Berkshire Hathaway (BRK) 2020: Buffett's 6 stock ideas

Warren Buffet’s 2020 annual letter is now published (2020 10-K and Annual Report). Always worth keeping an eye on what the old master is up to. I focus on the common stocks that Berkshire Hathaway (BRK) owns, which amateurs like us are able to buy.

This is how Buffett’s portfolio started 2020:

And this is how the portfolio finished 2020:

Companies appearing in the top 15 this year are AbbVie, BYD, Chevron, General Motors, Itochu, Merck and Verizon.

BYD last appeared on the list in 2017 and its share price has simply risen for the 2020 re-appearance. General Motors last appeared on the list in 2017 as well, and a small 2020 top-up (and several list disappearances) brings it back.

AbbVie, Chevron, Merck and Verizon look to me as if they were all purchased during 2020. The stats indicate Buffett bought AbbVie at $91 (now $108), Chevron at $83 (now $100), Merck at $83 (now $73) and Verizon at $59 (now $55).

Not sure about Itochu. Buffett must have owned this before 2020, having paid an average $23. The stock went from $46 to $58 during 2020.

Companies disappearing this year are Delta Airlines, Goldman Sachs, JP Morgan, Southwest Airlines, United Continental, Visa and Wells Fargo.

The stats suggest Buffett sold some (all?) of Delta, Goldman, JP Morgan and Wells Fargo – the latter stock falling 44% last year. Wells was the portfolio’s fifth largest position (7.5%) at the start of the year, so I think Buffett was a significant seller. (I always thought Buffett was a big fan of Wells, but I admit I have not kept up to date with his thinking.)

I am not sure about Southwest, United and Visa. Given their 2020 stock performances, they would no longer meet the top-15 for the annual letter if the holdings were left untouched.

That leaves American Express, Apple, Bank of America, Bank of New York Mellon, Charter Communications, Coca-Cola, Moody’s and US Bancorp.

Of those, only Bank of America saw notable 2020 buying – Buffett spent $2.1b at $24. Price now is $35.

So… should we take notice of Buffett’s big buys?

I have looked through the previous ten annual reports and identified twelve $1b-plus Berkshire investments:

Year Company Investment ($m) Buy price ($) Price now ($) Change
2018 Apple 15,083 43 121 184%
2017 Apple 14,214 34 121 259%
2018 Bank of America 6,643 30 35 15%
2018 Bank of New York Mellon 1,630 52 42 (20%)
2018 Goldman Sachs 1,726 233 320 37%
2014 IBM 1,476 167 121 (27%)
2010 J&J 1,025 62 158 154%
2016 Phillips 66 1,484 77 83 7%
2015 Phillips 66 3,697 106 83 (22%)
2018 US Bancorp 2,205 52 50 (4%)
2012 Wells Fargo 1,820 32 36 11%
2011 Wells Fargo 1,071 26 36 38%
Average 53%

Had you bought at the same price as Buffett, you would have averaged a 53% gain (before dividends) if you held on to today. Only the recent-ish Apple purchases and Johnson & Johnson (way back in 2010) presently look very insightful purchases.

That said, some of Buffett’s smaller investments have done very well. For example, Buffett spent $0.5b buying Deere & Co at $77 in 2015, the price now being $349.

The biggest ‘buy signal’ from Buffett’s 2020 letter actually related to Berkshire itself. Buffett said:

Last year we demonstrated our enthusiasm for Berkshire’s spread of properties by repurchasing the equivalent of 80,998 “A” shares, spending $24.7 billion in the process.”

Buffett bought BRK.A stock at $304k, and the price now is $364k.

Buffett added:

Berkshire has repurchased more shares since yearend and is likely to further reduce its share count in the future”.

I can only assume Buffett (and his investment managers) are struggling to invest a $281b portfolio, and reckon the best value today to be within Berkshire – which Buffett will know more about than any common stock.

Anyway, Buffett’s 2020 stock ideas appear to be: AbbVie, Chevron, Merck, Verizon, Bank of America and Berkshire.

Maynard

4 Likes

Another master class letter from the King. Still shocked how much money he has made so far on the Apple investment. What makes it impressive is the simplicity of the idea combined with his courage to buy such a large position.

Interesting buys were Verizon and AbbVie. Verizon no doubt is play on the 3 headed Oligopoly the US (only has to compete with T-mobile & AT&T).

I am a little dubious with Chevron, maybe he feels the oil price will rebound as travel demand comes back.