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Warren Buffett’s last trades as Berkshire Hathaway CEO are capturing particular attention ahead of his retirement at the end of this year.
Business Insider asked three longtime followers of the legendary investor what they thought of them.
‘The perfect Buffett play’
Berkshire built a $1.6 billion stake in embattled insurer UnitedHealth, its latest portfolio update showed.
The stock has nearly halved over the past 12 months to trade at five-year lows as investors fret over earnings, federal investigations, public backlash, and the leadership difficulties that followed the fatal shooting of CEO Brian Thompson in December. It rose 12% when Buffett’s investment was disclosed.
Peter Mallouk, the president and CEO of Creative Planning, called Berkshire’s purchase the “perfect Buffett play” because he “loves a company that is ‘unfairly’ valued to the low end.”
Mallouk, who’s been studying Buffett for more than 30 years, said the bargain hunter “clearly” sees UnitedHealth as “a major player, not going anywhere, but going through a very rough patch, part of which is reputational but survivable.”
The UnitedHealth bet is “interesting,” Darren Pollock, a portfolio manager at Cheviot Value Management, told Business Insider. He said the health insurer is under “intense regulatory scrutiny,” but operating in a “business-friendly political environment and is “so well-entrenched that it’s hard to see the company being materially displaced.”
CEO Stephen Hemsley said when second-quarter earnings were released last month that it had “embarked on a rigorous path back to being a high-performing company.”
Berkshire Hathaway cut its stake in Apple again last quarter
Buffett has long favored companies with dominant market positions and durable competitive advantages, or “moats”; Coca-Cola, Kraft Heinz, and Moody’s are all mainstays of Berkshire’s stock portfolio.
Pollock praised Berkshire as “prudent” for cutting its Apple stake once again last quarter, saying the iPhone maker is overvalued relative to its growth rate.
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Berkshire roughly quadrupled its money on Apple stock between 2018 and 2023, paying around $36 billion for a position that surged in value to north of $170 billion. The conglomerate has cashed in more than two-thirds of its biggest portfolio holding since then, leaving it with a $57 billion stake as of June 30.
Pollock said it was “good to see Buffett and his team realizing some profits from one of the biggest dollar gainers of all time.”
The value investor also hailed Berkshire’s first-half bets on homebuilders Lennar and DR Horton, saying the pair should benefit from strong national demand for more housing units “unless the economy really stalls out.”
Berkshire didn’t buy back shares last quarter, leaving one analyst ‘very, very surprised’
Berkshire sold a net $3 billion of stocks, grew its cash pile to a record $344 billion, and didn’t buy back any shares in the second quarter. Pollock said Buffett and his team were likely thwarted by lofty asset valuations, but appear poised to pounce when opportunities do arise.
“It might take some market turbulence, longer than what we experienced in April, to shake loose some bargains,” he said. “Berkshire has never been this flush with cash and ready to make unprecedentedly large acquisitions.”
Meyer Shields, an analyst who covers Berkshire for Keefe, Bruyette & Woods, told Business Insider he was “very, very surprised” by the absence of stock buybacks in the second quarter and the first few weeks of July.
Berkshire stock slumped by 13% between May 2, the day before Buffett’s retirement bombshell, and July 15. Buffett’s policy is to only repurchase shares when they’re priced lower than what he believes they’re worth.
Shields also said Berkshire “hoarding” so much cash was “not doing anyone any good,” and said the company should return some to shareholders by introducing a dividend — an idea that Buffett has resisted for decades as costly and inefficient.
Berkshire did not respond to a request for comment from Business Insider.
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