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Warren Buffett has just sold $4 billion worth of shares in this American bank. Should we?

Jamie Cameron
22. 11. 2022
4 min read

It's no secret that Berkshire Hathaway CEO Warren Buffett likes financial sector stocks. Of his current 49 holdings, financial sector stocks take up nearly a quarter of his portfolio. However, this share is smaller than it used to be, and mainly for two reasons. The first is Buffett's purchases of oil and gas companies over the past six months, and the second is the more than 60% reduction in his position in U.S. Bancorp stock, which for many years was one of Berkshire's largest positions. And it is this dramatic sale that we take a closer look at in this article.

Warren Buffett

The well-known investor's conglomerate has sold 84 million shares of parent company US Bank $USB+0.1% since June 30, according to a Securities and Exchange Commission filing on Thursday.

Buffett's company counts U.S. Bancorp among its largest holdings since 2007 and owned 145 million shares worth $8.1 billion at the beginning of January. It now holds only 53 million shares worth $2.4 billion, reflecting its share sales and a 22% decline in US Bancorp shares this year.

U.S. Bancorp's stock is down 16.30% in the past 5 years

Before the sale, Berkshire's cost basis was $5.4 billion, or about $38 per share. US Bancorp shares traded around $45 per share between July 1 and October 31, when the vast majority of the sales occurred. So Berkshire probably made an 18% profit on its sales, or about $600 million.

Some of the sales likely took place in the third quarter of this year, as Berkshire sold $4.7 billion worth of banking, finance and insurance stocks in that period, according to recent results.

While Berkshire was a net buyer of stocks last quarter, it reduced several long-held positions. For example, earlier this month it revealed that it sold approximately $275 million worth of BYD stock between September 1 and November 1. It has thus reduced its stake in rival Tesla by 19%, or nearly $900 million, since July, after not touching the bet since 2008.

Buffett first bought USB in 2006

US Bancorp is one of the oldest holdings in Berkshire Hathaway's portfolio. Warren Buffett first bought shares of the country's largest regional lender in the first quarter of 2006. And while he's always been tight-lipped about USB's position, Buffett's actions over the past few quarters have suggested that something like this could be in sight.

After all, Buffett cut his stake in USB by 5%, or 6.6 million shares, in the second quarter of 2022. He also trimmed his stake in each of the first three quarters of 2021. The truth is that Buffett has been gradually reducing Berkshire Hathaway's exposure to USB. But those cuts were in sharp contrast to what he did with many other bank stocks.

Just in the nick of time, Berkshire Hathaway dumped what was left of its stake in Wells Fargo in the first quarter of 2022 and exited positions in JPMorgan Chase, Goldman Sachs, PNC Financial Services and Travelers over the past few years.

Warren Buffett - Berkshire Hathaway, 11 largest positions

Of course, Warren Buffett is by no means done with big bank stocks. Bank of America is Berkshire Hathaway's second largest holding after Apple. The second-largest bank in the country by assets represents 10.3% of Berkshire's total portfolio value.

Berkshire Hathaway also owns 55.2 million shares in Citigroup, a position that Warren Buffett initiated in the first quarter of 2022. With 0.8% of the portfolio, Citigroup is one of Berkshire Hathaway's 15 largest investments.

Other financial sector stocks in Berkshire Hathaway's equity portfolio include American Express, Bank of New York Mellon, Mastercard, Visa and Ally Financial.

What it all means

The bottom line is that U.S. Bancorp stock has long lagged the market, so perhaps we shouldn't be too surprised that Warren Buffett decided it was time to dramatically lighten the position.

It's also fair to assume that this is not good news for USB stock. If Warren Buffett's recent history with big bank stocks offers any clue, Berkshire Hathaway may soon be selling even more USB stock.

DISCLAIMER: All information provided here is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.

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