Buffett throws bank stocks out of portfolio
While star investor Warren Buffett was still campaigning for confidence in the US banking system during the financial crisis, he is now bidding farewell to a significant proportion of stocks from the banking sector, according to the latest mandatory announcement from Berkshire Hathaway. A big wave of credit defaults is to expect.
Five big stocks that have been sold:
- Southwest Airlines
- Bank of New York Mellon
- Delta Airlines
- US Bancorp
- Goldmann Sachs
Berkshire Hathaway has almost completely withdrawn from Goldman Sachs. According to a notification of the US Securities and Exchange Commission, the investment vehicle controlled by Warren Buffett reduced its stake in the US bank by more than 10 million shares to 1.9 million in the first quarter.
At the annual meeting of his investment conglomerate Berkshire Hathaway, Warren Buffett had recently announced that he would be selling all his shares in the aviation industry. Referring to Berkshire Hathaway’s recent mandatory announcement, Warren Buffett and his partner Charlie Munger have suffered record losses on equity positions held in the first quarter.
These losses amounted to $66.5 billion, down from $242 billion at the end of the fourth quarter of 2019 to $175.5 billion at the end of the first quarter of 2020. But what is even more interesting is that Buffett now seems to have started throwing bank stocks out of his portfolio. It is clear that, regarding the private mortgage markets as well as an increasing wave of loan defaults, the worst is yet to come.
In addition it is very likely a good idea to be short selling bank stocks, as it has been a great source of income lately and will probably still be in the near future. Currently there is no reason for it to change, as a V-shaped recovery of the American economy is very, very unlikely
At the time of the global financial crisis, Buffett once helped Goldman Sachs to bail out, as Berkshire Hathaway had invested five billion US dollars in Goldman Sachs. In return, Buffett received preferred shares, which were endowed with an annual dividend of ten percent.
Only a while ago he cheered for the banks, now he is throwing out his bank stocks very quietly. It now has become clear, that the recovery of the economy will not take place anytime soon and the banks will be stuck in the holes they dug themselves. The recession has become inevitable.