Goldman Sachs has to believe it: The investment legend Warren Buffett is parting with his previously beloved bank holdings and putting the financial institutions in a row with aviation and energy companies. For the first time, the “Oracle of Omaha” is relying heavily on a gold sponsor.
According to the quarterly shareholder release published by Buffett’s investment company Berkshire Hathaway over the weekend, the investor sold all shares of the U.S. investment bank Goldman Sachs. Besides, he reduced his shares in JPMorgan Chase by 61 percent as well as in the significant bank Wells Fargo and the Pennsylvania-based PNC Bank.
Buffett thus treats his bank holdings in the same way as he treats those of energy companies and airlines, which until recently were still in his billion-dollar portfolio. Buffett had already announced the total sale of the airline holdings in May and finally also parted with the American prestige companies Delta and Southwest.
Among the energy companies, Buffett had recently disposed of his Occidental papers — despite a lavish dividend agreement in which “Oxy” had paid a hefty eight percent yield exclusively to Berkshire-Hathaway. Buffett had previously supported the energy giant in its acquisition of Anadarko. When oil prices hit record lows this spring due to idle aircraft and rapidly declining demand, US energy companies such as Occidental were shaken. Occidental, therefore, reduced its dividend to all shareholders — except Buffett — to just one cent per share.
Buffett’s sales list also included all his shares in Restaurant Brands International, the owner of fast-food restaurants such as Burger King and Popeyes. They have been in crisis since customers stayed at home out of fear of getting infected with Corona, and, besides, regional regulations are forcing the closure of some restaurants.
Bank shares have not lost nearly as much of their value on the stock exchange as airlines, restaurant chains, or energy companies. But Buffett sees no further potential in the papers. He possibly even fears a crash, because US financial institutions, like their competitors in Germany and the UK, expect rising credit defaults and have to build up corresponding risk provision positions.
In Germany, Deutsche Bank and Commerzbank, as well as the Volks- und Raiffeisenbanken and the savings banks, have so far conceded that they fear rising loan defaults if the economy goes bankrupt. This is not foreseeable at present because a temporary change in the law does not force companies to file for insolvency if they become over-indebted.
Buffett, as his latest figures show, sold far more stocks than he bought between April and June. As the coronavirus crisis escalated, the acclaimed investor added just one new stock to his portfolio: Barrick Gold, a Canadian-based mining company whose stock price is trading similar to the amount of gold. The surprising thing is that for years Buffett has made it clear that he has very little faith in gold and its promoters.
The price of gold has risen by almost a third so far this year because investors see the precious metal as a haven for their money. Barrick’s Canadian mine operators have dwarfed the rise in the price of the precious metal with a 45 percent increase in their shares this year. Buffett has thus once again proven his reputation as a star investor. His portfolio of Barrick shares is now worth around 565 million dollars, the number 22 in Buffett’s portfolio in terms of size.
However, not everything else in the headquarters of the investment company Berkshire in Omaha was utterly sold out. In addition to his involvement with the mining company, Buffett strengthened his position with the supermarket chain Kroger, the media group Liberty Media and Store-Capital, a real estate investment trust.
The bottom line, however, is how little Buffett bought in the second quarter of 2020, even though the stock market’s recovery from the corona shock has long since begun, and new all-time highs are already in sight. The Omaha oracle is thus apparently following the credo from its 1986 letter to shareholders: “We are afraid when others are greedy. And we are only greedy when others are afraid.”
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