Warren Buffett is Decreasing Stakes in These 6 Stocks

Published on September 6, 2022 at 11:01 am by Usman Kabir in Hedge Funds, News

In this article, we discuss the 6 stocks that Warren Buffett is decreasing stakes in. If you want to read about some stocks in the Buffett portfolio, go directly to Warren Buffett is Decreasing Stakes in These 3 Stocks.

Warren Buffett of Berkshire Hathaway manages an equity portfolio worth more than $300 billion as of the end of the second quarter of 2022. Buffett is a legendary value investor whose stock picks, mostly stable, cash-flowing businesses, have averaged an annual return of more than 20% for around five decades. As soaring inflation and rising interest rates prompt an exodus from growth towards value in 2022, the investing prowess of Buffett has come under increased spotlight in the media and there is special interest around his recent moves at the marketplace.

Some of the top stocks in the investment portfolio of Berkshire Hathaway include Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and American Express Company (NYSE:AXP). Between March and June 2022, the value of the equity portfolio decreased by around $63 billion. In this time, Buffett made new purchases in no stocks, sold out of 2, reduced holdings in 4, and made additional purchases in 9 stocks. The top ten holdings comprise over 87% of the overall portfolio. The top holdings are concentrated in the tech and financial sectors.

Berkshire Trims BYD Stake, Buffett Talks Inflation

The biggest news from the latest 13F filing of Berkshire Hathaway concerns China. Buffett is well-known for his aversion to technology stocks, some exceptions being Apple, Amazon, and Chinese automotive manufacturer BYD. In the past few months, Buffett has been decreasing his stake in the Chinese firm. Per latest data, Berkshire recently sold 1.72 million Hong Kong-listed shares of BYD. This sale raked in around $57 million and lowered the Berkshire holdings in BYD to 18.87% from 19.92% a few days earlier.

The sale is grabbing attention on Wall Street because Buffett has backed BYD for more than a decade. In the past few years, the company, once almost unknown to American investors, has overtaken some of the largest carmakers in the world to become a leading electric vehicles manufacturer. In the past five years, the share price of the company has climbed by an astonishing 357%. All indicators point to further growth for BYD as EV sales increase around the globe, even as Buffett dumps the stock.

Investors eager to replicate the success of Buffett can also look towards his comments at the annual shareholder meeting of Berkshire Hathaway in late April to reflect on their strategies. At the time, Buffett reiterated his strong belief that brand power and product superiority were not affected by inflation, a belief that is also reflected in his portfolio, noting that the “best thing a person could do is invest in a wonderful business that makes products that are in demand regardless of the performance of the dollar”.

Our Methodology

The companies listed below were picked from the investment portfolio of Berkshire Hathaway at the end of the second quarter of 2022. The stocks in which the hedge fund decreased stakes in the second quarter, compared to filings for the first quarter of 2022, were selected. The exact percentage decrease in stake is mentioned alongside other details. The analyst ratings of each company are also discussed to provide readers with some more context about their investment decisions. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

Warren Buffett is Decreasing Stakes in These Stocks

6. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 58

Percentage Decrease in Stake in Q2 2022: 100%

Verizon Communications Inc. (NYSE:VZ) provides technology and communications services. Berkshire Hathaway sold off the entire stake it had in the firm during the second quarter of 2022.

On June 22, RBC Capital analyst Kutgun Maral maintained a Sector Perform rating on Verizon Communications Inc. (NYSE:VZ) stock and lowered the price target to $54 from $57, noting that the firm had a track record that positioned it well for the coming period of uncertainty.

At the end of the second quarter of 2022, 58 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in Verizon Communications Inc. (NYSE:VZ), compared to 69 in the previous quarter worth $4.1 billion.

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. (NYSE:VZ) was one of them. Here is what the fund said:

“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like telecom (Verizon Communications Inc. (NYSE:VZ)). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”

5. U.S. Bancorp (NYSE:USB)

Number of Hedge Fund Holders: 43

Percentage Decrease in Stake in Q2 2022: 6%

U.S. Bancorp (NYSE:USB) is a financial services holding firm. According to regulatory filings, Berkshire Hathaway owned 119.8 million shares in U.S. Bancorp (NYSE:USB) at the end of June 2022 worth $5.5 billion, representing 1.83% of the portfolio. In mid-July, U.S. Bancorp (NYSE:USB) posted earnings for the second fiscal quarter, reporting earnings per share of $1.09, beating market estimates by $0.02. The revenue over the period was $6 billion, up more than 4% compared to the revenue over the same period last year and beating estimates by $120 million.

