Folks who follow stocks Warren Buffett is buying and selling just got something of a surprise. Berkshire Hathaway (BRK.B (opens in new tab), $308.91), of which Buffett serves as chairman and CEO, disclosed a huge new stake in Taiwan Semiconductor Manufacturing (TSM (opens in new tab), $72.80).
Warren Buffett’s holding company not long ago bought 60.1 million shares in the world’s largest pure-play semiconductor foundry. TSM, which is a critical source of chips for the global supply chain, has seen its stock get hammered this year as investors fret over weakening demand and increased competition.
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With a value of $4.1 billion as of the end of Q3, TSM is now Berkshire Hathaway’s 10th largest holding. Buffett made the purchases during the third quarter, according to a regulatory filing (opens in new tab) made November 14.
Warren Buffett’s big bet on the chip sector comes somewhat out of the blue. For one thing, he’s been heavily focused recently on adding exposure to energy sector names such as Occidental Petroleum (OXY (opens in new tab)) and Chevron (CVX (opens in new tab)). And even though Apple (AAPL (opens in new tab)), with a 42% weighting, is by far the largest holding in Berkshire Hathaway’s equity portfolio, only six of the holding company’s 48 stocks and two ETFs come from the tech sector.
The bottom line, however, is that Berkshire Hathaway was once again a net buyer of stocks during the quarter. Berkshire Hathaway’s net stock purchases (or the value of buys minus sells) came to about $3.6 billion in the third quarter, according to the company’s quarterly report.
Note well that those net purchases came despite the fact that it was generally harder to find bargains. The S&P 500 ultimately lost 5.3% on a price basis during the third quarter, but at one point in mid-August the benchmark index was up almost 14% from the end of Q2.
Either way, Warren Buffett was more greedy than fearful in the most recent quarter, as Berkshire Hathaway’s Q3 net buying was in line with its Q2 activity. True, third-quarter net purchasing paled in comparison to the way Warren Buffett kicked off the year, but it was a different market back then.
Berkshire Hathaway’s first-quarter shopping spree amounted to $41.5 billion in net stock purchases – or Buffett’s biggest splurge on equities since early 2008. The S&P 500, however, was off more than 12% at one point in the first quarter. That presumably made it easier for Buffett to find stocks on sale. It’s also true that energy giant Chevron, a component of the Dow Jones Industrial Average, accounted for about half of Berkshire Hathaway’s first-quarter binge.
Other new third-quarter investments included the purchase of 5.8 million shares in housing products maker Louisiana Pacific (LPX (opens in new tab)). The stake, worth $297 million as of the end of Q3, is small enough that it could be the work of co-portfolio managers Ted Weschler or Todd Combs.
Berkshire Hathaway also initiated a small stake in investment bank Jefferies Financial Group (JEF (opens in new tab)), buying 433,558 shares worth $12.8 million. Like LPX, the JEF position accounts for less than a tenth of a percent of Berkshire Hathaway’s total portfolio value. Again, this is probably not a Warren Buffett stock pick.
Elsewhere on the buy side of the ledger, Berkshire Hathaway added to its investments in the aforementioned OXY and CVX. The conglomerate also upped its holdings of Celanese (CE (opens in new tab)), Paramount Global (PARA (opens in new tab)) and RH (RH (opens in new tab)), which is also known as Restoration Hardware.
On the sell side of the books, we already knew from a filing last week that Warren Buffett sold 56% of Berkshire Hathaway’s stake in U.S. Bancorp (USB (opens in new tab)), but another bank in the portfolio likewise took a hit. Buffett cut exposure to custodian bank Bank of New York Mellon (BK (opens in new tab)) by 14% in Q3.
Other moves included parings of Berkshire Hathaway’s stakes in General Motors (GM (opens in new tab)), Activision Blizzard (ATVI (opens in new tab)) and Kroger (KR (opens in new tab)). Lastly, Berkshire Hathaway sold off its entire position in real estate investment trust Store Capital (STOR (opens in new tab)), shedding the remainder of its 6.9 million shares.
The big takeaway for folks who follow Warren Buffett stocks is the TSM stake. It’s bold, somewhat splashy and kind of a surprise. With shares down about 40% for the year-to-date, it would appear that Buffett – or one his lieutenants – found TSM to be trading at an irresistible price.