Warren Buffett Berkshire Hathaway (WKN: A0YJQ2) manages an incredible $ 200 billion. Although Buffett is known for his long-term strategy, he is not afraid to sell companies if he believes his money can be better spent elsewhere.
Because Berkshire Hathaway is so large, it tends to acquire great interests in companies that have been built up for months. That is why the prospect of gambling against the Oracle of Omaha is not pleasant. Fortunately, the shares that Berkshire Hathaway sells are published quarterly in the 13F report that the company submits to the Securities and Exchange Commission (SEC). According to recent disclosure, Verisk Analytics (WKN: A0YA2M), Phillips 66 (WKN: A1JWQU), American Airlines (WKN: A1W97M) and United Continental (WKN: A1C6TV) lost all Berkshire's favor in the last quarter.
Berkshire Hathaway was one of the founders of Verisk Analytics and the only one of the founding members in the 1970s who still owned shares when Verisk became public in 2009.
In the second quarter, however, this story came to an end. As I explained in May, Buffett reduced the position in the first quarter to a miniscule minimum. Berkshire sold the remaining 284,778 shares last quarter.
Buffett said nothing about why he decided that this was the right time to sell. However, the expansion of the company to other markets, which has reduced dependence on customers and accident insurance such as Berkshire & GEICO, can be a reason. It is also likely that Verisk Analytics has reached a record high this year, making the profit too attractive. The IPO price was $ 22 – the share price was more than $ 116 recently.
The fact that Verisk Analytics was able to rise despite the Berkshire Hathaway sales is fascinating. Now that Berkshire no longer has any shares to sell, it is interesting to see what happens next to the share price of that company. In the past, shares such as Walmart and IBM also rose after the Berkshire exit. However, Berkshire's share in Verisk Analytics was significantly lower than that of these two giants, so Berkshire's sales of Verisk probably were not very significant in terms of stock prices.
However, it may be worth monitoring Verisk Analytics because sales and revenues are rising. In the second quarter, sales increased 15% to $ 601 million, including organic-neutral growth of 7%, and earnings per share rose 29% to $ 1.06.
|Company||shares held||Shares sold in Q2 2018||Change of shares held in%||Residual value|
|Phillips 66||34,729,514||10,960,378||(23.99%)||$ 4.2 billion|
|Verisk Analytics||0||284,778||sold||0 USD|
|American Airlines||44,700,000||1,300,000||(2, 83%)||$ 1.7 billion|
|United Continental||26,684,542||1,021,421||(3.69%)|| $ 2, 2 billion  CURRENT FEATURES ON JUNE 30, 2018. DATA SOURCE: BERKSHIRE HATHAWAY SEC REPORT 13F, SUBMITTED ON AUGUST 14, 2018.
Perhaps Buffett & # 39; s decision to buy more shares in Phillips 66 – an oil and gas freight forwarding, storage, refining and marketing company – for sale this quarter, very surprising. Berkshire Hathaway sold 35 million Phillips 66 shares in the first quarter. However, this decision seems to have been prompted by the desire to reduce Berkshire's share below 10% in order to reduce regulatory pressure.
Berkshire Hathaway had about 9.8% of Phillips 66 in the second quarter, compared with 16 earlier%. But apparently that was not enough. In the second quarter, Buffett sold another 10.9 million shares, reducing its position by approximately 24% to 34.7 million shares.
The sale decision was made despite the fact that the Phillips shares reached 66 new highs. At the same time, the sale took place shortly before the publication of the financial results for the second quarter, which outperformed the market observers in both revenue and profit. Specifically, the company's sales increased by 21% to $ 29.7 billion, and the diluted earnings per share rose from $ 1.06 in the second quarter of 2017 to $ 2.84. The refining activities were strongest with a net result of $ 910 million compared to $ 224 million a year earlier.
Often a significant sale of a stock by Berkshire Hathaway indicates that sales will continue. With an occupancy rate of Phillips 66 refining capacity of 100% last quarter, oil prices are close to peak levels. The recovery of Phillips 66 could now be a good time to make a profit, especially because Berkshire still has enough shares to sell.
Berkshire Hathaway bought the first 2016 Times shares from an airline and since then a number of others have arrived. Buffett recently increased its stake in Southwest Airlines (WKN: 862837) and Delta Air Lines (WKN: A0MQV8) and reduced the interests of Berkshire in American Air and United Continental.
Rising kerosene prices and other costs have influenced the profit margins of the sector in the past year. The operating margins of American and United Continental are considerably lower than those of Southwest and Delta at 9%. American Air undoubtedly has one of the weakest balance sheets of the four companies because of the high debt burden. High costs can put further pressure on earnings this year. As an alternative, the share price of United Continental recovered well in 2018, especially after the second quarter results. In the quarter, however, United Continental was able to increase its revenue per average mile per seat more than expected. This prompted management to increase the adjusted earnings per share for the full year from a minimum of $ 7 to at least $ 7.25.
Warren Buffett's fondness for Southwest and Delta Air may suggest that both are his favorite stocks in the industry. If this is the case, investors may consider selling some of the shares in American and United Continental. In June, Berkshire Hathaway owned 26.7 million United Continental shares and 44.7 million American Airlines shares. If Buffett continues to dissolve these positions, stock prices may remain under pressure.
The simple secret of buying the best shares
As Warren Buffett once said, you do not have to have a genius IQ to be a big investor, all you need is simple math, knowing what numbers to look at and what common sense. In our free special report, "15 financials that make you a better investor", we share 15 key figures to help you identify the stocks with the best prospects for the future. Click here for free access to this special report.
The Motley Fool owns shares of Verisk Analytics. The Motley Fool recommends Berkshire Hathaway (B shares) and Southwest Airlines.
This article was written in English by Todd Campbell and published on Fool.com on August 15, 1818. It has been translated to allow our German readers to participate in the discussion.