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