Buffett’s Berkshire Hathaway sold all of its Biogen shares in the second quarter, reduced its Merck investment, and increased its Kroger interest, according to the company’s most recent portfolio report.
The famous investor’s company made just a few additional modifications to its stock holdings throughout the quarter, making those transactions all the more noteworthy. Here’s a deeper look at what we found.
Biogen, the biotech company that developed the Alzheimer’s medication Aduhelm, received an investment from Berkshire Hathaway in the fourth quarter of 2019. During the next quarter, it reduced its holding by 1 percent, to about 643,000 shares, and then maintained that position for the following year and a half.
Buffett’s firm sold its Biogen stock in the third quarter, perhaps taking advantage of the drugmaker’s stock price skyrocketing to a record high in June when federal authorities approved Aduhelm, according to the company. Based on Biogen’s average stock price in the most recent quarter, Berkshire at the very least broke even on the purchase, and it might have made a $50 million profit if it had sold at the top – a 25 percent return in roughly 18 months, according to estimates.
After originally purchasing about 22 million shares of Merck in the third quarter of 2020, Berkshire increased its stake in the pharmaceutical to almost 29 million shares, valued at approximately $2.3 billion, during the following quarter. However, in the first half of this year, it changed direction and reduced its investment by more than two-thirds, to around 9 million shares as of June 30.
Buffett’s firm has adopted a similar strategy with AbbVie and Bristol-Myers Squibb, among other pharmaceutical companies. Following the establishment of interests in the two pharmaceutical groups in the third quarter of 2020, the company increased its stakes in both businesses over the following three months before selling its shares in both companies during the first half of 2019.
In comparison, AbbVie and Bristol-Myers Squibb stock are up around 12 percent year to date, indicating that Berkshire Hathaway has earned money on its recent acquisitions in the pharmaceutical industry in general.
However, Buffett has previously shown an interest in holding a “basket” of pharmaceutical companies, and his latest transactions seem to indicate that he has suffered from buyer’s remorse. In May, the investor observed that Berkshire had invested in a group of equities in which he had no unique insights, felt “sort of so-so” about, and wasn’t “wildly comfortable” holding. This was a foreshadowing of the most recent disposals. In that regard, Berkshire Hathaway’s pharmaceutical investments, which included a tiny interest in Pfizer that was soon sold, met the bill.
Kroger’s stock has risen steadily over the last six weeks, increasing the value of Berkshire Hathaway’s investment in the company to about $2.7 billion today. The fact that Berkshire has continued to purchase the shares over the last 18 months, during which time the firm has eviscerated major holdings such as Wells Fargo and removed others such as JPMorgan, demonstrates how confident the company is in the company’s future.
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The Deals Berkshire Hathaway Did
- Last quarter, Warren Buffett’s Berkshire Hathaway sold its Biogen shares and reduced its position in Merck by a third.
- In the last 18 months, the investor’s firm has purchased more Kroger stock, bringing its total holding in the company to three times its initial investment.