Warren Buffett of Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) is famous in the investing world for two things: buying when others are panicking and holding stocks for years.
This has left his portfolio as susceptible to the current bear market in banks as yours.
Berkshire has lost $8 billion on financial stocks in just the last week, part of a $465 billion rout in the sector.
A Buffett Buffet
Buffett’s best-known bank bet, Bank of America (NYSE:BAC), is down 29% over the last year, suffering half that loss in the previous week. Berkshire remains the largest holder of BAC. During that year’s debt ceiling crisis, Buffett famously bought $5 billion in BAC stock and warrants in 2011. When he exercised the warrants, the shares it purchased were worth $20 billion in 2017.
Buffett makes big moves at times like this, with “blood in the streets,” as the saying goes. The latest collapse has come just as he issues his latest letter to shareholders.
The theme of this year’s letter is humility. Buffett admits to making mistakes, emphasizing the long-term value of owning dividend stocks like Coca-Cola (NYSE:KO). He rejects the idea of short-term capital gains, preferring investments that regularly bring in cash. “The world is full of foolish gamblers, and they will not do as well as the patient investor,” he writes.
Recent losers in the Buffett banking portfolio include Ally Financial (NYSE:ALLY), U.S. Bancorp (NYSE:USB), Citigroup (NYSE:C), and BNY Mellon (NYSE:BK). Assuming the businesses stay strong and dividends aren’t cut, this won’t matter, as with Ares Capital (NASDAQ:ARCC), a business lender in which Berkshire owns a position. It’s down nearly 10% in the last month, and its dividend now yields 10.4%.
Bank Stocks and Berkshire: What Happens Next?
Bill Ackman of Pershing Capital predicts Buffett may be “buying the dip” in regional bank stocks hit hardest by the rout. If things get worse, there was over $128 billion in cash on the Berkshire balance sheet at the end of 2022.
On the date of publication, Dana Blankenhorn held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
