Warren Buffett visits the grounds at Berkshire Hathaway’s annual shareholder meeting in Omaha, Nebraska.
David A. Grogan | David A. Grogan CNBC
Berkshire HathawayThe firm, led by legendary investor Warren Buffett, has been making secret bets on the financial industry since the third quarter of last year.
The identity of the shares Berkshire has been snapping up may be revealed at the company’s annual shareholder meeting on Saturday in Omaha, Nebraska.
That’s because unless Berkshire gets a third consecutive quarter of confidentiality on the investment, the stake will be disclosed in a filing later this month. So the 93-year-old Berkshire CEO may decide to explain his reasoning to the thousands of investors who flocked to the party.
The mysterious bet has attracted Berkshire investors since the beginning Appeared in its disclosure late last year. At the time, Buffett had been a net seller of stocks and lamented the lack of opportunities that could “really move the market forward.” Needle At Berkshire,” he’s clearly found something he loves — and it’s in finance.
He has pulled back in this area in recent years due to concerns about rising loan defaults. High interest rates have brought losses to some financial institutions, such as regional banks in the United States, while also making yields on cash instruments such as Berkshire’s Treasury bills suddenly attractive.
“When you become the best at investing, people are going to be interested in what you think is good,” said Glenview Trust’s chief investment officer. bill stone, using the abbreviation “Greatest of All Time.” “What’s even more exciting is that the bank is within his reach.”
Under Buffett, Berkshire Hathaway beaten The S&P 500 Index’s compound annual growth rate in the past six years was 19.8%, while the index’s compound annual growth rate was 10.2%.
Report description: The annual meeting will be held on CNBC and Stream live on CNBC.com. Our special coverage will begin Saturday at 9:30 a.m. ET.
implicit bet
Berkshire requested anonymity because if the stock had become known before the group completed its position, others would have bought the stock, pushing the price higher. David KassProfessor of Finance at the University of Maryland.
Buffett is said to control about 90% of Berkshire Hathaway’s massive stock portfolio, leaving the rest to his deputies Todd Combs and Ted Weschler, Kass said.
While the investment disclosure did not disclose the specifics of the stock, Stone, Kass and other Buffett watchers believe it is a multibillion-dollar bet on a financial company.
Separate Berkshire Hathaway data showed that’s because the cost basis of the company’s holdings in banks, insurance companies and financial stocks, the only category that grew, rose by $3.59 billion in the second half of last year. Filing.
At the same time, Berkshire exited the financial industry by dumping insurance companies. markle and Universal Lifeleading investors to estimate that the stakes could be as high as $4 billion or $5 billion by the end of 2023.
Schwab or Morgan Stanley?
If this is Buffett’s classic bet – owning a large stake in a company – then the stock must be worth a lot, possibly $100 billion.Triggered by holding at least 5% of shares in U.S. listed companies expose Require.
Investors have been speculating on the stock’s direction for months. Finance encompasses all types of companies, from retail lenders to Wall Street brokers, payments companies and various insurance sectors.
Charles Schwab or Morgan Stanley Reportedly may qualify James ShanahanAn analyst at Edward Jones, covering banks and Berkshire Hathaway’s businesses.
“Schwab was hit hard by last year’s regional banking crisis, and the problem they faced was retail investors converting cash into higher-yielding investments,” Shanahan said. “No one wanted to own the name last year, so Buffett could Buy as much as you want.”
Other names that have been circulated—— JPMorgan or black stoneIt’s possible, for example, but probably doesn’t make much sense given the valuation or business mix. truthist and other higher-quality regional banks and insurance companies that may also fit Buffett’s parameters American International GroupThat’s despite their smaller market caps, Shanahan said.
Buffett and banks
Berkshire owns financial name Buffett has stepped in repeatedly over the decades to inject capital and confidence into the industry.
As CEO of scandal-plagued Salomon Brothers in the early 1990s, Buffett helped turn the company around.He invested $5 billion Goldman Sachs In 2008, another US$5 billion was invested Bank of America In 2011, he finally became the largest shareholder of the latter.
But after adding lenders in 2018, from universal banks like JPMorgan Chase to regional lenders, PNC Financial and Bank of AmericaHe slashed investments in the sector in 2020 amid concerns that the coronavirus pandemic would punish the industry.
Since then, he and his deputies have largely avoided increasing their financial holdings except for small holdings in the sector. Citigroup and capital one.
“Fear is contagious”
Last May, Buffett told shareholders to expect more Banking turmoil. He said Berkshire could deploy more capital in the industry if needed.
“What’s going on in the banking industry is very similar to what it’s always been in the banking industry, fear is contagious,” Buffett said. “Historically, sometimes that fear is justified and sometimes it’s not.”
Regardless of where he bets, the move will be seen as a boost for the company and even the industry, given Buffett’s track record of identifying value.
It’s unclear how long regulators will allow Berkshire to shield its moves.
“I wish he would reveal the name and talk about the strategy behind it,” Shanahan said. “The SEC’s patience may run thin, and at some point it looks like Berkshire will get preferential treatment.”
—CNBC’s Li Yun contributed to this report
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