The banking crisis is costing most S&P 500 investors a lot of money. Even Warren Buffett takes his nuggets.
Berkshire Hathaway (BRKB). MarketSmith. And the sector that is causing him problems now? finance like Bank of America (BAK), ally finance (ALLIES), Bank of New York Mellon (BK) And U.S. Bancorp (USB).
Buffett’s longstanding penchant for finance is now costing him money. Six of its 15 worst dollar performers this year are in the financial sector. The market value of banks around the world has collapsed by more than $500 billion in the past week and a half, says Bespoke Investment Group. And Berkshire Hathaway is a big owner of some of them.
“From March 6th to March 15th, the total market cap (of banks) fell by 11.4%,” said Bespoke. “During this span, there have only been major declines during the global financial crisis in 2008, the chaos of the debt ceiling in 2011, the floating of the Chinese yuan in 2015 and the Covid shock. In short, this is a historic decline in the market value of banks, albeit far from unprecedented.”
Bank of America is Buffett’s #1 loser
Buffett’s exposure to Bank of America stock is now costing him money. How much? More than $4 billion this year alone.
The stock, which Berkshire Hathaway has been steadily building since 2017, is down 12.8% this year. That’s not the biggest percentage drop in Berkshire Hathaway’s portfolio of roughly 50 U.S.-listed stocks (ie Freedom SiriusXM (LSXMK)). But Bank of America is the costliest loss because Berkshire Hathaway is such a large owner. The value of the current position is down $4.3 billion this year.
Keep in mind that Buffett is now the largest holder of BofA stock. Berkshire Hathaway owns 12.6% of the bank, beating even ETF giant Vanguard’s 7.6% stake. Berkshire Hathaway’s only stock has fallen nearly as much as Bank of America in dollar terms rafters (CVX). Berkshire Hathaway is also the top owner of the oil giant, with an 8.8% stake. Falling oil prices have taken Chevron’s stock down 14.1% this year.
Other S&P 500 financials hurting Buffett
Other bank holdings also hit Berkshire Hathaway. Berkshire Hathaway still owns nearly 10% of Ally Financial, a bank with a large auto loan business. Shares are down 4.4% and down $31 million this year.
However, Berkshire Hathaway has coincidentally reduced its holdings in some banks. These measures are now paying off. Buffett’s holding company now owns less than 1% of US Bancorp, one of the many dogs it’s dumped. Berkshire Hathaway began selling shares in the bank in the middle of last year and sold nearly all of its shares by the end of 2022. That is a good thing. Shares are down nearly 17% this year, taking nearly $48 million from Berkshire Hathaway’s tiny remaining position.
Likewise, Berkshire Hathaway now owns just 3.1% of Bank of New York Mellon. Berkshire Hathaway has reduced its position in the bank since 2018. That means it’s just $28.5 million under the stock’s position this year, which is down 2.5% this year. Bank of New York Mellon is known as one of the banks with the highest percentage of uninsured deposits.
Banks are not easy stocks to hold as this crisis unfolds. “While not superlative, few other events have seen larger declines,” says Bespoke.
Buffett’s biggest dollar value losers this year
Based on Berkshire Hathaway’s current positions
|Pursue||symbol||sector||year-t0-date % ch.||Berkshire Loss (Billions)|
|Bank of America||(BAK)||finance||-12.8%||$4.3|
|Kraft Heinz||(CHC)||consumer goods||-6.3%||0.8|
|Freedom SiriusXM||(LSXMK)||communication services||-31.9%||0.5|
|Bank of New York Mellon||(BK)||finance||-2.5%||0.03|
Sources: IBD, S&P Global Market Intelligence based on current holdings
Follow Matt Krantz on Twitter @dull wreath
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