Berkshire Hathaway boosts Alphabet holding by $17bn

BERKSHIRE Hathaway significantly increased its investment in Alphabet during the second quarter, making the Google parent the third-largest holding in its equity portfolio.

The conglomerate owned nearly 106 million Class A and Class C Alphabet shares as of June 30, with the stake valued at about $36.6bn.

Alphabet now ranks behind Apple, whose Berkshire holding is worth $69.7bn, and American Express, valued at $51.9bn. Its position is slightly larger than the conglomerate’s $35.1bn investment in Coca-Cola.

Berkshire acquired 48.1 million additional Alphabet shares during the quarter. About 60% of the new shares came from a $10bn private placement directly with Alphabet that was announced by both companies in June.

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The remaining purchases, estimated at about $7bn, were made through the open market.

Alphabet represented Berkshire’s largest investment addition during the quarter. The company also increased its position in Delta Air Lines by 44%, adding roughly $1.6bn to the holding.

Berkshire now owns 57.3 million Delta shares valued at approximately $5.1bn.

Delta returned to Berkshire’s portfolio in the first quarter. Buffett had previously sold Delta and three other airline investments in early 2020 as the COVID-19 pandemic caused air travel to collapse.

Buffett has historically been critical of the airline industry as an investment, once using the example of the Wright brothers to illustrate how difficult the sector has been for investors.

Elsewhere, Berkshire raised its Macy’s holding by 142%, although the increase was worth only about $100m because of the relatively small size of the position.

The company also added roughly $280m to its investment in homebuilder Lennar during the same quarter in which Berkshire announced a $6.8bn acquisition of Taylor Morrison Home.

Berkshire cuts financial-sector exposure

While Berkshire increased its exposure to Alphabet and selected other companies, it continued reducing several financial-sector investments.

The conglomerate cut its Ally Financial stake by 7% and reduced its Capital One holding by 58%.

Its Bank of America position fell by 5.9%. Given the size of the investment, however, the reduction represented about $1.7bn, making it Berkshire’s largest dollar-value disposal during the quarter.

Berkshire has now reduced its Bank of America holding by 53% following eight consecutive quarters of selling.

The portfolio changes come as Berkshire resumes significant share buybacks after a two-year period of limited repurchases.

Burry questions Berkshire’s investment strategy

Michael Burry, the investor whose bet against the US housing market before the 2008 financial crisis was featured in The Big Short, has criticised Berkshire’s recent deployment of capital.

In a Substack post, Burry said his concern was that Warren Buffett’s successor, Greg Abel, might not demonstrate the same patience for highly attractive investment opportunities.

Burry said he now believes that concern has materialised and described Berkshire as an unattractive investment going forward.

Although Berkshire still holds roughly $360bn in cash, Burry argued that Abel’s initial moves appear to be more about positioning the company than making major investments.

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He clarified that his comments should not be interpreted as a recommendation to short Berkshire shares.

Patience has long been central to Buffett’s investment philosophy. The billionaire has frequently compared investing with baseball, arguing that investors can wait for favourable opportunities rather than being forced to act on every potential deal.

Despite the resumption of share buybacks, Berkshire’s two classes of shares fell by more than 3% during the week as investors reacted to the company’s second-quarter capital allocation decisions.