Speaker 1: One of the most important things that I like to do is keep up to date with the billionaire investors portfolios, what stocks are they buying? What stocks are they selling?
Why are they doing this? And the recent portfolio that I’ve been looking at is Warren Buffett, a.k.a. the Investing Goetze. Now Warren Buffett, he runs the largest investing firm in the world, Berkshire Hathaway. If we take a look at their portfolio, they’ve been doing a lot of selling, in fact, more selling than buying. They sold introduced 11 stocks in the most recent quarter and they bought added to just nine stocks. So let’s take a look at this. This is very interesting. J.P. Morgan, the bank, he sold 100 percent out of his position. Pfizer, 100 percent sold three point seven million shares and total PNC Financial Services, again, 100 percent sold one point nine million shares gone empty. Bank no longer holds any shares in or sold out of. And the last one that he sold 100 percent out of his position is Barrick Gold Corp., the gold mining company. I find that sale particularly interesting during this time. We can talk about that one soon. But let’s continue along this list. Wells Fargo, almost 60 percent was sold out of this bank stock. Suncor Energy, 28 percent sold Liberty, ten point two percent. General Motors, the joint vehicle manufacturing company that was reduced by nine point three eight percent. Apple, that’s an interesting one. He’s made a lot of money with Apple stock over the past couple of years.
But recently he sold out of six percent of his position. And the last stock that he sold out of was U.S. Bancorp zero point six percent with a total of eight hundred twenty three thousand shares. Now, I find this very interesting because Warren Buffett, those of you who know him, he’s normally against selling stocks. That’s why he says our favorite holding period for stocks is forever, a.k.a. never selling them. But if we look at his most recent filings, he’s kind of been doing the opposite of what he likes to do. And these, as you just saw, they’re not small sales. They’re not one, two, three, five percent reductions. They are huge reductions in the stocks that he owns. He sold 100 percent out of J.P. Morgan, Pfizer, PNC, MNC Bank and Barrick Gold. He sold 58 percent out of Wells Fargo and 28 percent out of Suncor energy. So the main question that we should be asking ourselves is, why is he selling out of so many of his positions, particularly the banking sector, PNC Financial, JP Morgan, Wells Fargo, MASC Bank, U.S. Bancorp, all of these apart from US Bancorp, he dramatically reduced his positions in most he sold completely out of in the banking sector is normally one which Buffett likes his own bank stocks for a number of years now. So what’s changed? OK, first is the economic environment that we’re in all of this, that all of this free money, these low interest rates that we see because of a range of these things, a lot of investors are worried about a new Great Depression and what happened in the last Great Depression. Most of the banks failed and had to shut down. In fact, in the last financial crisis, Buffett actually had to bail out Goldman Sachs with five billion dollars to help it recover. So it is fair to argue that over the next five years, especially if we see tough economic conditions, banks could struggle. And this could be made even worse with the rise of finance being done through the likes of PayPal through Square and with the growing popularity of pure online banks like Sophi. I think it’s for these reasons, and probably a few more, why Buffett’s letting go of bank stocks big time. But don’t forget that Warren Buffett is what’s known as a value investor, an investor who looks for cheap prices relative to the actual value of stocks. And you could argue that right now the valuations of stocks are the opposite of what a value investor likes. A value investor likes low prices, and right now prices are high. Look at the S&P 500 PE ratio. That’s forty more than double the average of a history of fifteen. The Shiller P e ratio is thirty five point seven way higher than what it was in the last financial crisis in 2008. And even the Warren Buffett indicator, Buffett’s main way of telling where valuations are in the market, that’s sky high right now. It’s one hundred eighty nine point five percent higher than both the 2000 technology bubble and the 2008 housing bubble. The prices are high if you look at the main indicators as. Pretty hard to argue that they’re not. Now, Warren Buffett, he learned the core of his investing style from someone called Benjamin Graham, a.k.a. the godfather of value investing in Benjamin Graham says this about buying and selling stocks.
