Buffett Bets $5.3 Billion On This Bank
Reporting on the market moves of well-known “guru” investors is a popular cottage-industry.
There are entire websites devoted to which stocks rich and famous investment titans are buying and selling.
But with 30 years in this business I prefer to do my own homework, so I don’t play the guru-watching game much.
It’s not because I don’t trust the advice. It’s because by the time the information is made public, it’s already stale. The trade value has long since ended.
But I do keep an eye on what the “Oracle of Omaha” is doing with his money.
No one in this pantheon of pros is more widely followed than Warren Buffett and the moves made by his investment vehicle Berkshire Hathaway.
That’s because he’s a very patient, long term investor, which means even if you follow his moves later on there’s still a good chance you’ll see strong returns.
According to Buffett, his favorite holding period is “forever,” which is about how long he’s held onto his fabled stake in Coca-Cola (KO).
KO remains a rewarding investment today.
As a shareholder of Berkshire Hathaway myself, I’ve made the pilgrimage to see Buffett & Co. at work up close and personal. Attending the company’s annual meeting in Omaha is quite a thrill. It’s an event that’s been dubbed the “woodstock of capitalism.”
To me it seemed more like a carnival of capitalism. But if you’re interested, the next one kicks off in Omaha on May 4th.
My Real Point is This
If you want to track what Warren Buffett is buying, but without booking airfare to Omaha, keep an eye out for the new Berkshire Hathaway filings with the SEC.
According to their last filing, Buffett’s recently been buying blue-chip financial stocks in a big way. And I think he’s onto something.
According to Berkshire’s 13-F filing on Valentine’s Day, Buffett boosted his stake in several of his large existing bank holdings including:
- Bank of America (NYSE: BAC)
- U.S. Bancorp (NYSE: USB)
- Goldman Sachs (NYSE: GS).
Buffett & Co. also established new positions in three blue-chip financial firms:
- JPMorgan Chase (NYSE: JPM)
- PNC Financial (NYSE: PNC)
- Travelers Companies (NYSE: TRV).
His new stake in JPM is especially noteworthy. Buffett bet $5.3 billion on the bank with his opening investment.
Your Billion-Dollar Takeaway Is This…
A few years ago Berkshire first disclosed a stake in Apple (NASDAQ: AAPL). The move was something of a head-scratcher at the time. Buffett had publicly said he doesn’t “understand” technology.
But since taking that initial stake in AAPL, Buffett has more than quadrupled his positions in the stock. It’s now his largest holding by far.
Perhaps he’s thinking the same runup will occur with JPM?
Only time will tell on that. But for us income investors JPM makes for as solid a dividend paying stock as you will find.
The reason is JPM’s income is evenly divided between interest income business, and fee-based income like investment banking, wealth management and JPM’s massive credit card business.
It’s a solid business model. These fee-based income streams can be much more stable and profitable. They’re less dependent interest rate yields.
That makes JPM one of the most quality, diversified big banks still standing post-financial crisis.
Plus, JPM is still about 12% off it’s 2018 high and pays a generous 2%-plus dividend.
Bottom line: Financial stocks have yet to recover much from last year’s nasty Q4 selloff. This could change soon and JPM is one of the best in the business to own.
If it’s good enough for $5.3 billion of Buffett’s money, then it’s good enough for ours too!
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch
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