Warren Buffet reveals which stocks absolutely NOT to buy today

The latest quarterly results from Berkshire Hathaway, the holding company of Warren Buffett, show how the company is reducing some of its main holdings.

Few investors are capable of attracting the attention of Wall Street (and beyond) like the famous American investor. Since taking the reins of Berkshire Hathaway in 1965, the Oracle of Omaha has almost doubled the annualized total return of the S&P 500. Over all these years, on an aggregate basis, Buffett has been able to record a gain of 5,174,441% on Berkshire’s Class A shares.

Given how Buffett is outperforming the major U.S. index by a mile, it’s no surprise that investors are eagerly awaiting clues about which stocks he’s buying and selling.

Those “clues” are contained in the 13F document filed with the Securities and Exchange Commission (SEC).

A 13F is a document filed each quarter that reports what Wall Street’s most effective (and richest) money managers bought and sold in the previous three months.

Berkshire’s 13F detailing its second-quarter 2024 activity will be released at the close of trading on August 14.

But you don’t have to wait for that document to find out what the Oracle of Omaha and his loyal managers, Todd Combs and Ted Weschler, have been up to. Thanks to an analysis of the company’s quarterly operating results, annual meeting of shareholders, and Form 4 filings with the SEC, we already know what three big moves the famous investor has made in his stock portfolio in recent months, while other operations seem to have gone unnoticed.

Which stocks is Warren Buffett dumping

One stock we know for sure that the Oracle of Omaha has dumped is Apple. Based on the fair value estimates for Apple (as of June 30), highlighted in Berkshire’s second-quarter operating results, we can roughly estimate that nearly half of the 789.37 million shares held as of March 31 were sold in the subsequent three months. At Berkshire Hathaway’s annual shareholder meeting in early May, Buffett suggested that corporate tax rates for Apple are set to rise in the coming years.

At the same meeting, Buffett admitted that he, and he alone, has sold his company’s entire remaining stake in Paramount Global. His remaining holdings stood at 7,531,765 shares as of March 31.
Traditional media companies like Paramount have been shaken by the rise and success of streaming services and the high costs associated with creating new content to compete with other services.

Additionally, Form 4 filings tell us that Buffett and his team have been actively selling shares of Bank of America (shareholders with a 10% or greater stake in a company are required to file Form 4 whenever shares are bought or sold).

In 12 consecutive trading sessions (from July 17 to August 1), Buffett sold 90,422,124 shares of Bank of America, for a total of about $3.82 billion. This position was reduced by about 9%, mostly due to the high book value and the potential start of a rate-easing cycle in the coming months. BofA is in fact the most sensitive to Federal Reserve interest rates among the large US banks.

The decision to sell BofA shares also appears to be a warning to Wall Street that the stock market is currently too expensive.

Buffett has sold more shares than he bought for seven consecutive quarters, for a total of $131.6 billion in net stock sales since October 1, 2022.

Not just Apple and Bank of America

Berkshire’s second-quarter operating results also offer a great clue as to other transactions that may have been undertaken in recent months.
The fair value cost basis for the "Commercial, industrial, and other" segment of Buffett’s holding company fell from $46.026 billion on March 31, 2024, to $45.006 billion on June 30, 2024. This segment excludes financials and consumer products but includes a variety of other sectors and industries.

Based on this fair value information, Buffett may have reduced his stake in another major stock and exited one of Berkshire’s smaller holdings entirely.

It seems almost certain that Buffett sold about 4 million shares of oil company Chevron during the second quarter.

Wall Street has focused heavily on Apple’s decline in fair value from the previous quarter but has overlooked the fact that Chevron’s fair value of $18.6 billion as of June 30 is about $0.6 billion below where it should be, assuming Buffett didn’t sell a single share.

Berkshire Hathaway also sold about 3.11 million Chevron shares during the first quarter of 2024.

In his latest annual letter to shareholders, Buffett also referred to Occidental Petroleum as an "indefinite" holding. Energy stocks have rarely played a key role in Berkshire Hathaway’s investment portfolio. As Berkshire’s position in Occidental Petroleum grows, it would not be surprising to see a corresponding reduction in Chevron.

Other rumors have the Oracle of Omaha dumping his position in Louisiana-Pacific, a provider of exterior cladding/building solutions used primarily in new construction.

At the close of the first quarter, Berkshire held 6,597,947 shares of the leading building solutions company, after selling 446,942 shares in the same quarter. Since Berkshire’s investment team has often added or reduced its holdings over multiple quarters, it seems logical to expect this selling to have continued (and increased) in the second quarter.

As Treasury yields skyrocketed in the wake of the Federal Reserve’s latest rate hike, 30-year mortgage rates hit 23-year highs. Existing home sales slowed significantly, opening the door to new home sales, which has benefited companies like Louisiana-Pacific.

However, with the Fed poised to cut interest rates and mortgage rates falling, the benefits for homebuilders and their suppliers may start to fade.

Finally, Louisiana-Pacific is no longer a particularly attractive investment from a value perspective: its forward P/E ratio of 18.4 is 78% higher than its 5-year average annual forward multiple.

Original article published on Money.it Italy 2024-08-12 15:33:00. Original title: Warren Buffet ci dice quali azioni non comprare assolutamente oggi