Speaker 1: As you guys all know, I like to keep a keen eye on what Warren Buffett is doing on the stock market, and I’ve been doing this for quite some time now. If we look at the past 11 years, he’s been doing one thing, buying stocks, the likes of Apple, Bank of America, General Motors, Southwest Airlines, etc.
That is until 2020 comes along 2020. He’s actually been doing completely the opposite. Most of his stock moves have been sales, and we’ve seen this recently as well when he released his 13 filings for the recent quarter. Here he made 22 stock moves, 17 of those moves with a sulien of stock in this video. I want to go over first the stocks that he decided to sell. And secondly, I want to go over the reasons why Buffett is predominantly selling instead of buying.
So the first major group of stocks that he’s been selling as his bank and financial stocks, he has the list of the ones he sold Wells Fargo. He got rid of eighty five point six million shares, reducing his position by twenty six point five percent. J.P. Morgan, he sold thirty five point five million shares, reducing this position by sixty one point five percent. PNC Financial, he’s reduced by forty one point eight percent. Bank of New York Mellon, he sold nine point three percent of that position. US Bancorp is reduced by point four percent. MNC Bancorp, he’s reduced by fifteen point seven percent. And Goldman Sachs, guess what he’s done with that? He sold out of his entire position. That’s seven banking and financial stocks being either sold by a certain percentage or completely sold out. The next group you probably already know by now, Delta, Southwest, United and American Airlines, he has completely sold out of all of those positions, doesn’t have a single stock left in them. OK, another stock, his company, Berkshire Hathaway, has completely sold out of its restaurant Brands International, the fast food holding company. He also sold out of his entire Occidental Petroleum stock. Now, to be honest, that was a bit of a surprise for me. I thought he’d be enjoying oil stocks during this time while they’re cheap. But no, another position reduced was charter communications. He sold three point nine per cent of that stock. Also, the majority of Sirius XM stock was sold, but he bought Liberty, Sirius XM. So that kind of cancels out one another. And MasterCard and Visa were the last stocks that were sold this quarter, reduced by seven point five and five point four per cent, respectively. So that’s all of the stocks that he sold, 17 of them in total. I don’t know if Buffett has ever been on a selling spree this big. Now, the interesting thing is if you look at the stocks that he bought, most of them were defensive plays. So overall, he bought five stocks this quarter. The first and only new position there BofA bought was a gold mining company by the name of Barrick Gold Corporation. BofA bought twenty point nine million shares in this company, worth about five hundred sixty four million dollars. Now, the fascinating thing that all of us follow is that there will no is that Buffett has not bought gold ever in his life. In fact, he’s normally against gold. He said back in 1998 that gold gets dug out of the ground in Africa or someplace. Then we melted down, dig another hole, bury it again and pay people to stand around. Guarding it has no utility. Anyone watching from Mars would be scratching their head. So he never liked gold. That is up until now where he decides to buy millions of dollars of it. So the question is why? Because it’s a defensive play. It’s known as a safety measure and it’s known as a portfolio hedge in case of a crash. But this wasn’t the only defensive move made by Buffett.
He also added four point two million shares to his Suncor energy position. Now, why should you take note of this? Well, again, it’s those who know the market well who are surprised by this, because energy stocks and precious metal are known to do the best during the very late stages of the market cycle, often right before a market crash. So the fact that he’s gone and bought, first of all, gold and energy, it’s something to mull over. Let’s just say that his third stock buy was accompanied by the name of the Kroger company where he bought three million shares, a Kroger as United States largest supermarket in terms of revenue. And it’s more of a defensive play. Why? Because even in a market crash, people will still need to buy from the supermarkets. As for stock buy was Store Capital Corp., where he bought five point eight million shares. It’s a great stock. So Buffett has put a bit of money into real estate. And his last stock buy, which I briefly mentioned before, was Liberty Sirius XM Group. But he sold his Sirius XM Holdings stock. So I think he’s just making a direct switch here between the two companies. So I do want to sum this up for you guys. Warren Buffett’s most recent moves, this call. He’s made 22 of them, 17 of those were stock sales, five of those were stock buys. However, three of those stock buys were in defense of stocks, gold, energy and consumer staples. The other buy was a real estate investment trust, and the last was used as a stock switch. Put simply, I’ve never seen Buffett be this defensive with his market moves, probably since 2006, 2007. And, you know, Buffett is never going to tell you outright his exact thoughts on the markets. What he normally says is he just doesn’t know what’s going to happen over the next couple of years. But what you need to look at as an investor is not exactly what he’s saying, but look what he’s doing.
