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Warren Buffett Continues to Avoid Ford, Adds More GM Shares

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Berkshire Hathaway

On November 14, Warren Buffett’s Berkshire Hathaway revealed in its 13F filings that the company added more General Motors (GM) shares to its portfolio. In the third quarter, Berkshire Hathaway bought ~1.06 million shares of the largest US automaker (XLY) after adding ~1.4 million shares in the second quarter. Berkshire Hathaway’s total stake reached 52.46 million shares in the third quarter—compared to 51.39 million shares in the second quarter.

To learn about Ford’s October sales, read Ford: Declining F-Series Sales Could Be Disastrous.

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Buffett continues to avoid Ford

Despite additional shares, Berkshire Hathaway’s stake value in General Motors fell to $1.77 billion in the third quarter—compared to 2.02 billion in the second quarter. The fall was due to a 14.5% drop in General Motors stock in the third quarter. Ford (F), the second-largest US automaker, fell 16.4% in the third quarter, while Tesla (TSLA) and Toyota (TM) fell ~22.8% and 3.5%, respectively.

Buffett usually increases a company’s shares in his portfolio when the stock goes down. He bought General Motors shares in the third quarter when they were at a cheaper rate. Although Ford stock also fell in the third quarter, Buffett doesn’t seem to like Ford as much as General Motors. There could be several rational arguments for his decision to avoid Ford and invest in General Motors.

Ford continues to struggle in China and Europe. Right now, there doesn’t appear to be any relief in sight. General Motors decided to exit the European market after it struggled to make a profit. General Motors’ China sales (including its joint ventures) have been solid in the last few years despite a recent drop in the third quarter.

General Motors has taken several steps to strengthen its profitability in the last few years. The steps include cutting fleet sales to daily rental companies, driving manufacturing efficiencies, and exiting loss-making international markets. These steps might have compelled Buffett to continue choosing General Motors over Ford. In the third quarter, General Motors reported a profit margin expansion and stronger revenues despite a sharp decline in its global vehicle sales. In contrast, Ford’s profit margins contracted in the third quarter.

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