Yeah, yeah it’s Warren Buffett week. The Oracle held his annual meeting over the weekend and sat down with CNBC’s Beck Quick yesterday, offering wide ranging thoughts on his holdings, the health of the economy and a few life lessons (watch here).
CNBC.com even has a fun little tool they call the Berkshire Hathaway Portfolio Tracker, and based on the latest SEC filings, it does exactly what the title suggests. Of the list, the top 10 holdings range from about $3 billion in value upwards to $25 billion:
Shares of Berkshire Hathaway-B are actually up 2.5% in 2016, after declining 12% in 2015, massively under-performing the S&P 500 by a country mile. The list of holdings above are benefiting from what appears to be a flight to perceived safety in defensive stocks like KHC up 6.5% ytd, KO up 1% ytd, PG up 2% and WMT up 8%. Financial stocks have just been out of favor in this rate environment with USB & WFC suffering from the inability of rates to go higher, while AXP continues to be a huge drag as the company transitions away from their exclusive Costco deal and other secular trades in payment processing. IBM is fairly obviously on the wrong side of tech innovation (wrote about it here), and frankly PSX acts ok flat on the year.
You might be asking yourself if you really want to endure my critique of Buffett’s top holdings. Well it’s not a bad question. But I’ll be gentle cause he is the Oracle. Let’s just say this, the “defensive” consumer staples stocks are likely to outperform if the broad market continues to rally. Bank stocks might rally, but they’re unlikely to see their prior highs any time soon. IBM is probably hopeless. The best case scenario for Mr. Buffett’s current equity positioning might be a crash where he can swoop in and get a bunch of sweetheart deals on distressed companies like he did in 2008-2011 with the likes of GE, GS, and Bank of America. Buffett made $10 billion investing $25 billion in distressed stocks between 2008 and 2011, per WSJ:
Its impossible to poke any holes in Buffett’s historical performance, but given his current positioning in public equities I am hard pressed to see massive out-performance from this group.
As for BRK/B stock, since late 2014 it has been in a massive downtrend, earlier this year bouncing off of technical support at $120, an now banging up against the downtrend of the last 14 months. A failure here could yield a decline of 10% back towards the 2016 lows.
Options are tough to trade in BRK/B, and I am not sure it makes a whole heck of a lot of sense of trying to be against Mr. Buffett but I think it’s worth noting the technical set up and meh nature of his top holdings.