Berkshire Hathaway Inc. CEO Warren Buffet has always been a fan of the banking industry, and a critic of gold, so much so that he trivially calls gold a “yellow stone.”
His company’s latest report showed that in the second quarter of 2020, Buffet began selling shares of the banking stocks he held in his portfolio. Specifically Wells Fargo & Co for 26 percent and JPMorgan Chase & Co. for 62 percent (in addition to other banking stocks) buying instead stocks of Barrick Gold Corp. That is, the largest mining company in the world. The stock rose from the $12.61 value in early June to $30.29 on Aug. 18. A 140% increase. Will it be the Buffet effect or is his decision really worthy of his name “Oracle of Omaha”?
What can all this tell us? Is Buffet trying to give us a wake-up call about the U.S. economy? Certainly his much-criticized decision to leave the airline industry a few months ago eventually paid off, so much so that the stocks of major airlines failed to recover their losses.
It should also be said that Warren’s position on Barrick Gold is not as heavy-handed as people think. In fact it covers only 0.23 percent of his portfolio for a total amount of $625 million. Consider that Apple and Coca Cola account for $134 billion.
It may therefore have been a decision not even made by Buffet himself, but by his team of analysts at the end of the day. The sale of Well Fargo’s shares may be due to a rebalancing of the portfolio, as the stock was weighing a little too heavily.
Note also that Buffet bought more than $2 billion in Bank of America securities in the last 30 days.
In the end, in my opinion, much ado about nothing. Buffet may simply have jumped into what many are considering an ‘investment’ asset but which is not so much of an investment: gold. But Buffet does not do this by buying the raw material directly, but by buying Barrick Gold at prices that I believe were good (when it was still quoting under $20). Recall that Buffet has always invested from a very long-term perspective. We will see in a few years who was right. The Oracle of Omaha or the average investor.