Warren Buffett has sometimes been touted as the world’s greatest investor of the modern era. He built up Berkshire Hathaway Inc. (NYSE: BRK-B) into arguably the greatest conglomerate in the world. Buffett also has been quoted for many years as saying that investors should “be fearful when others are greedy and greedy when others are fearful.” During each crisis and scare, he has preached “America’s greatest days are ahead!” The problem with the insta-recession is that just about every sector and the major companies in them have been gutted. Some have done incredibly worse than the market as a whole.
Evaluating the “Warren Buffett” investment portfolio is not as simple as just looking at his major sector bets. Berkshire Hathaway also owns businesses such as utilities, and the utility sector was gutted as suddenly millions of customers in America are going to be hard-pressed to make their payments. Berkshire Hathaway also owns the BNSF rail giant, and many of the freight transport companies were down 40% or more at the selling peak this Monday. Owning insurance and reinsurance operations has not been painless, either, as customers may not be able to afford the same car and home insurance they have always had.
While Buffett’s bets on America have been far and wide, in recent years Buffett bought his way into real estate brokerage and car dealerships. How are home sales and car sales doing after everyone is suddenly getting pink slips?
Where the real carnage can visibly be seen is in the portfolio of Buffett’s public stock holdings. 24/7 Wall St. has looked through the top Buffett stocks to see where the real damage has been seen.
The airlines bet was already tallying up at a $2.7 billion loss even three weeks ago. That investment looked dire earlier this week before the $2 trillion rescue package looked like a done deal. Delta Air Lines Inc. (NYSE: DAL) was last seen up over 20% on Wednesday because of the inclusion of airlines in the bailout package, but its shares were still down over 50% from their highs. American Airlines Group Inc. (NASDAQ: AAL) was even worse, and it is still down well over 50% from its highs.
Wells Fargo & Co. (NYSE: WFC) is a position that Buffett finally started scaling down. He is still very profitable from his investment in the bank years ago, but even after recovering almost 15% from its bottom, the bank is down more than 40% from its highs of the last year, and it is still down over 55% from its peak value before the scandals broke in 2017. Wells Fargo now is suffering from what will be an all-out stop in mortgage activity. Its asset management is dealing with battered clients, and the bank just got squeezed on the interest margins as rates plummeted and as the deposits can now only be a zero. Buffett has seen the value fall by the billions of dollars here, and his side bets in other banks have not done much better in the market malaise. That 925 million shares Bank of America Corp. (NYSE: BAC) was worth $33 billion on paper at its recent peak, but even after a handy recovery this week, a $21 billion or value implies a $12 billion loss on paper.
Apple Inc. (NASDAQ: AAPL) was a wildly successful investment that Buffett made, and Berkshire Hathaway’s 5.6% stake of 245 million shares means that Team Buffett makes or loses $245 million in paper value each $1.00 in share price. Recovering from under $215 to $255 on last look has to be a wonderful improvement, but that’s still down about $18 billion or so in value form the peak just earlier this year.
American Express Co. (NYSE: AXP) has been hammered hard in the market selling. The Berkshire Hathaway stake is now decades old, but the 151.6 million share stake was worth almost $21 billion at the peak, when shares traded above $138. They even fell to just under $70 before recovering to $91 this week, for a current value of just under $14 billion. That’s a paper loss of 7 billion even after a massive recovery.
Kraft Heinz Co. (NASDAQ: KHC) has been a painful thorn in Buffett’s side, and even the notion that “now everyone wants their non-perishable food” hasn’t made a major rally. Now near $24 a share, its low was $19.99, and the high was above $90 back in 2017. Buffett already has admitted what a mistake this was.
Coca-Cola Co. (NYSE: KO) is supposed to be highly defensive in a bad market, but when all the restaurants and public venues are forced to close, there is just less soda that gets sold. Maybe hoarding helped, but even after an 8% gain to $42.50, the shares are down from a high of $60.13. Berkshire Hathaway’s 400 million shares may still be worth $17 billion, but that is down $7 billion from the peak. The good news here is that Buffett’s all-in cost after factoring dividends has to be close to zero now.
Occidental Petroleum Corp. (NYSE: OXY) was a monumental mistake to get in. The company has shares and offered preferred financing that now has to look at-risk far more than when it paid $55 billion to acquire Anadarko. Occidental’s shares were down to $45 already when the deal closed, but they were down to under $10 before recovering to $12.00 on last look.
Before counting Buffett and his portfolio managers out, note that Buffett has seen other recessions come and go. And he has proven to be a financier of last resort for more than a few companies during hard times. He even got a better deal investing back in the financial crisis than the government got. It remains to be seen whether Buffett has been an aggressive buyer of stocks for Berkshire Hathaway and its entities during this market panic.
It also remains to be seen if Buffett is now more closely able to find that “whale of a deal” he would like to use with his cash arsenal of more than $100 billion. Berkshire Hathaway does have buyback plans in place that the company can use to make purchases in its own shares, almost entirely at the discretion of Buffett and Charlie Munger. That said, buybacks are very unpopular and create bad marketing for companies if they are buying back stock when they could be saving jobs or deploying capital better.
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