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Which Stocks Did Warren Buffett Buy and Sell In Q3?

Warren Buffett's Berkshire Hathaway (BRK.A)(BRK.B) trimmed shares of bank stocks, like JPMorgan Chase (JPM), PNC Financial Services (PNC), Wells Fargo (WFC), and M&T Bank (MTB), and bought shares of healthcare stocks, such as Bristol-Myers Squibb (BMY), Merck (MRK), and company in AbbVie (ABBV).

Berkshire Hathaway (BRK.A)(BRK.B) recently reported its 13F holdings and there were quite a few changes in the company’s portfolio. Let’s take a look at which stocks Warren Buffett bought and sold in Q3 of 2020.

Warren Buffett added six new positions

In the third quarter of 2020, Berkshire Hathaway surprised investors and added multiple pharma companies to its portfolio. Warren Buffett has historically shied away from the pharma sector.  However, healthcare is one of the more defensive asset classes and is recession-proof. Further, it is also one of the hottest sectors amid the pandemic. Berkshire bought 3.7 million shares of Pfizer (PFE) which just announced the development of a COVID-19 vaccine with an efficacy rate of 95%.

The other new additions for Berkshire in Q3 were T-Mobile (TMUS) (2.4 million shares), Snowflake (SNOW) (6.12 million shares), Bristol-Myers Squibb (BMY) (29.9 million shares), Merck (MRK) (22.4 million shares), and another healthcare company in AbbVie (ABBV) (21.26 million shares).

What did Berkshire sell in Q3?

While the Oracle of Omaha is betting big on pharma, he reduced his position in JPMorgan Chase (JPM) by 95%. Berkshire sold 21.2 million shares of the banking giant and it now accounts for just 0.03% of the company portfolio, down from 1% in Q2. Warren Buffett also sold his stake in Costco (COST) after the stock gained over 30% year-to-date.

Berkshire Hathaway is trimming its exposure to the financial sector and reduced its stake in PNC Financial Services (PNC), Wells Fargo (WFC), and M&T Bank (MTB) by 64%, 46%, and 35%, respectively in Q3. Financial companies have been underperforming in 2020 due to the COVID-19 pandemic.

As unemployment rates have soared there are concerns over the risk of defaults. A low-interest-rate-environment is also expected to impact the bottom line of banks in the near-term. In Q2, Buffett exited Goldman Sachs (GS) and this trend has continued in the September quarter as well.

Berkshire reduced its holding in Canadian gold mining company Barrick Gold (GOLD) by 42%. We know that Buffett is not a fan of gold and Wall Street was taken aback when Berkshire purchased close to 20 million shares of Barrick Gold in Q2.

Berkshire also reduced stakes in Liberty Global, DaVita, and Apple by 6%, 5%, and 3% respectively. Apple (AAPL) still accounts for 48% of Berkshire’s total portfolio and its stake in the tech giant is worth over $100 billion. Though Berkshire sold 36.3 million Apple shares it owns 944 million shares of the trillion-dollar heavyweight.

Warren Buffett added stake in Bank of America

While Warren Buffett sold off millions of dollars in financial companies, Bank of America (BAC) is an anomaly. The company is the second-largest bank in the U.S. in terms of asset base and has been a part of the Berkshire portfolio for close to a decade. Buffett bought 85 million shares of BAC and increased his position by 9%, accounting for 10% of Berkshire’s total portfolio.

Another noticeable buy for Berkshire was supermarket giant Kroger (KR). It's quite possible that Buffett is impressed with Kroger’s resilient business model and its dividend growth. In the last five years, the company has increased payouts at an annual rate of 12%. In the June quarter, Kroger increased quarterly dividends by 12.5% to $0.72 per share indicating a forward yield of 2.2%.

Another value bet by Warren Buffett is General Motors (GM), a company first bought just after the financial crash in 2011. Berkshire increased positions in the fifth-largest automobile manufacturer in the world in the last two years and now holds a 5.5% equity stake in the company, after increasing its holding by 7% in Q3.

The final takeaway

It's quite clear that Warren Buffett is bullish on the pharma sector and is bearish on the banking industry with the exception of Bank of America. He might also believe that Costco does not have significant upside potential after an impressive run in 2020 while the experiment with Barrick Gold was a rather short one.

Further, the increase in stake in GM might suggest Buffett expects the automobile sector to stage a turnaround and demand to pick up in 2021.

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PFE shares were trading at $36.63 per share on Friday morning, up $0.44 (+1.22%). Year-to-date, PFE has declined -2.69%, versus a 12.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.


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