The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). Sean Williams owns shares of Bank of America and Teva Pharmaceutical Industries. While Buffett's buys and sells are always a hot-button topic, the second quarter was more about what Buffett didn't do.
Then again, this decision might not be made by Buffett, with other members of his team appearing to call the shots on Teva. Even if these lawsuits do result in a judgment against Teva, the company's liability would be amortized over many years, and it shouldn't be anywhere near as crippling as the recent share price movement would suggest. Plus, Buffett does believe in the brands that Kraft Heinz owns in its portfolio.Īs for Teva, the decision to hold could be based partly on valuation - Teva trades at less than three times 20 earnings per share - as well as an overreaction to the ongoing opioid lawsuits.
There's not really an effective way for Berkshire to sell down this position without negatively impacting Kraft Heinz's share price. You see, the 325.6 million shares that Berkshire Hathaway owns of Kraft Heinz stock represents 26.69% of the company's outstanding shares at the end of the second quarter. Of course, this decision is being made more out of necessity than anything else. However, he has also been adamant that Berkshire Hathaway would stand by its position.
Holding out hope?įor what it's worth, Buffett has admitted that Berkshire Hathaway overpaid for its stake in Kraft Heinz. Kraft Heinz has a tough task ahead of it to ignite interest in its core brands, all while attempting to whittle away an enormous amount of long-term debt ($29.8 billion) and goodwill ($36 billion) that remains on its balance sheet.Ī businessman holding a stack of cash behind his back, with his fingers crossed. Revenue in the first half of the year has fallen 4.8%, hurt by both promotional timing and price reductions, with adjusted profits falling by more than 50%. Following a $15.4 billion writedown on goodwill associated with a number of marquee brands, Kraft Heinz followed up with equally dismal first-half operating results on Aug. Meanwhile, Kraft Heinz has been nothing short of a disaster. Recently, Teva has been hammered by opioid lawsuits and the unknown liability it could face from those lawsuits, as well as a multitude of factors that have built up over the past couple of years, including generic-drug pricing weakness, a bribery settlement, the halting of its dividend, and a large debt load. Teva Pharmaceutical, which was first added to the Berkshire Hathaway portfolio - by someone other than Buffett – during the fourth quarter of 2017, and was subsequently added to in 2018, has lost more than three-quarters of its value over the trailing 12 months. However, what has to be the biggest surprise in Berkshire Hathaway's latest filing is that Buffett and his team didn't do a thing with two of the biggest portfolio drags: Teva Pharmaceutical Industries (NYSE: TEVA) and Kraft Heinz (NASDAQ: KHC). The biggest surprise in Berkshire's latest filing In fact, averaged out over many decades, Buffett's book value growth for Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), the company he runs as CEO, has absolutely thumped the S&P 500.Ī hand holding a magnifying glass over a financial newspaper. It's an investment strategy that might bore the daylights out of some investors who enjoy the heart-pounding tick of the Dow Jones Industrial Average up or down a fraction of a percent, but it works for him. Essentially, these are companies that he could buy and forget about for years or decades at a time. Rather, he seeks out companies that have clear competitive advantages and, often, a long history of profitability.
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What makes Buffett's success so interesting is that he isn't trying to reinvent how to invest. And, as I've noted before, if not for his philanthropic contributions over the decades, he just might be the wealthiest man in the world right now. With roughly $10,000 in hand in the mid-1950s, the Oracle of Omaha has grown that initial nest egg into a net worth that now exceeds $79 billion. Warren Buffett is arguably the greatest investor of our time.
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