Forget the tales of retail investors day-trading in recent weeks. When it comes to investing, no one holds a candle to what Warren Buffett has achieved as the CEO of conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B).
Buffett has grown his net worth from $10,000 in the 1950s to approximately $90 billion, as of Feb. 9, 2021. Keep in mind that this figure doesn't account for the $37 billion the Oracle of Omaha has generously donated to charitable organizations over the past 14 years.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Meanwhile, Buffett has led Berkshire to an average annual return for investors of 20.3% between 1965 and 2019. This works out to an aggregate gain of 2,744,062%. For comparison, the benchmark S&P 500 didn't even tally a 20,000% total return (i.e., including dividends) over the same time frame.
Mark your calendars, investors
Given his track record of success, Warren Buffett rightly commands the attention of Wall Street and investors. In just five more days, that track record will get a new chapter.
Money managers with over $100 million in assets under management are required to file Form 13F with the Securities and Exchange Commission roughly 45 days after a quarter ends (which happens to be Feb. 15). A 13F provides an under-the-hood look at what the brightest minds on Wall Street were up to in the preceding quarter. Considering how successful the Oracle of Omaha has historically been, many eyes will be on Berkshire Hathaway's 13F filing, which usually comes after the market closes for the day.
What might the biggest Buffett news of the quarter hold for investors?
Image source: Getty Images.
Buffett and his team likely went shopping
If there's one certainty, it's that Buffett's investing lieutenants, Todd Combs and Ted Weschler, will continue to play a larger role in Berkshire's trading activity. This was plainly visible in the dozens of buys and sells executed in the first nine months of 2020. Buffett has historically run a pretty passive portfolio, but it's shifted away from that in recent quarters.
As for the fourth quarter, it would be surprising if Buffett and his team didn't go shopping. Even with the stock market pricier than it's been since the dot-com bubble, the Oracle of Omaha has a knack for finding plain-as-day value.
For example, pharmaceutical stock Pfizer (NYSE: PFE) is a company I can see Buffett's investing lieutenants adding to in the fourth quarter. Pfizer is one of two drug developers with coronavirus disease 2019 (COVID-19) vaccines approved by the U.S. Food and Drug Administration for emergency use. Following the release of its fourth-quarter operating results, the company anticipates that it will generate $15 billion from its COVID-19 vaccine in 2021. While generally slow-growing, Pfizer looks relatively inexpensive at roughly 10 times Wall Street's profit projections for 2021.
Additionally, don't be shocked if Buffett and right-hand man Charlie Munger put more of the company's $145 billion cash hoard to work by repurchasing shares of Berkshire Hathaway. Buffett's company spent a good chunk of the fourth quarter valued between 20% and 30% above its book value. That compares to a range of 30% to 60% above book value between 2013 and 2019. Buffett has repurchased $22 billion worth of his company's stock since mid-2018, and that trend likely continued in the fourth quarter.
Image source: Getty Images.
Expect some selling activity, too
On the other hand, it's a veritable certainty that Buffett or his lieutenants pared down or sold off some of Berkshire Hathaway's positions.
Money-center bank Wells Fargo (NYSE: WFC) was likely pared down in the fourth quarter. Buffett loves bank stocks, but Wells Fargo broke the cardinal rule by losing its customers' trust in 2016-2017, when it revealed that its employees had opened approximately 3.5 million unauthorized accounts over a seven-year stretch beginning in 2009. Wells Fargo remains profitable and has excellent rapport with well-to-do clients, but it appears that Buffett's trust in management was irreparably shaken. After three years of selling, more seems likely to have occurred in Q4.
Sticking with the banking theme, JPMorgan Chase (NYSE: JPM) also likely got the boot. In the first nine months of 2020, Berkshire Hathaway reduced its stake in JPMorgan from 59.5 million shares to fewer than 1 million. Since Buffett has never been one to slowly walk down a stake in a company he's lost faith in, this all but assures that JPMorgan Chase was given the heave-ho in the fourth quarter.
Why sell these typically top-performing bank stocks? The answer probably lies with Buffett and his team getting the OK from the Federal Reserve Bank of Richmond to up Berkshire's stake in Bank of America to as much as 24.9% without being labeled a bank holding company. BofA looks to be Buffett's clear-cut favorite bank stock, with ancillary companies like JPMorgan Chase getting pushed to the wayside.
Mark your calendars, folks, because the big day is just five sunrises away.
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Sean Williams owns shares of Bank of America and Wells Fargo. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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