Look at the moves he’s making. And in 2020, it’s been pretty much sell, sell, sell. So the question we need to ask ourselves is why? Why is Buffett, who is pretty much always buying stocks, why has he made the switch to selling? There’s a couple of reasons that I want to talk about. The number one reason why I think Buffett has made these sales is because of stock prices. As we all know, it’s been around 11 years of a strong bull market. This has caused prices to be at sky high amounts. It’s currently almost five times the price as it was in 2009. And we can see this with Buffett’s primary indicator that he uses to see where we are in the markets. As we all know, Buffett likes to invest in the USA and the USA. Buffett Indicator is sitting at 131 percent. That’s three percent away from the market being significantly overvalued. Right now. It’s sitting in between what it was back in the 2000 dotcom crash and the 2008 housing bubble. And, you know, if you look at Benjamin Graham, Buffett’s mentor, he says there’s only very few occasions where you should sell a stock. And he has a quote. Graham said, Buy wisely when prices fall sharply and sell wisely when they advance a great deal. And other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies. So basically, according to Buffett’s mentor, the only time you should really look to sell a stock is when prices get ridiculously high. And this may be one of those occasions. Stock prices are so high right now, there’s no great deals in the market and Buffett has decided to sell. The other thing you’ve got to realize is before this, Buffett had a very offensive portfolio. As of twenty nineteen, most of his money was in stocks stuff 20, 20 was the same. Yes, Buffett’s got one hundred thirty seven billion dollars in cash, but Berkshire Hathaway is worth 500 billion dollars. That means the remainder of his portfolio is in either stocks or fully own businesses. So 20-20 could simply be the rebalancing year where Buffett looks at his portfolio. He looks at stock prices, he looks on what the economy is doing, and he thinks, hang on, I need to play the game more defensively.
So he starts selling and less that cash pile build up for when times might be cheaper. And yes, as I’ve just mentioned, the economy, that’s something we’ve got to talk about. You’d have to be hiding underneath a rock to not know that the economy has taken a hit in 2020 U.S. GDP growth. Normally, it’s in the positives by a couple percentage points each year. However, in 2020, it’s expected to decline by six point five percent unemployment. That number shot up to 23 million dollars this year. It went from three point five percent in 2019 to around 10 percent this year. Businesses have been on lockdown. The travel industry is basically being closed. The economy has been hit hard. You look at the stock market, however, it’s rolling along just fine at all time highs. So you got prices which have got two all time highs, but underlying production, it’s got worse. I think this is a major reason why Buffett has been selling so many stocks. But to be honest, I was surprised that he sold so much of his bank stocks, you know, considering how cheap they’re going for relative to the markets. But I guess if you look at the Great Depression, banks were one of the worst sectors hit, and it’s the same in other recessions as well. So maybe his bank sales are justified.
Also, we all know why he sold his airline companies. They’ve got a lot of debt to pay and they’re getting more revenue coming in. They need travel for revenue and there’s no travel right now. So you’ve got a lot of businesses, especially ones that buffer zones that are struggling. Then Buffett goes and he looks at his indicator, he looks at stock prices. They’re at all time highs and he decides to play the safe game. For me, I don’t think it’s the worst move to make during these market conditions.