Berkshire Hathaway bought some stocks — including Apple and Goldman Sachs — and sold some stocks — including Wells Fargo and United Continental Airlines — in the past few months, but don’t get worried or excited.
The company, headed by Warren Buffett, had said that most of its recent transactions were aimed at keeping Berkshire’s holdings below 10 percent of a company’s total shares rather than changes in Berkshire’s view of the quality of the investments.
When Berkshire buys or sells stocks, some other investors mimic those decisions, creating a “Buffett bounce” in price if Berkshire buys and a price drop if Berkshire sells.
Berkshire filed its list of stock investments after the stock market closed Tuesday, boosting its share of Apple Inc. by about 5 percent, its shares of Delta and Southwest Airlines by nearly 19 percent each, its U.S. Bank holdings by 10.8 percent and its ownership of financial firm Goldman Sachs by nearly 21 percent.
The list showed Berkshire’s holdings down 3.7 percent for United Continental, 2.8 percent for American Airlines, 1 percent for Wells Fargo and 4.2 percent for Bank of New York Mellon, a longtime Berkshire investment.
Berkshire also reduced its holdings in Phillips 66 by 24 percent and in Charter Communications by 8.7 percent and added 6.7 percent to the stock it owns in Teva Pharmaceuticals.
In a press release issued Monday, Berkshire said the sales and purchases of banking and airline stocks during the past three months were triggered mostly by the companies’ purchases of their own shares, known on Wall Street as buyback programs.
With few exceptions, Berkshire said, it tries to avoid owning 10 percent or more of a company’s shares. As companies buy up their own shares and remove them from public ownership, Berkshire’s percentage would creep past 10 percent if it did nothing.
“These buy and sell decisions did not reflect our investment management’s views as to the relative attractiveness of the bought and sold securities but were rather a response to the 10 percent limitation,” Berkshire said on Monday. “Similar situations may occur in future quarterly reports as Berkshire continues to have 9 percent-plus holdings in a number of equity securities that are active repurchasers of their shares.”
The 10 percent threshold is especially important for Berkshire’s ownership of banking stocks like Wells Fargo and U.S. Bank. If Berkshire owned 10 percent or more of a bank, it could be reclassified as a bank holding company, which would bring a raft of new regulations and possible restrictions on its business activities.
Berkshire regularly bumps up against the 10 percent limit with Wells Fargo but remains well below the limit with U.S. Bank.
By keeping its ownership below 10 percent, Berkshire can say, correctly, that it owns shares for investment purposes only and is not a part of a company’s management. Larger percentages could lead to other regulations under U.S. securities rules that are aimed at tracking management’s financial transactions.