Speaker 1: Anyone who has been paying attention to what Warren Buffett’s Berkshire Hathaway has been doing lately will know that they have made some interesting moves in the stock market.
They’ve recently come out and made big investments in the pharmaceutical stocks. Now, we all know that these pharma stocks are the ones developing vaccines for the world, illness that has spread to almost every country. This means there is a lot of potential profit on the table for the companies that develop cures and sell it worldwide. This has left a lot of investors, including Buffett and his team, intrigued at the potential amounts of money to be made in this video. What I’m going to do is I’m going to show you the exact companies that Berkshire Hathaway decided to invest in, and then we’ll get a bit deeper into the reasons why. So Berkshire Hathaway, Warren Buffett’s investing firm, bought 21 million shares of Evvy, 22 million of Misk, three point seven million shares of Pfizer and nearly 30 million shares in Bristol-Myers Squibb. This was as per his 13 filings that his company is required to release. This means every investor can look at what he’s buying. The interesting thing is that Pfizer, the company that has a vaccine, has been his smallest investments out of the pharma stocks.
Berkshire invested under one hundred and fifty million dollars in this, which to most people I know, that’s a massive investment to Berkshire Hathaway at some loose change found on the wallet. And I know a lot of people do look to make similar investments to Buffett. I don’t think it’s a dumb strategy, but you do need to do your own research and understand each stock. I cannot stress this enough. But for those who do want to know if they can be bought for just under a hundred dollars per share, which comes with an extremely nice dividend of five point three percent, any long term could be Academy followers or know that this has been on my buy and list. Pfizer sells for thirty six dollars a share that a company that has the vaccine, Bristol-Myers Squibb, sells for 62 dollars a share. And lastly, Musk sells for 80 dollars a share. So it’s not like any investor can afford these. Anyone can buy into these companies.
You just have to decide if there are good enough investments or not. That’s where you want to analyze. Why did Buffett’s Berkshire Hathaway decide to plow billions into these pharma stocks? And I’m not sure if you guys have been following Buffett for a while, but for those that have, they will know that he has teased the idea of buying big pharmaceutical companies before. Back in 1997, Buffett said at his annual shareholder meeting that you could have just bought the whole industry and done very well. We didn’t do it. It was a mistake. Charlie Munger, Warren Buffett’s right hand man, agreed with that later, saying we stupidly blew that one. But fast forward to 2020. It looks like Berkshire made sure that they didn’t blow this opportunity. As the saying goes, you got to learn from your history, learn from your past or you doomed to repeat it. Berkshire have sunk more than five billion dollars into these four pharma stocks that I just went through. But you might rightfully ask the question, why didn’t they just buy one pharmaceutical stock and invest heavily into that? I mean, she’s known for picking great individual companies and a sector and making a lot of money Apple, Coca-Cola, Geico, etc., etc., etc.. However, if you dig deep into the archives, we can see why Buffett has made this decision. Back in 1999, Buffett said he did not have the specialist skill to pick any individual pharmaceutical stock. But for him, betting on the industry as a whole was the way to go, he said. In 1999, if we could buy a group of leading pharmaceutical companies at below market multiple, I think would do it in a second. It’s hard to evaluate the individual companies, but that’s no reason not to have a basket approach to the industry. And that’s the approach that Berkshire have gone with. Now, 20 years later, they’ve bought a basket of different pharma stocks instead of singling out just one. And I’ll tell you one of the investment thesis behind buying pharma stocks. First of all, we’ve got to look at valuation levels. If we look at Pfizer, five years ago, it was selling for thirty two dollars a share.
Today it’s selling for only a couple of dollars. More than that, Bristol-Myers Squibb is selling for less than what it was selling for five years ago. Merck and AbbVie have gone up. By 50 and 60 percent, respectively, the entire market, however, has gone up by over 70 percent. So one could easily argue that these pharma stocks are selling at a discounted price, as Buffett said back in the day, about pharmaceutical stocks at some valuation level. It would be something we would think very hard about. And Buffett continued. And it’s something where we could put quite a bit of money if it happened, which is another. Plus to us, it appears that today these pharma stocks, at least for Berkshire, are selling at an attractive valuation level at prices that they consider attractive. So you’ve got, let’s say, cheap prices. But the other thing is you’ve got a lot of potential for growth in this current environment. We all know that the world, more than ever needs vaccines and solutions to problems. And these pharma companies are the ones who are looking to solve them. This creates enormous potential revenue for these companies, low prices, high potential growth. That’s something that every investor is a fan of, while every smart investor. Let’s just say that. So that’s one of the bull cases to buy in pharma stocks. And of course, there’s plenty more, but there’s also some bear cases out there as well. So that’s up to you to decide which you align with, then make your own decision. Of course, never just go with what someone else is going with. Go with your own opinion after weighing up the facts. OK, now I want to talk about the other stocks that Buffett’s Berkshire Hathaway has been buying and selling as of late 2020. We’ll start with the buys. We’ll start with the positives. They bought a further 85 million shares of Bank of America. That’s an increase of nine point two percent. Berkshire also bought a completely new stock that they’ve never bought before. T Mobile, the Internet company. They bought two point four million shares in the stock worth two hundred seventy five million dollars. They also added seven point one percent to their General Motors position and thirteen point eight percent to their Kroger position. The supermarket company, however, one of the most interesting buys, along with the pharma stocks, was Berkshire’s investments in snowflakes. IPO snowflake, for those who don’t know, is the cloud based data warehousing company. You know, instead of having to store everything with your own hardware, corporate users can store and analyzed data online with Snowflake. It’s revolutionary technology. We’ll just say that. And Berkshire, who never invest in IPOs, they invested in Snowflake at the IPO price of one hundred and twenty dollars.
Since then, it has traded for about two hundred and fifty dollars. So Buffett’s Berkshire has already made some good money with this investments. OK, let’s get into the stocks that Berkshire sold. Now, the biggest sell was in the company Apple, where thirty six point three million shares were let go of. That’s a reduction of three point seven percent of Berkshire’s total Apple position. Then two bank stocks, Wells Fargo and JP Morgan, had their positions reduced as well. One hundred and ten million and twenty one million shares, respectively, were sold. But for me, the most interesting sale for the quarter was the one point five dollars billion worth of Cosco that was sold. For those who don’t know, Cosco has been a big investment for Charlie Munger over the years, essentially his entire net worth for the Munger family. They own three stocks, Berkshire Hathaway, Leyla’s fund and Costco. But Berkshire Hathaway, they no longer hold any Costco shares that’s been completely sold out of as well as this. They sold another financial stock called PNC Financial Services.
Three point four three million shares were sold here. That’s a reduction of 64 percent. So Buffett’s Berkshire Hathaway has been doing both buying and selling. They’ve got rid of some bank stocks, some Apple, some Costco, and they’ve deployed some capital and pharma stocks. I think this is a smart idea. I think pharma stocks are going to play a big role in the world, especially over the next five years and investments in these companies. I don’t think it’s a dumb plan, but because each of these pharma companies are investments under two billion dollars, it’s likely that they were done by Buffett’s two main investors, either Ted or Todd Combs. Both of these guys follow Buffett’s value, investment style of buying good quality businesses for cheap. Prices.