On Feb. 14, Warren Buffett’s company, Berkshire Hathaway (BRK.A 0.17%) (BRK.B 0.01%), will likely report its 13F filing, which details which stocks the large conglomerate bought and sold in the fourth quarter of 2022. A company must file a 13F no later than 45 days after the quarter ends.
Because Buffett is considered one of the greatest investors of all time and Berkshire has soundly beaten the market since he became CEO in 1965, Berkshire’s 13F is closely watched by the entire investing community. In Berkshire’s 13F filing for the third quarter of 2022, the conglomerate made several sizable sales of existing positions it has held for a long time. Here are two stocks I could see Berkshire selling more of in Q4 — and it wouldn’t necessarily have to do with their performance.
1. U.S. Bancorp
In the third quarter of 2022, Berkshire sold about 42 million shares of the large regional lender U.S. Bancorp (USB -0.43%). That’s equivalent to roughly 35% of Berkshire’s total position in the regional bank.
Berkshire has owned U.S. Bancorp since 2006, and the stock seemed to be Berkshire’s regional bank of choice after the company sold most of its other regional holdings during the beginning of the pandemic. U.S. Bancorp currently pays a strong dividend yield of more than 3.8% and has consistently generated excellent returns for shareholders. It is definitely one of the better banks in the industry.
But Buffett has said in the past that “when we sell something, very often it’s going to be our entire stake: We don’t trim positions. That’s just not the way we approach it any more than if we buy 100% of a business. We’re going to sell it down to 90% or 80%.” Given the size of the sale in the third quarter, I could see Berkshire Hathaway continuing to reduce its stake in U.S. Bancorp.
One reason could be U.S. Bancorp’s recently completed large acquisition of the U.S. banking operations of Japanese lender Mitsubishi UFJ Financial Group (MUFG 0.90%). Large bank acquisitions have proven difficult to pull off, although I do see the potential for this one. But bank investors don’t always like a big change in strategy, especially when the bank has already been successful.
Furthermore, U.S. Bancorp currently trades at more than 300% of its tangible book value or net worth. That’s a high valuation, although not out of line with its historical range. Interestingly, all of Berkshire’s bank purchases in 2022 were in value stocks such as Citigroup, Ally Financial, and Jefferies Financial Group, all of which traded below or right around their tangible book values.
2. Bank of New York Mellon
In the third quarter of 2022, Berkshire also sold more than 10 million shares in another longtime bank holding, Bank of New York Mellon (BK -0.03%). That equates to about 14% of its total position in the stock. Berkshire first invested in Bank of New York Mellon in 2010.
Interestingly, Berkshire sold about 18% of its total position in the bank in the second quarter of 2020 despite what Buffett has said about trimming positions. Perhaps Berkshire is just maintaining appropriate exposure to the banking sector after buying more bank stocks in 2022. When Berkshire sold a lot of banks in 2020, Buffett said it had nothing to do with banks and their performance but that the company didn’t want to be overexposed to the sector.
Bank of New York Mellon, one of the largest custodian banks in the world, can see its business impacted by market conditions because a bearish market can lead to outflows in its investment and wealth-management business. Still, the bank also benefits from rising interest rates and is seen as a safer play in the industry because of its limited credit exposure. But like U.S. Bancorp, Bank of New York Mellon trades at a premium valuation of more than 240% of its tangible book value.