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Knee Jerk Reactions to 13F Deadline Day
TSMC, we hardly knew ye...
Happy Wednesday and welcome to our new subscribers!
As we all catch our collective breath after another frenetic 13F deadline day, I’d like to start with a brief word of thanks to the small (but amazing!) band of Kingswell readers who have become paid subscribers over the past few months.
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Onto the main event…
My customary 13F refresher: Each quarter, all investment managers with more than $100 million of assets under their control must file a report (Form 13F) with the SEC to disclose any changes in their portfolios.
And they must do so within 45 days of the end of the previous quarter — setting up yesterday’s mad rush as heel-draggers got their Q4 2022 papers in right under the wire.
It’s a fun (and informative) way to see what some of our favorite super-investors have been buying and selling over the past few months.
Just don’t turn 13Fs into more than an academic exercise. These are not cheat sheets of what your next move in the market should be — nor are they endorsements about the future prospects of any company.
No matter who’s doing the buying.
Remember: Anything revealed in these filings is only current as of December 31, 2022, so it’s already six weeks old and quite possibly out of date.
In other words, don’t coat-tail.
But, on the plus side, 13Fs perfectly illustrate how different investors — even those who espouse the same value-based principles — go about their business in drastically different ways.
As Warren Buffett says, “In investing, there’s more than one way to get to heaven.”
And a word of warning about Berkshire Hathaway:
Berkshire Hathaway’s 13F should come with a warning.
Not all investments revealed herein were made by Warren Buffett.
With Ted Weschler and Todd Combs managing an ever-increasing portion of Berkshire’s portfolio, it can be difficult to discern which investments belong to Buffett and which come from his lieutenants.
Some try to read the tea leaves or make deductions based on a particular position’s size or industry, but — at the end of the day — everyone’s just guessing.
(So, whenever I write “Buffett bought…” or “Buffett sold…” a particular security, it might actually be Combs or Weschler’s handiwork. Such is the inherent uncertainty that all Berkshire students must labor under.)
Now that all of that’s out of the way, let’s dig into what turned out to be a wild quarter of trading at Berkshire Hathaway…
Well, the old man had me fooled. When Berkshire revealed its sizable stake in Taiwan Semiconductor Manufacturing Co. back in November, I thought it was just the first bite of the apple and that much more would be added in Q4. (Especially with TSM 0.00%↑ bottoming out in the first half of the quarter.) So imagine my surprise when Berkshire's 13F dropped and we learned that Buffett (or Ted/Todd) sold over 86% of his TSMC stake. A preferred holding period of forever? Try less than three months! And, while I'm sure Berkshire caught TSMC’s big upswing in early December for a nice profit, the semiconductor maker has risen even higher to start 2023. I definitely did not see this one coming.
After picking my jaw up off the floor from the TSMC sell-off, I was thrilled to see modest additions to the Paramount and Apple positions. Berkshire bought another 2.4 million shares of PARA 0.00%↑ in Q4, boosting its overall stake to about 15.4% of the streamer's Class B (non-voting) stock. Paramount is the only company that Berkshire purchased in all four quarters of 2022.
Admittedly, adding 333,856 shares of Apple isn’t the most consequential news in the world. But, of course, it’s tough to move the needle on an investment when you already own 915 million shares and it accounts for over 40% of your total portfolio. Certainly possible, too, that Berkshire kept buying when AAPL 0.00%↑ hit a 52-week low in early January. Fingers crossed on that one.
Or not… On closer inspection, that’s the exact number of shares owned by Alleghany Corp. at the time of its acquisition. It looks like Berkshire didn’t purchase any Apple stock on the open market in the fourth quarter.
The biggest buy of the quarter, though, was another surprise: Louisiana-Pacific Corp. Berkshire opened a small position in the Nashville-based building materials company in Q3 — and, now, added another 1.25 million shares to boost its stake by 21.5%. Still just a microscopic speck in the Berkshire portfolio, but perhaps attractive because of its prolific share repurchases.
Notable cuts (non-TSMC edition): Berkshire sold 71.1 million shares of U.S. Bancorp, 37.1 million shares of BNY Mellon, and — for the second straight quarter — trimmed Activision Blizzard by about 12%. Some negligible sales of Chevron (1.4%), Ally Financial (0.67%), and Kroger (0.53%), too.
Regarding Activision Blizzard, I don’t really know what to make of the Q3 and Q4 reductions. No question, regulatory storm clouds have gathered on the horizon for the planned Microsoft/Activision merger — and Berkshire might be spooked. But we just saw Buffett slash stakes in other companies by 80-90% this quarter and, if he were really worried about the FTC’s case, I’d expect him to be making a bigger move for the exits. Something to keep an eye on, I guess.
While I poked fun at Berkshire’s shocking sale of TSMC after holding the stock for less than three months, it’s days like this that make me marvel at what Warren Buffett and Charlie Munger have accomplished over the years.
In what other industry do so many people — quite rightly — hang on every word of two nonagenarians?
There’s precious little sentimentality in the money game. If Buffett and Munger were slipping, there would likely be a long line of Berkshire shareholders “encouraging” them to head off into the sunset. Instead, they both remain on top of their game decades after the normal retirement age.
It reminds me of something that Buffett said at an annual meeting more than thirty years ago:
One of the questions we get asked quite frequently is, “What happens if you get hit by a truck?”
But what we’re worried about is the year when you show up and you say, “What happens if you don’t get hit by a truck?”
Based on the evidence so far, I don’t think they have anything to worry about.