Daily Brief: Buffett's Secretly Backed A Few New Stocks

Daily Brief: Buffett's Secretly Backed A Few New Stocks

about 3 years ago3 mins

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Looks like Buffett’s been up to his old tricks: a filing released by Berkshire Hathaway late on Tuesday revealed it’s sold off some of its Apple stock and quietly bought into three other companies.

What does this mean?

Investors don’t usually find out what the Buffett-run investment firm has been buying and selling until its quarterly updates, so this one-off filing might’ve caught investors off guard – especially because it was selling off some of its stake in Apple and holding on to “just” $120 billion worth of the tech giant’s shares. But Berkshire didn’t just trim back there: it recently sold stakes in JPMorgan Chase and Wells Fargo too. And since that freed up some loose change, the conglomerate bought into telecom giant Verizon, insurance broker Marsh & McLennan, and bruised oil major Chevron instead.

Ten largest equity holdings

Why should I care?

For markets: When Buffett talks, investors listen.

Berkshire Hathaway is a global bellwether for investors: where Buffett’s team boldly goes, other investors follow. So it might come as little surprise that Verizon, Marsh & McLennan, and Chevron’s shares initially rose on Wednesday, while Apple, JPMorgan, and Wells Fargo’s fell. Investors might’ve seen that coming, though: data from TipRanks shows investor sentiment had recently turned “very negative” on the three stocks Berkshire sold.

For you personally: Portfolio rebalancing in practice.

There’s a lesson in Berkshire’s latest update too: the importance of rebalancing your portfolio. See, banks have done well in the last few months, and Apple – which is the investment firm’s single biggest investment – has even seen its value triple since Berkshire last sold some of its stake back in 2019. By selling those stocks, then, Buffett’s business locked in some profits and made sure no single industry or company sways its portfolio too much.

Berkshire Hathaway's top performing holdings

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Rio Tinto Posted Better-Than-Expected Earnings

Rio Tinto image

Rio Tinto was born to (extract ore from) rock: the world’s second-biggest mining company announced better-than-expected earnings on Wednesday.

What does this mean?

Rio’s done well out of China’s rapid post-pandemic recovery: the price of the company’s most important commodity – iron ore – jumped almost 85% last year on the back of strong demand from China’s massive steel-making industry. That led Rio to announce a higher-than-expected profit, not to mention the biggest dividend payout in its 148-year history.

Boom Times Are Back

Never one to rest on its laurels, Rio will be spending more on new green technologies too – specifically those that lower the emissions its customers generate when they process its raw materials. And since steelmakers single-handedly account for 7% of direct fossil fuel emissions, that could be a big step forward for the industry.

Why should I care?

For markets: Miners aren’t making mistakes of the past.

The world’s biggest miner impressed earlier this week too: BHP released a strong earnings update and handed out a bumper payout of its own. Both miners’ dividend announcements will come as a relief to their shareholders, who might’ve been nervous they’d use the money to buy lower quality mines just to get their hands on more ore. That’s what they did at the peak of the last commodity cycle a decade ago, and it all ended in tears when prices came crashing down.

The bigger picture: You are now entering a commodities supercycle.

JPMorgan and Goldman Sachs reckon this is actually the start of a years-long “supercycle” of commodities gains – for only the fifth time in history, no less. An economic recovery and the green revolution should, they reckon, drive a lot of commodity-dependent infrastructure investments. And given there’s a limited supply to meet this rising demand, that should push prices higher for longer. Hedge funds, for their part, seem to agree: they’ve already allocated more money to commodities than they have in a decade.

Multi year booms
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