Subject: Barrons, Bary,
" Berkshire Sold Stocks in First Quarter. 6 Takeaways and a Buffett Mystery.
By
Andrew Bary"

"
Key Points

About This Summary

Berkshire Hathaway bought $16 billion and sold $24 billion in the first quarter, liquidating about $14 billion in holdings managed by Todd Combs.

Berkshire tripled its Alphabet stake to 58 million shares, now valued at $23 billion, and initiated a $3 billion Delta Air Lines position.

The $24 billion in stock sales resulted in a $2 billion tax bill and sparked debate over divesting blue-chip companies.

Berkshire Hathaway
BRK.B

-0.28%

just had one of its most active quarters for stock purchases and sales in recent memory.

First quarter highlights included a big increase in the company’s stake in Alphabet
GOOGL

-1.07%

, the initiation of a $3 billion position in Delta Air Lines
DAL

-1.84%

, and the sale or virtual elimination of stakes in more than a dozen companies, including Visa, Mastercard, Amazon, UnitedHealth Group, Constellation Brands, Aon, and Pool.

The changes were detailed in a quarterly 13-F report released after the close of trading on Friday.

All told, Berkshire bought $16 billion of stocks and sold $24 billion in the first quarter, leaving its equity portfolio with a market value of more than $300 billion.

2. The Combs-related sales have prompted a debate about whether it was a bad move by Abel to dump the stocks after Combs left.

Some think it was petty, shortsighted, and expensive, since Berkshire has to pay taxes on the gains—its total tax bill in the quarter related to all its equity sales was about $2 billion. Visa, Mastercard, and Amazon for instance are blue-chip companies with favorable outlooks. Why sell them? The counterargument is that that Combs positions were just 5% of the portfolio, and that without him actively monitoring the stocks, it didn’t make sense to keep them.

3. A big question is which Berkshire manager decided to triple the Alphabet stake to 58 million shares on March 31, from 18 million at year-end. That stake is now Berkshire’s fifth largest holding at $23 billion, behind Apple, American Express
AXP

+0.23%

, Coca-Cola, and Bank of America.

The size of the stake is more than the roughly $18 billion to $20 billion of equities managed by Berkshire manager Ted Weschler, who runs about 6% of the portfolio with Abel overseeing it all.

It therefore could it have been Abel’s first major investment move. Then again, it could have been a choice by chairman Warren Buffett, who still has a hand in running equity investments.

It is a winning investment since Alphabet stock is up 25% this year. It may signal that Abel is willing to make sizable equity investments—an encouraging sign given Berkshire’s desire to invest a chunk of its $380 billion in cash.

4. Weschler’s holdings now are more visible with the sales of the Combs stocks. The bulk of the Berkshire holdings of under $5 billion likely are Weschler investments. They include Davita ($4 billion) and Sirius XM Holdings ($3 billion), both of which he owns personally. Other possible Weschler investments are Kroger ($3.6 billion) and Capital One ($1.3 billion).

Berkshire’s new investment in Delta likely was a Weschler investment. The size of it exactly matches the increased authority of about $3 billion that he got this year as his responsibility went to 6% of the portfolio from 5%, based on Abel’s comments in his annual letter around March 1. Weschler has a value bent, and Delta is the industry leader valued at around 10 times earnings.

5. Combs and Weschler’s investments probably were behind the S&P 500 over the past five years. Looking at the likely Combs and Weschler holdings, there isn’t much that beat the tech-dominated S&P 500 over the past five years. Maybe that’s why Buffett never talked about their investment performance over the past seven years. Each operated independently, although it’s possible there was some investment overlap.

6. Berkshire initiated a small investment in Macy’s
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+0.55%

, buying three million shares in the first quarter, and raising the question of who was behind that decision. That’s a 1% stake in the depressed retailer, valued at about $55 million.

That purchase could have been made by Buffett. In a CNBC interview on March 31, he was asked whether he was still “making new purchases” of stock as chairman. He replied: “Got one tiny purchase.” It could have been Macy’s. What’s the retailer’s potential appeal? It could be its real estate holdings."

Our, hedge fund, is generating, taxable events. Go figure. :)