When scandal hits a company you’ve invested in, run for your life. That’s another good lesson from Berkshire Hathaway chairman Warren Buffett whose usual holding period for stocks he buys is “forever”. But if the company becomes tainted by scandal, the world’s greatest investor drops the stock without hesitation. He took a $444m bath when dumping Tesco two years ago after the company’s accounting shenanigans were exposed. And he has followed that up by selling a $250m stake he had built in Rupert Murdoch’s 21st Century Fox (formerly Newscorp), the world’s fourth largest media conglomerate. Yet another sexual harassment scandal erupted at Fox last month, this time involving TV anchor Bill O’Reilly and a $13m settlement with five accusers. Buffett isn’t alone. In the wake of growing concerns around its laddish corporate culture, the Fox share price has dropped 15% in the last two months. – Alec Hogg
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(Bloomberg) – Warren Buffett’s Berkshire Hathaway Inc. spent the first quarter fine-tuning its investments in airlines and technology companies, and retreating from 21st Century Fox Inc.
In a filing Monday detailing its stock portfolio at the end of the quarter, Berkshire no longer listed Fox. Holdings in American Airlines Group Inc. and Southwest Airlines Co. increased, while a stake in Delta Air Lines Inc. was reduced. Buffett previously disclosed that he boosted a bet on Apple Inc. in the first quarter as he pulled back from International Business Machines Corp.
Buffett was a net buyer of stocks as 2017 began, adding more than $7 billion worth of securities in the first quarter. While U.S. equity markets have been rising for years, making it harder to find bargains, the 86-year-old Berkshire chairman and chief executive officer continues to say stocks are a good investment because interest rates are low.
“Buffett has an overall optimistic outlook for the economy and the stock market,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business who has taken students to meet the investor. “This is consistent in that direction.”
Berkshire took the stake in Fox at the end of 2014. It amounted to about $250 million at the end of last year, ranking among the firm’s smaller holdings.
The media company has contended this year with allegations of sexual harassment at Fox News. Reports by the New York Times that Bill O’Reilly had settled allegations led advertisers to boycott his show, ultimately forcing Fox and the popular host to part ways in April. Fox News accounted for an estimated 20 percent of the parent’s profit in 2016. A Fox representative declined to comment on Berkshire’s filing.
Deputies’ Picks
Buffett’s company also boosted an investment in Bank of New York Mellon Corp. by half during the quarter to 33 million shares. It was worth more than $1.5 billion as of Monday’s close of trading.
Not all picks in the portfolio are Buffett’s. In 2010, he brought on Todd Combs, a former hedge fund manager, to help him pick stocks. A year later, the billionaire hired another money manager, Ted Weschler. The filing doesn’t show which person is responsible for each holding. In general, the deputies tend to make smaller investments than their boss.
For much of his career, Buffett criticized airlines as terrible businesses, a view he revised last year, as his company built stakes of more than $2 billion in each of the four largest U.S. carriers. Airlines are filling more of their seats than before, and labor relations have improved, the billionaire investor told his shareholders this month.
Berkshire’s stake in Delta declined 8.3 percent to 55 million shares. A holding in Southwest increased 10 percent to 47.7 million shares, and a stake in American grew 8.2 percent to 49.3 million shares. Berkshire’s stake in United Continental Holdings Inc. remained unchanged at about 29 million shares.
‘Wrong’ on IBM
One of his biggest changes during the quarter was previously disclosed. In February, he said he’d boosted Berkshire’s stake in Apple. At the end of the first quarter, the holding was valued at more than $19 billion, making it one of Berkshire’s biggest stock investments.
The filing on Monday didn’t include the most up-to-date information on two of Buffett’s other major investments. In April, he said he was selling a small portion of Berkshire’s stake in Wells Fargo & Co. to keep it under a threshold that would have invited more regulatory scrutiny.
This month, he disclosed that he divested about a third of his IBM stock. At Berkshire’s annual on May 6, he said his analysis of the company was “wrong” and that the company had underperformed his expectations since he spent more than $10 billion amassing the holding in 2011.
Even as Berkshire’s stock picks are closely watched by investors, they’ve become less important to the company’s overall performance. During the past two decades, Buffett has focused more on acquisitions than stocks to generate growth.
Berkshire’s dozens of subsidiaries include auto insurer Geico, Dairy Queen, Fruit of the Loom and railroad BNSF. Early last year, Buffett completed one of his biggest acquisitions, the $37 billion buyout of Precision Castparts Corp., a supplier to the aerospace industry.
