Warren Buffett's Panic Sale Of Two Stocks Cost $713 Million

[bobandsherry]

This shows that even the most informed investor doesn't always get it right in trying to time and predict the market.

https://www.investors.com/etfs-and-...fetts-panic-sale-two-stocks-cost-700-million/

Berkshire also unloaded JPM in 4th quarter of 2020. Since then JPM shares up 30% vs 7% for S&P. Berkshire bought into VZ which is down nearly 10% since Berkshire bought and CVX that is up a respectable 23% but still below JPM.

https://www.cnn.com/2021/02/16/investing/berkshire-hathaway-warren-buffett-stocks/index.html
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[RetireeRobert]

This shows that even the most informed investor doesn't always get it right in trying to time and predict the market.

https://www.investors.com/etfs-and-...fetts-panic-sale-two-stocks-cost-700-million/

Berkshire also unloaded JPM in 4th quarter of 2020. Since then JPM shares up 30% vs 7% for S&P. Berkshire bought into VZ which is down nearly 10% since Berkshire bought and CVX that is up a respectable 23% but still below JPM.

https://www.cnn.com/2021/02/16/investing/berkshire-hathaway-warren-buffett-stocks/index.html
View attachment 38201

Maybe so. But consider it is Buffett who is, and has been for decades, a multi billionaire, while the financial writers are still working for pay!

 

[yakers]

BRKB is doing fine by me.

 

[triangle]

I wonder if that was not a clickbait headline/article. It did not go into any details but I suspect the Occidental sale was related to the deal a year or so ago where Berkshire loaned a bunch of cash for "$10 billion in preferred stock paying an 8% dividend, and roughly $1.2 billion worth of warrants to buy Occidental shares at a discount in the future."....that maybe they are cashing in part of that to reduce risk. Maybe he likes the other banks and financial institutions more than JPM, I believe they own 12% of Bank of America and growing that position.

I do think the Airline selling was odd timing, Berkshire did not need the cash but surely he knew the business was not dead. I suspect he feared a significant shareholder dilution or bankruptcy restructuring, as there was a lot of noise around not rescuing the airlines and telling them to go raise capital on the open market and failing that to declare bankruptcy and start all over. As many were still upset about the too-big-to-fail bank bailouts from 2008 and angry at Boeing and the airlines for having recently bought back their own shares instead of paying down debt or building a cash position. Fed manipulation of low interest rates causes so much ill investing and many problems in our economy that are often hard to see.

 

[Montecfo]

I wonder if that was not a clickbait headline/article. It did not go into any details but I suspect the Occidental sale was related to the deal a year or so ago where Berkshire loaned a bunch of cash for "$10 billion in preferred stock paying an 8% dividend, and roughly $1.2 billion worth of warrants to buy Occidental shares at a discount in the future."....that maybe they are cashing in part of that to reduce risk. Maybe he likes the other banks and financial institutions more than JPM, I believe they own 12% of Bank of America and growing that position.

I do think the Airline selling was odd timing, Berkshire did not need the cash but surely he knew the business was not dead. I suspect he feared a significant shareholder dilution or bankruptcy restructuring, as there was a lot of noise around not rescuing the airlines and telling them to go raise capital on the open market and failing that to declare bankruptcy and start all over. As many were still upset about the too-big-to-fail bank bailouts from 2008 and angry at Boeing and the airlines for having recently bought back their own shares instead of paying down debt or building a cash position. [Fed manipulation of low interest rates causes so much ill investing and many problems in our economy that are often hard to see.

Yes. The only thing worse would be starving the market of credit just when it is on its heels.

 

[Born2Fish]

Warren Buffett "PANIC SALE"?

He isn't exactly known for panicking.

 

[VanWinkle]

He is a long term investor and they are comparing short term results. He will be smiling in the end, if he is able to live long enough to see the results.

 

[bobandsherry]

He is a long term investor and they are comparing short term results. He will be smiling in the end, if he is able to live long enough to see the results.

