It was quite a shock for me to discover that Warren Buffett was unenthusiastic about buying stocks when the pandemic first arrived. In fact, he famously dumped all his airline shares!
And during the second quarter of 2020, his company Berkshire Hathaway became a net seller of stocks. So, it’s encouraging for me to learn from several newspaper reports recently that the company became a net buyer of shares again during the third quarter of the year.
Warren Buffett’s gone in big on Pharmaceuticals
However, in fairness, it may not be the great investor himself doing the buying. After all, he’s handed some responsibility for investment decisions at Berkshire Hathaway to his two investment deputies Todd Combs and Ted Weschler. And that makes a great deal of sense for a man of 90, no matter how much he still appears to love the investing game.
But my guess is Warren Buffett remains fully informed and supportive of his deputies’ buying decisions. So, the investments they’ve made could be useful ideas to help me with my own investment decisions right now. And Berkshire Hathaway has made some big stock purchases in the pharmaceutical sector. It has new positions in Merck and Pfizer and made top-up purchases in AbbVie and Bristol-Myers Squibb.
Bearing in mind the news regarding Covid-19 vaccines over the past few days, Buffett’s conglomerate has certainly ended up being where the action is. However, I’ve been keen on the defensive, cash-generating stability and potential of the pharmaceutical and healthcare sectors for a long time. And today, on the London market, I’d invest in shares such as AstraZeneca, GlaxoSmithKline and Smith & Nephew, and hold them for the long haul.
He’s reducing financials
Meanwhile, Berkshire Hathaway continued reducing its positions in financial stocks, such as Wells Fargo and JP Morgan Chase, in the third quarter. Warren Buffett starting offloading financials early in the pandemic along with his airline shares. However, since the vaccine news emerged, bank shares have been shooting back up. But the disclosure from Berkshire Hathaway is historical now and covers events during the third quarter of the year.
Nevertheless, the act of selling financials is harder for me to understand. Indeed, I’d expect cyclical sectors to recover as the pandemic fades. And London-listed banks such as Lloyds and Barclays look attractive to me now in their fallen condition. Indeed, I’m tempted to buy some of their shares. But I don’t expect them to move straight back up without a few wiggles along the way. And that’s despite the snap-back rally since the announcements regarding vaccine progress.
Warren Buffett and his investing subordinates will have their own reasons for the buys and sells they make in stocks, as we all do. But the important message I’m taking from their recent actions is that they are buying again. So, it’s time for me to double down on my efforts to research the shares of good-quality businesses selling at reasonable prices. And I’ll be aiming to hold those stocks for the long haul in order to compound gains over time.
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK owns shares of and has recommended Bristol Myers Squibb. The Motley Fool UK has recommended Barclays, GlaxoSmithKline, and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.