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Warren Buffett’s “secret portfolio” includes 90 stocks, including five magnificent stocks acquired during the quarter ended in March.
Berkshire Hathaway (BRK. A) (BRK. B) CEO Warren Buffett has consistently outperformed Wall Street’s benchmark S&P 500 for nearly six decades.
While the S&P 500 has achieved a total return of about 35,000%, including dividends, since the mid-1960s, Berkshire Hathaway Class A shares (BRK.A) have generated an extraordinary overall gain of more than 5 060,000% without paying any dividend over the same period. .
Given Buffett’s remarkable track record, it’s no surprise that investors eagerly await the quarterly release of Berkshire Hathaway’s Form 13F filing with the Securities and Exchange Commission.
Warren’s Treasure Vault after new additions
In 1998, Berkshire acquired General Re in a $22 billion deal. The main attraction was General Re’s reinsurance operations, but the acquisition also included a specialist investment company, New England Asset Management (NEAM). Once the transaction was completed, Berkshire Hathaway became the new owner of NEAM.
At the end of the March quarter, NEAM had approximately $646 million in assets under management (AUM), which required a 13F filing like other institutional investors.
Although Warren Buffett does not directly manage NEAM’s investments as he does with Berkshire Hathaway’s $380 billion portfolio, all 90 securities in NEAM’s portfolio are ultimately owned by Berkshire Hathaway. This 26-year-old acquisition gave Buffett a “secret” portfolio of $646 million.
This hidden wallet includes many exchange-traded funds as its largest holdings and dozens of well-known companies. The five notable stocks were added to this “secret” portfolio in the first quarter. Let’s take a look.
AT&T and Verizon
Despite Warren Buffett’s recent dislike of traditional telecommunications companies, NEAM’s 13F filing reveals purchases of 22,235 shares of AT&T and 14,175 shares of Verizon Communications (VZ) during the March quarter.
Legacy telecommunications providers like AT&T and Verizon have significantly underperformed in the current bull market due to rising interest rates, which increase the costs of refinancing and closing deals, and concerns highlighted in a Wall Street Journal (WSJ) report regarding lead-sheathed cables laying potential cleanup costs and health responsibilities.
AT&T has made substantial progress in reducing its net debt, which has decreased by more than $40 billion to $128.7 billion since divesting WarnerMedia in April 2022. Conversely, Verizon has not not yet significantly reduced its outstanding debt.
AT&T and Verizon are capitalizing on the 5G revolution. Upgrading their networks to support 5G speeds has led to increased data consumption from wireless customers and a steady increase in broadband net additions.
In the first quarter, Verizon added 389,000 net broadband customers, while AT&T has achieved at least one million net broadband customer additions for six consecutive years.
Johnson & Johnson
Another notable addition to Warren Buffett’s “secret” portfolio is healthcare conglomerate Johnson & Johnson (JNJ), with 2,225 shares purchased in the quarter ended March. Once a large stake in Berkshire Hathaway, Buffett reduced his stake after J&J used his shares as collateral in the 2012 acquisition of Synthes.
J&J stock has underperformed in the current bull market, primarily due to Legal issue surrounding its discontinued talc-based baby powder. The company faces about 100,000 lawsuits alleging the powder causes cancer, with previous settlement attempts having failed.
Despite these challenges, J&J enjoys the highest possible credit rating (AAA) from Standard & Poor’s, shared by only one publicly traded company. This rating reflects S&P’s confidence in J&J’s ability to service its debts and cover settlement costs with liquidity or operating cash flow.
Wells Fargo
Wells Fargo (WFC) is the fourth notable addition to Warren Buffett’s hidden portfolio in the first quarter, with 6,830 shares acquired.
Once a top holder of Berkshire Hathaway, Buffett reduced his position following the bank’s unauthorized accounts scandal, which damaged his reputation.
Additionally, Wells Fargo is enjoying the fastest rate hike cycle in four decades. The rise in lending rates increased the net interest income of banks benefiting from variable rate loans.
Chevron
Energy giant Chevron (CVX) is the fifth notable stock acquired for Warren Buffett’s secret $646 million portfolio. Although Berkshire Hathaway sold more than three million shares of Chevron in the quarter ended in March, New England Asset Management (NEAM) added 1,900 shares to its existing position.
Chevron will also acquire Hess in a $53 billion all-stock deal. If the deal is approved, Chevron will gain 465,000 net acres in the Bakken Shale and increase its oil equivalent production in Guyana.
Mike Wirth, CEO of Chevron, said: “This combination allows Chevron to strengthen our long-term performance and further enhance our advantageous portfolio by adding world-class assets. »
Chevron’s flexible balance sheet allows for major acquisitions and strong dividend payouts, boosting its appeal in the energy sector.
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