After dumping some $13 billion worth of shares amid the COVID-19 pandemic, Berkshire Hathaway is back in the buying mode. This change in stance would cheer a lot of investors, considering that the man responsible for the decisions, Warren Buffett -- CEO and Chairman of Berkshire Hathaway -- is rated as one of the most successful investors globally.
According to Tara Lachapelle of Bloomberg, the change in outlook is significant as previously, Buffett had shown remarkable calm during instances of wars and terrorist attacks. But the coronavirus appeared to have shaken him. In the annual meeting of Berkshire Hathaway Inc., Buffett had acknowledged that the pandemic could significantly damage the economy and his investments.
Let's take a look at the firms and stocks that Berkshire Hathaway focused on after returning from pandemic-induced exile.
Investments in limelight
With a pile of $150 billion at his disposal, Buffett appears to have given into the pressure of putting the money to use. However, none of these investments qualified for the tag of 'elephant' scale—a term Buffett uses to describe big buys, relative to the size of the firm and cash pile.
Some of the investments that stand out are Berkshire's purchase of Dominion Energy's energy business and the acquisition of some $6 billion worth of shares in five Japanese companies.
Further, the conglomerate invested some $250 million in the IPO of Snowflake Inc., a data-warehousing company—billed to be the most sought-after tech IPO of the year.
Interestingly, Buffett made the biggest investment in his firm, Berkshire Hathaway, by buying back $9 billion worth of shares. The total buybacks in the three-fourth of 2020 now stand at a whopping $15.7 billion.
Some analysts believe that Hathaway with its presence in food manufacturing, insurance, furniture manufacturing, railroads, and jewellery retailing is no longer a growth company. Rather it is more of a cash cow that could use investment decisions allocating $10 billion or up.
Analysts also believe that with buybacks, Buffett is setting the stage for post-Buffett Berkshire by effectively shrinking the company's investor pool.
According to the George Washington University Law Professor, Lawrence Cunningham, Buffett values shareholders that hold their Berkshire investments for decades. Buybacks are a way of easing out investors who are willing to sell.
Stocks in limelight
The firm seemed to be partial to pharmaceutical stocks, more so after the vaccine announcement by Pfizer. Other than Pfizer Inc., Bristol-Myers Squibb Co., AbbVie Inc., and Merck & Co. were among its picks. However, a quick look at the portfolio shows that this bet on pharma stock was not influenced only by the pandemic.
Banking shares saw some action in Buffett's portfolio, but on their way out. The firm reduced stakes in JPMorgan Chase & Co., Wells Fargo & Co., PNC Financial Services Group, and Costco Wholesale Corp.
The conglomerate also bet on shares of T-Mobile US Inc., as the largest wireless network operator is heading into 5G.