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Warren Buffett Expands PNC Financial Stake in 1st Quarter, Divests of Travelers and Phillips 66

Warren Buffett (Trades, Portfolio)'s $413.07 billion conglomerate, Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), disclosed its equity portfolio for the first quarter of 2020 on Friday.


Despite having a record $137 billion to spend on stocks, the renowned guru and his two portfolio managers, Ted Weschler and Todd Combs, did not enter any new positions during the three months ended March 31. They did, however, expand the firm's holding of PNC Financial Services Group Inc. (NYSE:PNC) by 6.08%.

In addition, they increased the firm's Delta Air Lines Inc. (NYSE:DAL) and United Airlines Holdings Inc. (NASDAQ:UAL) positions, which were later eliminated in April along with its stakes in American Airlines Group Inc. (NASDAQ:AAL) and Southwest Airlines Co. (NYSE:LUV).

The long-term investors also exited positions in The Travelers Companies Inc. (NYSE:TRV) and Phillips 66 (NYSE:PSX) during the quarter and slashed the Goldman Sachs Group Inc. (NYSE:GS) stake, which was once among the top 10 largest holdings, by 84%. The investment bank has tumbled nearly 25% year to date in the wake of the Covid-19 pandemic.

Berkshire trimmed a slew of other holdings as well, including JPMorgan Chase & Co. (NYSE:JPM), DaVita Inc. (NYSE:DVA), Sirius XM Holdings Inc. (SIRI), Synchrony Financial (SYF), VeriSign Inc. (VRSN), Amazon.com Inc. (AMZN) and Biogen Inc. (BIIB).

Valued at $175.53 billion, the equity portfolio consisted of 50 stocks as of March 31. A majority of the portfolio was invested in financial services stocks at 37%, while the technology sector has a weight of 37.01% and the consumer defensive space represents 15.74%.

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Buffett's five largest holdings as of the end of the quarter, accounting for over half of the portfolio, were Apple Inc. (AAPL), Bank of America Corp. (BAC), The Coca-Cola Co. (KO), American Express Co. (AXP) and Wells Fargo & Co. (WFC).

PNC Financial

Berkshire invested in 526,930 shares of PNC Financial, bringing its total stake up to nearly 9.2 million shares. It now represents 0.50% of the equity portfolio. The stock traded for an average price of $135.33 per share during the quarter.

The Pittsburgh-based financial services company has a $41.26 billion market cap; its shares were trading around $97.25 on Friday with a price-earnings ratio of 9.06, a price-book ratio of 0.84 and a price-sales ratio of 2.37.

The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued. The GuruFocus valuation rank of 4 out of 10, however, leans more toward overvaluation.

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Weighed down by long-term debt, PNC Financial's financial strength was rated 2 out of 10 by GuruFocus. The company's profitability fared a bit better with a 5 out of 10 rating, driven by margins and returns that outperform over half of its competitors. It also has a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% per annum over a 10-year period.

Buffett is still the company's largest guru shareholder with a 2.17% stake. Other top guru investors include the T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Chris Davis (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Joel Greenblatt (Trades, Portfolio) and Richard Snow (Trades, Portfolio).

Phillips 66

Berkshire sold its remaining 227,436 shares of Phillips 66, impacting the equity portfolio by 0.01%. The stock traded for an average per-share price of $82.30 during the quarter.

GuruFocus data shows the conglomerate has gained an estimateed 47.46% on the long-held investment, which was established in the second quarter of 2012.

The independent oil refining company, which is headquartered in Houston, has a market cap of $30.97 billion; its shares were trading around $70.93 on Friday with a price-earnings ratio of 104.31, a price-book ratio of 1.46 and a price-sales ratio of 0.3.

According to the Peter Lynch chart, the stock is overvalued.

Phillips 66's financial strengtj and profitability were both rated 6 out of 10 by GuruFocus on the back of adequate interest coverage, an expanding operating margin and a one-star business predictability rank, which is on watch as a result of a slowdown in revenue per share over the past 12 months.

Gurus with larges positions in Phillips 66 include Barrow, Hanley, Mewhinney & Strauss, Pioneer Investments, Tweedy Browne, Greenblatt and Gabelli, among others.

Travelers

The firm sold its 312,379 remaining shares of Travelers, which impacted the equity portfolio by 0.02%. Shares traded for an average price of $125.01 each during the quarter.

According to GuruFocus, Buffett gained approximately 6.3% on the investment since establishing it in the third quarter of 2018.

The New York-based insurance company has a $22.83 billion market cap; its shares were trading around $90.31 on Friday with a price-earnings ratio of 9.7, a price-book ratio of 0.93 and a price-sales ratio of 0.74.

Based on the Peter Lynch chart, the stock appears to be undervalued. The GuruFocus valuation rank of 8 out of 10 aligns with this assessment.

Weighed down by a low cash-debt ratio of 0.08, Travelers' financial strength was rated 3 out of 10 by GuruFocus. Its profitability fared better, scoring a 6 out of 10 rating on the back of consistent earnings and revenue growth and a four-star business predictability rank. GuruFocus says companies with this rank typically return 9.8% per year on average.

First Eagle Investment is now the company's largest guru shareholder with a 1.54% stake. Hotchkis & Wiley, Tom Gayner, Pioneer Investments, Mairs and Power and several other gurus also have positions in the stock.

See Buffett's full portfolio here.

Disclosure: No positions.

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This article first appeared on GuruFocus.