices moving forward.

But Buffett has actually said previously that, "if we were in an oil stock, it's because we think it offers a lot of value at this price, but it does not mean that we think the price of oil is going up. If we thought oil was going up, we could buy oil futures." So, definitely don't take his moves in oil companies as a sign of oil prices.

But with that said, that was Buffett's moves in the oil stocks. And then beyond that, Berkshire also added 25% to Capital One Financial, reduced 39% in Celanese, halved their General Motors position, reduced 60% in Globe Life, sold out of McKesson, Marsh & McLennan, and Vertice Energy. Then they bought three new stocks: DR Horton, NVR, and Lennar Corp.

But have a look at this: when you switch to portfolio view, all of a sudden those moves get put into context. The Chevron and OXY changes are right up the top. The Activision stake was cut from position number nine. GM was cut from position number seventeen. But apart from that, the rest of the moves are happening way down in the bottom half of the portfolio, meaning they're not really significant to the Berkshire portfolio overall.

For example, the biggest new buy this quarter was DR Horton, which represents just 0.21% of the Berkshire portfolio. What this means in reality is that these new buys are again likely Ted or Todd, as Buffett just wouldn't be bothering with moves that affect the portfolio so little.

So, that's most of the major news out of Berkshire Hathaway's 13F filing this quarter. The only other thing I wanted to briefly mention is more of a milestone than a bit of news, and that is that Apple has now grown so much since 2016 that the investment Buffett made is now over 50% of the Berkshire Hathaway U.S. portfolio. We have to show the pie chart on that. Look at how much of an outlier Apple is versus all the other stocks in the portfolio.

Now the next largest stock is Bank of America at 8.51%, so absolutely crazy how much that investment has grown. Although, remember, if you're perhaps someone that looks at that weighting and gets a little bit nervous, while I do agree that one stock occupying over 50% of your portfolio is definitely a little bit nerve-wracking, we do have to remember that this is just Berkshire's U.S. stock portfolio.

If you read any of Buffett's annual letters, you quickly realize that it's not something to really worry about because, ultimately, the stock portfolio represents just one part of Berkshire's business. Remember, they also have a huge set of insurance businesses. They have a massive railroad business. They have Berkshire Hathaway Energy. And then, on top of those things, they have a large investment in Apple and smaller investments in other businesses. They're definitely not 100% all in on Apple stock; although yes, it is a substantial element of Berkshire's overall business at this point.

Anyway, with that said, that is everything Warren Buffett bought and sold in Q2 of 2023. Thanks very much for watching, guys! Please leave a like if you did enjoy, subscribe if you'd like to see more, and with that said, I’ll see you guys in the next video.