U.S. Bancorp (NYSE:USB) has been in the Berkshire portfolio since the fourth quarter of 2010. Back then, the position consisted of just 69 million shares purchased at an average price of $24.57 per share. Buffett has reduced his holding in the years since, most significantly in the first quarter of 2012 and the first quarter of 2021. The share price of U.S. Bancorp (NYSE:USB), as of September 6, is upwards of $45 per share. At the end of 2019, Berkshire owned more than 132 million shares of U.S. Bancorp (NYSE:USB).

U.S. Bancorp (NYSE:USB) has an impressive dividend history stretching back close to two decades. U.S. Bancorp (NYSE:USB) has paid a consistent dividend to shareholders for the last nineteen years. Over the past eleven years, this payout has registered consistent growth as well, in a sector where the median in this regard is just two years. In mid-June, U.S. Bancorp (NYSE:USB) declared a quarterly dividend of $0.46 per share, in line with previous. The forward yield was 4.02%.

On July 12, Citi analyst Keith Horowitz maintained a Neutral rating on U.S. Bancorp (NYSE:USB) stock and lowered the price target to $50 from $53, noting the losses from the recent Federal Reserve stress test as one of the reasons behind the target decrease.

At the end of the second quarter of 2022, 43 hedge funds in the database of Insider Monkey held stakes worth $6.5 billion in U.S. Bancorp (NYSE:USB), up from 40 the preceding quarter worth $7.3 billion. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in U.S. Bancorp (NYSE:USB), with 9.5 million shares worth more than $439 million.

Just like Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and American Express Company (NYSE:AXP), U.S. Bancorp (NYSE:USB) is one of the stocks on the radar of elite investors.

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and U.S. Bancorp (NYSE:USB) was one of them. Here is what the fund said:

“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp (NYSE:USB).”

4. The Kroger Co. (NYSE:KR)

Number of Hedge Fund Holders: 49

Percentage Decrease in Stake in Q2 2022: 10%

The Kroger Co. (NYSE:KR) is an Ohio-based firm that owns and runs retail stores. Securities filings reveal that Berkshire Hathaway owned 52.4 million shares of The Kroger Co. (NYSE:KR) at the end of the second quarter of 2022 worth $2.4 billion, representing 0.82% of the portfolio. In mid-June, the firm posted earnings for the first fiscal quarter, reporting earnings per share of $1.45, beating market estimates by $0.17. The revenue over the period was $44 billion, up more than 8% compared to the revenue last year and beating estimates by $1.5 billion.

The Kroger Co. (NYSE:KR) has been in the Berkshire portfolio since the fourth quarter of 2019. This is a relatively new holding of the fund, since most of the top stocks on the Buffett portfolio have been held for more than a decade. In 2019, the Berkshire position in The Kroger Co. (NYSE:KR) consisted of just 18 million shares purchased at an average price of $26.51 per share. Buffett has increased his holding in the years since, most significantly in the third and fourth quarters of the pandemic-ravaged 2020. The share price of The Kroger Co. (NYSE:KR), as of September 6, is upwards of $48 per share.

The Kroger Co. (NYSE:KR) has a solid track record in the dividend space stretching back more than a decade. The Kroger Co. (NYSE:KR) has paid a consistent dividend to shareholders for the last fifteen years. Over these years, this payout has registered consistent growth as well, in a sector where the median in this regard is just two years. In late June, The Kroger Co. (NYSE:KR) declared a quarterly dividend of $0.26 per share, an increase of more than 23% from the previous dividend of $0.21 per share. The forward yield was 2.20%.

In late June, MKM Partners analyst Bill Kirk maintained a Neutral rating on The Kroger Co. (NYSE:KR) stock and raised the price target to $55 from $48, forecasting that the firm would soon announce a new buyback authorization.

At the end of the second quarter of 2022, 49 hedge funds in the database of Insider Monkey held stakes worth $4.3 billion in The Kroger Co. (NYSE:KR), compared to 45 in the preceding quarter worth $5.1 billion. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in The Kroger Co. (NYSE:KR), with 16.7 million shares worth more than $792 million.

Along with Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and American Express Company (NYSE:AXP), The Kroger Co. (NYSE:KR) is one of the stocks that hedge funds are monitoring.

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AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on May 1, 2024 at by Inan Dogan, PhD

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Published on May 2, 2024 at by Insider Monkey Staff

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