Warren Buffett is buying again, and pharma has tickled his fancy
Buffett probably sees broader value in the pharma space, which had been somewhat beaten down heading into the US election
Warren Buffett is a living, breathing billionaire, but he’s also a leading economic indicator. So after his Berkshire Hathaway dumped almost $13bn of stocks in the throes of the Covid-19 crisis, investors were beside themselves. They’ll now be quite relieved to see that his company is back in buying mode, making the biggest outlay for equity purchases in a year.
And he’s not just making oddball bets, like Japanese trading houses and, yikes, gold. A filing late on Monday showed that in the latest period Berkshire Hathaway bought a handful of US pharmaceutical giants: AbbVie, Bristol-Myers Squibb, Merck and Pfizer. It also purchased a new stake in T-Mobile US, the wireless carrier with the most enviable spectrum position heading into 5G, and Snowflake, one of the hottest tech IPOs of 2020.
They’re part of the net $4.8bn Berkshire spent buying equities during the period; it spent an additional $9bn buying up its own shares.
The disclosure of Berkshire’s Pfizer holding — valued at $138m as of Monday’s close — comes a week after the drugmaker announced that its Covid-19 vaccine had been more than 90% effective in preventing cases of the virus. Following up on the good news, Moderna, another company in the Covid-19 vaccine race, said on Monday that its formulation was 94.5% effective.
Even so, my colleague Max Nisen tells me that Buffett’s pharma bets are likely not to be entirely vaccine-related, as that logic only really works for Pfizer. Instead, Buffett — or one of his investing deputies — probably sees broader value in the pharma space, which had been somewhat beaten down heading into the US election on fears of a “blue wave” that would produce profit-crimping policies. Those fears aren’t quite so intense without Democrats taking control of the Senate, or at least not yet.
Berkshire continued its banking purge — further reducing its stakes in JPMorgan Chase, PNC Financial Services and Wells Fargo. It also exited a $1.3bn position in Costco Wholesale, which I guess means Buffett didn’t take my suggestion to outright acquire the retailer for his next “elephant-sized” deal.
But shares of Costco have risen 7% to a record high since the third quarter ended, and it just declared a whopping $10-a-share special dividend. Buffett is going to be hitting the See’s candies hard tonight.
But it sure is good to see the investor, well, investing again. Right before the pandemic hit, Buffett said in a TV interview that he’s been a net buyer of stocks every year since he was 11 years old; he’s 90 now. It’s incredible how a virus — and the mishandling thereof — rattled his optimism in a way that wars, terrorist attacks and other recessions didn’t. The US isn’t out of the woods yet, but there are reasons to be hopeful, and that seems to be what Buffett’s latest moves are suggesting.
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