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Tags: warren buffett | berkshire hathaway | 8 billion | stock sales

Buffett's $8B in Stock Sales Raises Crash Worries

Buffett's $8B in Stock Sales Raises Crash Worries
Berkshire Hathaway Chairman and CEO Warren Buffett (AP)

By    |   Friday, 18 August 2023 08:49 AM EDT

Warren Buffett’s Berkshire Hathaway was a net seller of $8 billion of equities in the second quarter, potentially signaling the Oracle of Omaha’s bearish outlook on the U.S. economy and overvalued stocks, Newsweek reports.

Berkshire sold $13 billion worth of shares and bought less than $5 billion, according to the company’s second-quarter earnings released earlier this month. This comes on the heels of $6 billion of net equity sales in the first quarter.

This raises Buffett’s cash pile to $147 billion, 13% higher just in the second quarter, and stokes investor concerns that the U.S. will eventually be in a recession.

Viewed another way, Berkshire bought $57.3 billion worth of stocks in the first half of 2022 but a meager $7.4 billion in the first half of 2023, a sign that the legendary investor is protecting his portfolio from a stock market crash, Motley Fool reports.

Buffett “has always acted as a voice of confidence for markets during turbulent times,” says David Nicholas, president and founder of Nicholas Wealth Management. “But this marks a significant departure in his tone and positioning toward U.S. equities.”

Nicholas believes Buffett is guarded for three main reasons: “The three big risks for Buffett are China, the U.S. banking sector and commercial real estate. These are very real risks for economic growth and just one would be enough to derail growth—yet we are dealing with all three at the same time.”

Steve H. Hanke, professor of applied economics at Johns Hopkins University who served on President Reagan’s Council of Economic Advisers, adds: “When a recession is right around the corner, Buffett knows that cash is king, particularly when he can earn a decent rate of return on it. Apparently, Buffett anticipates that the U.S. economy is headed for troubled waters. I think he is correct.”

A significant factor Buffett may be weighing, Hanke suggests, is the money supply.

“The money supply is fuel for the economy, and it has been contracting over the last year,” Hanke says. “Now, the rate of contraction is -3.6%/year, something we have not seen since 1938. Following significant changes in the money supply, the economy changes course with a lag of 6-18 months. At present, the economy is running on fumes and a 2024 recession is inevitable.”

8 Stocks Buffett Sold

Buffett hacked his Activision Blizzard (ATVI) holdings by 70% in the second quarter to 14.7 million shares worth $1.2 billion, Kiplinger reports. Investors are not viewing this as a loss of confidence in the stock but as an arbitrage play based on Microsoft’s acquisition, which earlier looked like UK regulators would readily approve.

Berkshire’s highly concentrated portfolio slashed its holdings of General Motors (GM) by 18 million shares, or 45%. GM, which Berkshire has owned since 2012, is now the investment firm’s 24th largest holding, with a weight of 0.2%.

Buffett also cut back 7% of his stake in Chevron (CVX) to 123.1 million shares. At a total of $19.4 billion, Chevron is now the fifth largest holding with a 5.6% weighting in the renowned investor’s portfolio.

Celanese (CE) positions in the Berkshire portfolio also were substantially cut, by 38% to 5.4 million shares worth $620.5 million. CE is now its 31st largest holding, representing a mere 0.2% of the Berkshire investments.

Buffett also dumped insurance companies Globe Life (GL) and Marsh & McLennan (MMC), pharmaceutical distributor McKesson (MCK) and Vitesse Energy (VTS).

Kiplinger lists the complete holdings of the Berkshire Hathaway portfolio here.

© 2024 Newsmax Finance. All rights reserved.


StreetTalk
Warren Buffett's Berkshire Hathaway was a net seller of $8 billion of equities in the second quarter, potentially signaling the Oracle of Omaha's bearish outlook on the U.S. economy and overvalued stocks, Newsweek reports.
warren buffett, berkshire hathaway, 8 billion, stock sales
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2023-49-18
Friday, 18 August 2023 08:49 AM
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