After reducing his holdings in Apple, Warren Buffett began to buy "insurance"

The official account of Beijing Business Daily

2024-05-17 06:12Published on the official account of Beijing Business Daily, Beijing

After a large reduction in Apple's holdings, Warren Buffett, the "god of stocks", secretly opened a position for several months. His Berkshire Hathaway's latest Form 13F disclosure on the U.S. Securities and Exchange Commission (SEC) website shows that Buffett is back in familiar territory — insurance. In addition, Berkshire's investment costs in "banking, insurance and finance" stocks increased by another $1.4 billion in the first quarter of this year, following an increase of $3.59 billion in the second half of last year.

Secret positioning

Berkshire Hathaway revealed in its first-quarter investment report filed with the U.S. Securities and Exchange Commission on May 15 local time that the company acquired nearly 26 million shares of Chubb Insurance, which are worth more than $6.7 billion. Chubb shares rose more than 8% in after-hours trading on Wednesday after the news broke.

According to website data, Berkshire Hathaway began to buy Chubb insurance shares in the third quarter of 2023, including about 8.14 million shares worth about $1.7 billion in the third quarter of 2023 and about 20.1 million shares worth about $4.54 billion in the fourth quarter of 2023. As of the end of the first quarter of 2024 (March 31, 2024), Berkshire Hathaway held about 25.92 million shares of Chubb Insurance, worth about $6.72 billion, making Chubb the ninth largest holding of Berkshire Hathaway.

It is worth noting that Berkshire Hathaway has been keeping the public confidential when increasing its stake in Chubb Insurance, and has asked the SEC for "confidentiality" in previous filings. Berkshire Hathaway's request for such treatment is rare, and the last time the company kept the acquisition secret was in 2020 when it bought stakes in Chevron and Verizon.

Why does Berkshire Hathaway want secrecy? University of Maryland Robert A. David Kass, a professor of finance at the H. Smith School of Business, believes that "millions of people are following Buffett's lead, and if investors know before Berkshire completes their positions, others will buy aggressively, pushing up the stock price." Warren Buffett is more sensitive to this issue than others."

In addition, the dynamics of the U.S. stock investment of the Public Investment Fund (PIF), Saudi Arabia's largest sovereign wealth fund, have also surfaced. On the whole, the Middle East "local tyrants" also participated in the AI boom of U.S. stocks, with the market value of U.S. stocks held by public investment funds reaching $20.6 billion in the first quarter, including 13 new U.S. stocks and 4 U.S. stocks. During the same period, 5 U.S. stocks were reduced and 25 U.S. stocks were liquidated.

Familiarity with the field

From this 13F table, it can be seen that Buffett is retreating from the U.S. stock technology sector and increasing investment in energy and insurance. Some analysts said that the once familiar Buffett is back, and this position report also released a signal that he is becoming more cautious about the U.S. stock market, increasing his holdings in traditional areas, reducing his holdings in technology stocks, and holding huge amounts of cash.

It is understood that Chubb Insurance is an insurance company headquartered in Zurich, Switzerland, listed on the New York Stock Exchange, operating in 54 countries and regions around the world, and is one of the world's largest publicly traded property and casualty insurance companies, with a total market capitalization ranking fifth among listed insurance companies. Chubb has assets of more than US$225 billion, with a total written premium of US$57.5 billion in 2023.

Analysts point out that one of the reasons Buffett is eyeing Chubb may be that the company's valuation is low and Buffett is very familiar with the company's business model. Earlier this week, Chubb was trading at 11.3x earnings, compared to 20.6x for the S&P 500 and 15.3x for the financials sector average, according to FactSet data.

Cathy Seifert, an analyst at CFRA Research, said in an email: "Chubb is an attractive equity investment for Berkshire because it operates what Berkshire is known as 'property casualty insurance.'" He did not say whether Berkshire would acquire all of Chubb's shares, but thought the company's focus on commercial line specialty insurance and high-end owner protection would be a "good fit" for Berkshire's insurance and reinsurance portfolio.

In 2016, insurance company Ace Limited acquired the original Chubb Insurance for $29.5 billion in cash and stock, and the combined company adopted the name Chubb Insurance. It is worth mentioning that Evan Greenberg, chairman and CEO of Chubb Group, is the son of Maurice Greenberg, former chairman and CEO of insurance giant American International Group (AIG).

The insurance field is also an area that Buffett is familiar with. Geico, National Indemnity and General Re are all subsidiaries of Berkshire Hathaway. In a recent letter to shareholders, Warren Buffett said, "Property and casualty insurance is at the heart of Berkshire's happiness and growth. ”

Invest prudently

Data from the 13f.info website also shows that as of the end of the first quarter of 2024, Berkshire Hathaway's top 10 holdings, from high to low, are Apple, Bank of America, American Express, Coca-Cola, Chevron, Occidental Petroleum, Kraft Heinz, Moody's, Chubb Insurance, and Davita. These top 10 holdings account for about 91% of Berkshire Hathaway's holdings.

It's also worth noting that Berkshire Hathaway also held about 905.6 million shares of Apple as of the end of the fourth quarter of 2023. As of the end of the first quarter of 2024, Berkshire Hathaway held about 789.4 million shares of Apple, which means that in the first quarter of 2024, Buffett reduced his holdings of about 116 million shares of Apple.

In addition, the company also liquidated its holdings in HP. As of the end of the fourth quarter of 2023, Berkshire Hathaway held approximately 22.85 million shares of HP. As of the end of the first quarter of 2024, all holdings of HP shares have been liquidated.

At the same time, Buffett continued to increase his bets on Occidental Petroleum Corp., adding 4.3 million shares in the first quarter. In his shareholder letter published in February, Buffett mentioned that Berkshire is particularly bullish on Occidental Petroleum's large holdings of oil and gas in the United States, as well as its leadership in carbon capture.

Analysts believe that this indicates that Buffett has released a more cautious attitude towards the U.S. stock market. "Warren Buffett believes that high-tech companies are changing too fast and do not belong to the category they are familiar with, and it is difficult to predict their long-term competitive advantages, and he prefers the fields he is familiar with and the companies that remain unchanged for a long time." Regarding the growth of the cash position in hand, Buffett said that unless he can find an investment standard that is very risky and can bring good returns, he will not spend this money, and "only swing at the right time".

From the perspective of the U.S. stock market, the U.S. stock market closed overnight, and the three major indexes collectively hit a record high, with the Nasdaq rising 1.4%, hitting a record high for two consecutive days; The S&P 500 rose 1.17% to close above 5,300 points for the first time in history; The Dow rose 0.88%, updating the record closing high set on March 28.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told Beijing Business Daily that as we all know, Buffett's consistent investment strategy is: "Be afraid when others are greedy, and be greedy when others are fearful." "The current U.S. stock market is in a super bull market, the market sentiment is very optimistic and greedy, and the market concentration is very high, which may be a huge risk behind this, which is one of the reasons why Buffett remains cautious. On the other hand, in the context of the record high of the US stock market, high-quality companies are no longer cheap, and even the valuation of most listed companies has been expensive. This is also the reason why Buffett has a huge amount of cash in his hands but can't do it.

Beijing Business Daily reporter Zhao Tianshu

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