Boy, when people, including experts, are pessimistic and sell when they are actively optimistic. Now, a lot of investors are very optimistic when it comes to stocks. Look at the high prices. Look at the likes of GameStop. Look at the levels these IPOs are selling for. They’re optimistic and perhaps the is just following the advice of his former mentor and Sulien whilst there’s high optimism in the markets. But the other thing that we have to look at when trying to understand why Buffett is selling is the economy and the performance of businesses. So if we compare today’s economy to what it was during twenty nineteen and the start of twenty twenty, it’s down GDP. It’s lower than what it was in the third quarter of twenty nineteen. Same with the fourth quarter twenty nineteen and the first quarter of twenty twenty decreased. You know, you look at how many permanent closures of businesses that have taken place over the past year or so. There’s a lot they’ve gone from temporary closures to actually we have to close these businesses down because we can’t afford to run them anymore. Look at the earnings for the S&P 500. They have decreased a lot. Just take a look at the top right hand part of that graph over there.
So businesses like stocks are earning less money. But as we talked about earlier, the selling for higher prices, the price of S&P 500 stocks is well above what it was a year or two years ago. So higher prices, less earnings, less production, more business closures. I’m sure Buffett’s looked at all of these and things. Hmm. This isn’t a great recipe for success. And it all adds up to why he’s selling. Another thing that we should take into consideration is the history of market crashes. Now, generally, throughout history, we see a market crash on average once every 10 years. Now, this is an average it’s not like as soon as the 10 year mark hits, the market crashes. Sometimes it’s eight years. Sometimes it’s longer, 13 doesn’t matter. The average is 10 years. Now, the last time we had a big market crash was in 2008. Yes, we did have a 30 percent crash in 2020, but a bounce back and a couple months. There are some investors saying that we are due to see a proper market crash. So Buffett’s made some interesting sales during this period, but he’s also made some calculated buys targeted at a specific industry, which I want to show you now. So, as we know, Buffett sold 11 stocks recently, but he bought nine as well. So the first one he bought was Restoration Hardware. Only a tiny, tiny amount, though. Second, he bought Chevron. He added nine point five percent to his position here. Third, Bristol-Myers Squibb, the American pharmaceutical company. He added 11 percent. His position, AbbVie, also a pharmaceutical company. He added to his position there, Marsha McLean, the insurance business he added to as well. Merck, again, a pharmaceutical company, Berkshire, added twenty eight percent to their position. Kroger’s stock increased its position and as well. And lastly, T-Mobile and Verizon, he added substantially to his positions in these telecommunications company, over 100 percent added. So the one pattern that stood out to me was the amount of pharmaceutical stocks that Buffett was buying. And I think this is a smart strategy for these times because who are the main companies that will really be profiting from the pandemic and the so-called new world?
One of those companies that will be as pharmaceutical companies, they are the ones that are developing the vaccines for billions of people. They are the ones that are creating the pills and the well, at least so-called solutions. So I think in the new world, pharmaceuticals is a smart investment for Buffett to make. And the other thing that he bought heavily into was the telecommunications sector. T-Mobile and Verizon were among his biggest plays this quarter. Again, I think it’s a smart move by Buffett. Let’s be honest. The world is becoming more dominated by the Internet. So why not be an owner in the companies that provide the Internet, you know, with all of the Xoom meetings instead of real life meetings with work from your computer, instead of work from an office, companies like Verizon and T-Mobile are benefiting from this change to a he’s playing the game smart. He’s let go of a lot of his bank stocks, which could Strugar. During these times, and he’s let go of a range of other businesses, but he’s also smartly added to both pharmaceutical stocks and telecommunication ones, so he’s picked out specific industries to add to bots.
There’s no doubt that the thing that should stand out the most to US investors is the fact that he’s done so much selling this recent quarter. I believe it’s because of a mix between high prices, struggling businesses with lower profits, high debt in the system, and a potential chance of a recession. Why we’re seeing this unusual behavior from Warren Buffett.