Berkshire retrenches

Investment Analysis Clubs Macro Economic Trends and Risks
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I’m putting this here rather than on the Berkshire board because I believe the moves are macro in nature. Specific stocks, yes, but the overall moves in Buffett’s stock allocation demonstrate a clear move to safety.

Warren doesn’t duck in and out of the wholly owned subsidiaries, obvioiusly, but the portfolio does often indicate his thinking. He’s slimming down to the point where 78% of his stock allocations are in just five stocks: Apple (huge), BoA, American Express, Coca Cola, and Chevron. He’s gotten rid of laggards like GM and those facing other unknowns (J&J), etc.

Interesting trend from a pretty savvy investor.

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Not sure that safety is the correct word, particularly when looking at the stock betas. (Beta is a measure of the volatility , or systematic risk , of a security or a portfolio in comparison to the market as a whole.) Here are the numbers (betas are from Zach’s):

     % Holdings   5yr Beta
AAPL    53%        1.30
BAC     10         1.38
AXP      8         1.21
KO       8         0.59
CVX      6         1.16

So, they have a very concentrated portfolio where 70% of their holdings have a volatility that is 30% higher than the market.

DB2

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Years ago reading Buffett’s compounded annual growth rate in BRK was 29%. Not a coincidence.

adding his operating costs are 1% of the float. Somewhat of an apples to oranges comparison but also not a coincidence.

Note I am not sure I am stating the 1% operating costs accurately as from the float.

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Paywalled article.

I can understand why he has questions about J&J: not only the talc issue, which J&J says it retained, but how will the company fare after spinning off consumer products? No telling how much lipstick got spread around in that split…and that goes for Kellogg’s too.

Would like to know about his issue with P&G, I have been holding that one for a while. I could understand trimming P&G if he was 100% sure of a recession, because P&G stuff is pricey, so pricey I rarely buy their stuff myself.

Steve

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J&J is pretty clear, legal issues, messing around with corporate structure and splitting company, etc.

GM is having further labor issues and having great difficulty with their transition to EV, so I can see the reasons there.

But P&G, it’s a typical consumer goods/staples company. Usually plods along and does reasonably well in most times. This one I don’t understand.

I wonder which is the new company Berkshire has been buying? I suppose we will know in a few weeks/months.

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Yes, that is what I was saying. I have about a 4 bagger on P&G, over 5 years, plus divis. Either the concern is a recession causing people to leave P&G’s expensive products for something cheaper, or their analysis says P&G’s profits come from price increases, not expansion of the business. which might not be sustainable.

Steve

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These look like Ted Weschler/Todd Combs trades. They trade a lot and they don’t necessarily look like Buffett trades.

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Buffett famously rejects the definition that volatility is a measure of risk.

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Understood. But at the same time I wouldn’t characterize his portfolio changes as “a clear move to safety”.

DB2

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