How long you want to look? Over the past year Berkshire has trailed the broader market. Trails over 3 and 5 years as well. That's long term enough, no?



Anyway, the point of me sharing this was to show that even the "best" makes a bad call. Ya shrug it off and set sight on what's ahead and not what's in the past.

And now looking at the 1, 3 and 5 year performance shows that even the "best" can't outperform the broader market on the long term.

 

[MichaelB]

One of the things that sets Warren Buffet and Charlie Munger apart from the world of professional investors is their readiness to acknowledge mistakes made.

 

[bobandsherry]

BRKB is doing fine by me.

FWIW, over the past year you could have done better just putting the money into VOO. Would have done better over 3 and 5 year horizon as well.

 

[VanWinkle]

How long you want to look? Over the past year Berkshire has trailed the broader market. Trails over 3 and 5 years as well. That's long term enough, no?

View attachment 38238

Anyway, the point of me sharing this was to show that even the "best" makes a bad call. Ya shrug it off and set sight on what's ahead and not what's in the past.

And now looking at the 1, 3 and 5 year performance shows that even the "best" can't outperform the broader market on the long term.

I would love to agree with you.....but 5 years is not long term. 20 years or more are long term results for me. He can make mistakes and has admitted the same in the past. I just don't think this decision can be designated a mistake after just a few years.

Best to you,

VW

 

[NW-Bound]

During the subprime fiasco, Buffett had a lot of public appearance, and looked to be ecstatic about being able to scoop up bargains. This time during the pandemic, he appeared to be reserved and much more concerned. I remember in one interview, he said he had seen a lot of turmoil in his life, but a pandemic was something new and unexpected. I guess nobody including Buffett could tell how things would evolve.

Indeed, he did not make any major purchase with the cash he had. Perhaps the market rebounded so fast compared to the much slower slide/rebound of the market during the housing bubble burst, before Buffett could react. Recently, it was revealed that he repurchased a lot of BRK shares. Apparently, he did not find anything worthwhile out there. Of course, he did not pick up any of the EV stocks, or the many tech stocks that had no revenue let alone earnings. These vaporware stocks are no small reason the market has been doing so well.

Looking back 5-10 years, I can see that he kept up with the S&P until recently while owning no high P/E stocks. Many bubbles have been inflated in the market recently. If you do not own any bubble, of course you are going to trail the total market.

 

[target2019]

from his 2021 newsletter (BRK.A first, S&P500 second):

Compounded Annual Gain – 1965-2020 ... 20.0% 10.2%
Overall Gain – 1964-2020 ...................... 2,810,526% 23,454%

Yes, he has made mistakes and admits those each year.

 

[wolf]

As long as you have more winners, than losers, you are doing great. I only wish I could do as well as Warren Buffet.

 

[11522914]

FWIW, over the past year you could have done better just putting the money into VOO. Would have done better over 3 and 5 year horizon as well.

Great comment bobandsherry, particularly when you have the benefit of hindsight.

Can you please enlightened me as to what Berkshire will do over the next 5 years.

Thanks

 

[bobandsherry]

Great comment bobandsherry, particularly when you have the benefit of hindsight.

Can you please enlightened me as to what Berkshire will do over the next 5 years.

Thanks

I would, but you wouldn't listen to me - LMAO

But my comment was in response to someone, so maybe go back and re-read why I posted my comment. Cheers

 

[triangle]

Yes. The only thing worse would be starving the market of credit just when it is on its heels.

This has been going on since the time of Alan Greenspan. Allowed more corporate debt to build up pre-covid.

 

[triangle]

During the subprime fiasco, Buffett had a lot of public appearance, and looked to be ecstatic about being able to scoop up bargains. This time during the pandemic, he appeared to be reserved and much more concerned. I remember in one interview, he said he had seen a lot of turmoil in his life, but a pandemic was something new and unexpected. I guess nobody including Buffett could tell how things would evolve.

