Christmas has come early for the bank’s shareholders with the decision to slightly increase the 2024 dividend – despite a single-digit decline in the net profit and cash earnings.
Beating the market benchmark is never easy, with 72 per cent of Australian actively managed global equity general funds trailing the S&P World Index in the six months to June 30, 2024. Domestic equity funds performed slightly better, albeit against a significantly lower bar set by the S&P/ASX 200 Index.
Buffett keeps Berkshire Hathaway busy
Berkshire Hathaway’s quarterly investment reports, or 13F in technical terms, stand out among the most anticipated reports each year. Alongside the annual Berkshire Hathaway event in Omaha Nebraska, followers of the company are always keen to see the moves Buffett and his growing team have been making with the Berkshire portfolio.
The June quarter of 2022 remains as busy as ever with the underlying portfolio expanding to 45 stocks with a combined market value of US$330 billion. Buffett is regularly quoted as recommending investors use ETFs, adopt a value approach or refrain from investing in certain asset classes. Yet the problem with being 91 years of age and having achieved so much success is that his quotes now contradict each other.
Take for instance the suggestion that Buffett would put all of his wife’s money into an exchange traded fund tracking the S&P500. This flies in the face of everything Buffett and Berkshire have done for decades now, with their preference being to take complete ownership and privatise large companies, as they can be run more efficiently this way. It is more likely that Buffett would ensure his wife’s money remains invested in Berkshire.
According to Berkshire’s 13F lodgement to the Securities Exchange Commission, the SEC, the conglomerate increased investments in nine stocks, sold out of two completely and reduced investments in four other companies. The two stocks he sold out of completely were Verizon Telecommunications and Royalty Pharma, both of which had held up quite well in the first half of 2022 as investors sought safe haven sectors like healthcare and telecommunications.
The group also sold down positions in Store Capital, General Motors, Kroger Co and US Bancorp, with Store Capital being a specialised lender to the real estate sector, not unlike the non-bank financial institutions that are booming in Australia. It was on the buying side where the majority of the action occurred with Berkshire effectively doubling down on fast-growing digital bank Ally Financial after the tech-focused company’s share price capitulated amid the Nasdaq selloff that dominated 2022.
Berkshire continues to back the resurgent energy sector, which is seeing record cash flows on the back of the global energy crisis and years of undersupply; positions in Occidental and Chevron were added. There was a broad sense of picking up discounts across the portfolio with the holding in media company Paramount Global seeing a material increase and the holding in Apple also improved after the circa 15 per cent selloff.
So, what can we learn from Warren Buffett?
While it may be somewhat forced by the regulator, the role and importance of regularly taking stock of portfolio and stock decisions is highly valuable. The world is increasingly dominated by short-term headlines and momentum rather than fundamental-driven investment decisions, hence undertaking a simple review of every trade that has been placed and its continued role within portfolios every quarter can bring structure to an inherently noisy task.
