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Berkshire Switches Bets on Banks, Adds Wager on Barrick Gold

(Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc. shifted investments in banks — paring stakes in many of the financial industry’s top names — and bet on Barrick Gold Corp. despite years of chiding the precious metal.

Berkshire significantly reduced its stakes in JPMorgan Chase & Co. and Wells Fargo & Co. in the second quarter, according to a regulatory filing Friday. His Goldman Sachs Group Inc. holding, a remnant of the financial crisis, was gone and even a wager on PNC Financial Services Group Inc. was cut. But Berkshire isn’t giving up on banks, instead spending recent weeks further building its stake in Bank of America Corp.

The second-quarter stock moves are consistent with Buffett’s “extremely cautious” outlook expressed at this year’s shareholders meeting, David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business, said in an interview. “He’s showing extreme caution by basically lightening up on his major banking investments except for Bank of America.”

Buffett has famously called banks a good business as long as they don’t make major mistakes. He has stood by longtime favorite Wells Fargo as it works to free itself from years of scandals. Bank of America ranks as Berkshire’s biggest bank holding by market value and its second-largest common-stock investment overall behind Apple Inc.

Bank of America had a lower price-to-book ratio at the end of the second quarter than JPMorgan and PNC, setting its shareholders up for a greater payoff if the lender closes the gap with its top peers. Charlotte, North Carolina-based Bank of America’s ratio was 0.85, compared with JPMorgan’s 1.23.

Berkshire trimmed other stakes in financial firms. Buffett’s company cut a holding in M&T Bank Corp. and an investment in Bank of New York Mellon Corp. Even wagers on Visa Inc. and Mastercard Inc. were reduced in the second quarter.

Berkshire took a new stake in Barrick Gold, a holding that was valued at about $564 million at the end of the period. While the filing discloses the holdings overseen by Buffett as well as his deputies Todd Combs and Ted Weschler, the move marks a shift for a company run by an investor who has expressed his disdain for gold.

Buffett, Berkshire’s chairman and chief executive officer, has previously chided investors who chose to bet on gold over stocks because of fears of runaway federal budget deficits.

“The magical metal was no match for the American mettle,” Buffett said in his annual letter to shareholders released in 2019.

Kass called the Barrick investment “the biggest shock” from Friday’s filing, and suggested that the size means it could be a stake made by Combs or Weschler.

“Still, you would think they would share Warren Buffett’s skeptical philosophy of investing in gold, which he’s expressed at several annual meetings as well as his letters to shareholders,” Kass said. “Yet this suddenly shows up in his portfolio, almost as a hedge against possible bad times.”

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The liveblog on 13F filings is here.

Other exited holdings:

The filing from Berkshire showed that it cut investments in four major U.S. airlines, a move that Buffett announced in May at his annual meeting. He reversed course on the airline bet after the start of the pandemic, saying that the world has changed for the industryRestaurant Brands International Inc.: 8.44 million valued at $337.8 millionThe filing no longer showed a stake in Occidental Petroleum Corp. Buffett helped the oil producer finance its deal for Anadarko Petroleum Corp. with a $10 billion preferred stock investment. Berkshire later disclosed a common stock stake as well and the oil producer has paid some of the preferred stock’s dividends in the form of common shares in recent months, upping Berkshire’s stake. That common stock holding was gone with the recent filing

One new buy:

Barrick Gold: 20.9 million shares valued at $563.5 million, representing 1.2% of shares outstanding

Four increased holdings, including:

Store Capital: 5.79 million shares, up 31% to 24.4 million valued at $581.3 million, representing 10% of shares outstandingKroger Co.: 3 million, up 16% to 21.9 million valued at $742.7 million, representing 2.8% of shares outstandingSuncor Energy Inc.: 4.25 million, up 28% to 19.2 million valued at $323.7 million, representing 1.3% of shares outstanding

Ten decreased holdings:

Wells Fargo: 85.6 million shares, down 26% to 237.6 million valued at $6.08 billion, representing 5.8% of shares outstandingJPMorgan Chase & Co.: 35.5 million, down 62% to 22.2 million valued at $2.09 billionSirius XM Holdings Inc.: 82.4 million, down 62% to 50 million valued at $293.5 million, representing 1.1% of shares outstandingPNC Financial Services Group Inc.: 3.85 million, down 42% to 5.35 million valued at $562.9 million, representing 1.3% of shares outstandingM&T Bank Corp.: 845,866, down 16% to 4.54 million valued at $471.6 million, representing 3.5% of shares outstandingBank of New York Mellon Corp., Mastercard Inc. Class A, Visa Inc. Class A, Charter Communications Inc. Class A, US Bancorp

Click here for the holder’s 13F filings.

Click here for the holder’s equity holdings analysis.

Click here for the holder’s investor profile.

(Updates with quote, other banks, price-book ratio starting in third paragraph.)

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