Berkshire Hathaway Invests in Drugmakers Seeking Covid-19 Vaccine -- Update
November 16 2020 - 7:37PM
Dow Jones News
By Jenna Telesca and Ben Eisen
Warren Buffett's Berkshire Hathaway Inc. is betting on some of
the largest firms chasing a Covid-19 vaccine.
The Omaha, Neb., conglomerate recently made new investments in
large pharmaceutical companies Merck & Co., Bristol Myers
Squibb Co. and AbbVie Inc., investing between $1.8 and $1.9 billion
in each, according to public filings. Berkshire also made a new,
smaller investment in Pfizer Inc. of $136 million.
Berkshire made these investments sometime in the quarter ended
Sept. 30, well before Pfizer, BioNTech SE and Moderna Inc. reported
positive results from late-stage trials of potential vaccines.
"Historically, Buffett has stated that, if he were to invest in
the pharmaceutical industry, it would likely be that he takes a
basket approach and buys a handful of companies instead of a very
large stake in just one," Berkshire investor and Cheviot Value
Management LLC portfolio manager Darren Pollock wrote in a
note.
Mr. Buffett generally invests in stable industries he expects to
grow over time, suggesting he expects the broader pharmaceutical
world to profit from eventual Covid-19 vaccines and therapeutics.
Berkshire's recent investments give insight into how he believes
the coronavirus pandemic will shape American businesses for the
long term.
Overall, Berkshire's largest stock investments remain Apple
Inc., Bank of America Corp. and Coca-Cola Co.
The 90-year-old Mr. Buffett might or might not have made these
investments himself. Berkshire employs two portfolio managers, Todd
Combs and Ted Weschler, who make many of Berkshire's equities
investment decisions. When Mr. Buffett eventually steps down from
running Berkshire, they are on the shortlist of potential
successors, along with Greg Abel and Ajit Jain.
The purchases come after Berkshire Hathaway trimmed its airline
holdings earlier this year as the pandemic struck. In May, Mr.
Buffett disclosed Berkshire had sold its stakes in United Airlines
Holdings Inc., American Airlines Group Inc., Delta Air Lines Inc.
and Southwest Airlines Co.
"The airline business has the problem that if the business comes
back 70% or 80%, the aircraft don't disappear," he said during
Berkshire's virtual annual meeting. "The world changed for
airlines."
Berkshire unloaded more bank stocks in the third quarter.
The conglomerate roughly halved its remaining stake in Wells
Fargo & Co., further whittling down its holdings in a bank it
has owned for more than three decades. Berkshire also sold nearly
all of its remaining stake in JPMorgan Chase & Co. The moves
continue the billions of dollars worth of sales of both firms in
the second quarter.
Meanwhile, Bank of America appears to be emerging as Mr.
Buffett's favorite bank. His firm increased its share holdings by
about 9% last quarter. Berkshire now owns nearly 12% of the
company, according to FactSet, above the 10% threshold Mr. Buffett
has said he typically tops out at.
Berkshire has also invested heavily in its own stocks in the
first three quarters of the year, making $15.7 billion in stock
buybacks. These buybacks rank among the largest investments
Berkshire has ever made.
Investors and analysts continue to wait for Mr. Buffett to spend
a larger chunk of Berkshire's $150 billion cash pile on an
acquisition or a significant stake in a company. In recent months
Berkshire purchased Dominion Energy Inc.'s midstream energy
business and invested $6 billion in five Japanese companies.
"The portfolio has really taken on a new economy look," said
James Shanahan, senior equity research analyst at Edward Jones.
Last quarter, Berkshire invested almost $276 million in T-Mobile
US Inc.
Mr. Shanahan said the portfolio has become more balanced with
more technology and telecommunications positions in recent years
and reduced exposure to financial services.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
November 16, 2020 19:22 ET (00:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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