For a bull market to stay alive, you have to have participation from the financial sector. Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK-A) has been a financial stock buyer for many years. In fact he has added to his biggest holding of Wells Fargo & Co. (NYSE: WFC) quarter after quarter since the recession — until now. After looking over Buffett’s other positions in the newly released March 31, 2014 13F filing with the U.S. Securities and Exchange Commission, it seems that perhaps Mr. Buffett has decided that enough is enough for major banking stock purchases.
Wells Fargo is Warren Buffett’s largest portfolio holding at 463.45 million shares. In current dollars, it is worth $22.7 billion. This past quarter was the first time going back to the selling peaks of 2008 and 2009 that Buffett did not add to his stake. He has been a buyer literally every quarter, even if some may have just been via writing put options or buying call options. At the base level his stake was about 290 million shares, so he has grown the size of the shares by almost 60%, and the value has grown along with the stock purchases. Perhaps Buffett feels that 20% of his public stock holdings in one stock is just too much exposure, or that maybe being the largest holder almost twice over with an 8.8% stake is enough.
So, what about the “other” banks and financial stocks held by Berkshire Hathaway?
American Express Co. (NYSE: AXP) was roughly 151.6 million shares, the same as the previous quarter and the same as always. This position has been static for years.
Bank of New York Mellon Corp. (NYSE: BK) was the same position at 24.6 million shares, but this was not listed as a holding back in 2008.
Goldman Sachs Group Inc. (NYSE: GS) was the same stake of 12.631 million shares.
M&T Bank Corp. (NYSE: MTB) was the same position at 5.38 million shares. This was actually listed as 6.71 million shares if you go back to the start of 2009.
MasterCard Inc. (NYSE: MA) looked like a larger stake on the surface but is actually the same position due to a stock split. It is now at 4,050,000 shares, versus the prior 405,000 shares before that stock split. Visa Inc. (NYSE: V) was the same position of 1.555 million shares, but this is still lower than in 2012. Neither of these were listed as holdings in the recession.
Torchmark Corp. (NYSE: TMK), in insurance, was the same stake as last year at more than 4.2 million shares.
The exception to the rule was U.S. Bancorp (NYSE: USB). This stake was raised again to 80.026 million shares. This was about 79.3 million shares at the end of 2013 and was about 67.6 million shares at the end of 2008. This is a position that just keeps growing.
Another position to consider is that Bank of America Corp. (NYSE: BAC) was a bit of a sore spot even though it was a preferred purchase. And General Electric Co. (NYSE: GE) is soon to shed its consumer finance unit, which Buffett may opt to keep considering that his stakes in American Express, Visa, MasterCard and others are all present.
The long and short of the matter is that Buffett may simply be too loaded up on financial stocks. The tell is that Buffett did not grow the Wells Fargo position. The bank and finance sector stocks have also run into trouble technically of late. Buffett might not care about this as a short-term issue, but perhaps he will only add to his positions in banks and financials when he feels the prices are on sale.
Lastly, Berkshire Hathaway’s stock performance has grown more than the book value. If Buffett wants to change the ship’s direction, perhaps he feels like buying more and more financials (perhaps at a peak valuation) is not the way to make that change.