Berkshire Hathaway’s (BRK-B) portfolio is overweight on banking and financial stocks. Chairman Warren Buffett’s love for financial stocks continued in the fourth quarter. Berkshire Hathaway added more shares of U.S. Bancorp (USB), JPMorgan Chase (JPM), Bank of America (BAC), and Bank of New York Mellon (BK) in the fourth quarter. Berkshire Hathaway also added more shares of PNC Financial (PNC). However, the company trimmed its stake in Wells Fargo (WFC). Over the last few quarters, Berkshire Hathaway has been selling some Wells Fargo shares to limit its stake in the company below 10%.
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Looking at Berkshire Hathaway’s financial holdings’ price action in the first quarter, JPMorgan Chase, Wells Fargo, Bank of America, American Express (AXP), and Goldman Sachs (GS) rose 4.5%, 5.8%, 12.5%, 15.1%, and 15.4%, respectively. U.S. Bancorp and Bank of New York Mellon rose 6.3% and 7.7%, respectively.
Among Berkshire Hathaway’s financial holdings, JPMorgan Chase was the worst performer, while Goldman Sachs was the top performer. Berkshire Hathaway acquired its stake in JPMorgan Chase in the third quarter and added more shares in the fourth quarter. Buffett has praised JPMorgan Chase CEO Jamie Dimon on several occasions.
The financial sector underperformed broader markets in the first quarter. Banking stocks fell sharply in the fourth quarter amid broader markets’ sell-off. The S&P 500 (SPY) rose 13.1% in the first quarter, while the Financial Select Sector SPDR Fund (XLF) rose 8.5%. The Fed abruptly ended its tightening cycle after its March policy meeting. The Fed doesn’t see any more rate hikes for 2019. Usually, banks benefit from a higher interest rate scenario.