Indeed, he did not make any major purchase with the cash he had. Perhaps the market rebounded so fast compared to the much slower slide/rebound of the market during the housing bubble burst, before Buffett could react. Recently, it was revealed that he repurchased a lot of BRK shares. Apparently, he did not find anything worthwhile out there. Of course, he did not pick up any of the EV stocks, or the many tech stocks that had no revenue let alone earnings. These vaporware stocks are no small reason the market has been doing so well.

Looking back 5-10 years, I can see that he kept up with the S&P until recently while owning no high P/E stocks. Many bubbles have been inflated in the market recently. If you do not own any bubble, of course you are going to trail the total market.

I agree, he did seem more reserved or unsure about how the pandemic would affect long term behavior. As if he thought there was going to be permanent structural changes in the economy.

I also wonder if the point made by some financial commentators is not also true. That in prior crisis it was easier for Berkshire to use its status and cash to its advantage. I recall the deal they did with Goldman Sachs in 2008 where they invested $5 billion on preferred shares at 10% interest. I wondered at the time why is the public at large not allowed in on that deal? And later Berkshire got a sweet deal on Bank of America warrants that allowed them to later get a big stake in the company at a low cost basis. But in this new 2020 crisis, the Fed stepped in and bought corporate bonds for the first time ever. So there was no need or more to the point....no opportunity for Buffet to come in and save the day for other companies. He was not able to leverage their big cash reserve this time as they had done in the past. Of course he could have bought more common stock but that is a different playbook.

 

[njhowie]

I've seen Buffett make similar near-term "mistakes", which ultimately were proven correct.

Maybe 7 or 8 years ago, after much fanfare about him/Berkshire investing in Exxon (probably in the mid-$80/share range), not even 2 months later he sold the entire stake at roughly the same price paid, maybe he took a 10% gain. Though the shares did go somewhat higher as/after he sold, Exxon shares ultimately fell, and the company has been an extremely poor investment since.

Similarly, two years ago, he/Berkshire was unloading an extremely large position in PSX shares in the $90 area. Shares went as high as $125 afterwards, but then we've seen them go below $50 this past year.

As with anyone buying or selling shares - there will always be a question regarding timing. The key with Buffett/Berkshire, is that the decision is made based on logic and is not a knee-jerk reaction.

Lastly, with the numbers Buffett/Berkshire deal in, $1B for him is like $1000 for you/me - $734 million is relatively insignificant. Keep it in perspective - he's made over $100B profit on his Apple stake and collects about $800 million in annual dividends from it.

 

[OverThinkMuch]

I recall Buffet saying when you don't understand the rules, get out of the game. I think that's why he exited his airline stake - but I didn't know he sold OXY as well. Some oil companies went under, which I imagine was his concern.

Buffet has my utmost respect, but not my investing dollars. He has to make a good return on about $500 billion in assets, which greatly limits which companies he can buy. If he invests $5 billion and it doubles, that's a 1% gain for Berkshire. I'm not as optimistic he can beat the market while being so limited in where he can invest.

 

[WhenIsItTime]

Berkshire made huge chunk of 2020 profit on individual 3rd party stocks. Seems contrary to tone of this board to invest in something that is doing this. Not to mention, as per the annual letter table the results last many years are underperforming S&P. Given age of founders, this business is past its prime.

 

[PoorOldCountryBoy]

This shows that even the most informed investor doesn't always get it right in trying to time and predict the market.

https://www.investors.com/etfs-and-...fetts-panic-sale-two-stocks-cost-700-million/

Berkshire also unloaded JPM in 4th quarter of 2020. Since then JPM shares up 30% vs 7% for S&P. Berkshire bought into VZ which is down nearly 10% since Berkshire bought and CVX that is up a respectable 23% but still below JPM.

https://www.cnn.com/2021/02/16/investing/berkshire-hathaway-warren-buffett-stocks/index.html
View attachment 38201

It's a clickbait article, there is a lot more factors Berkshire Hathaway was considering during that sale. The article is like saying you heard one note misplayed in a symphony--my how clever of you.