Markets

RH shares surge after Warren Buffett's Berkshire Hathaway reveals new stake in furniture retailer

Key Points
  • Berkshire Hathaway reveals a new stake in RH, formerly known as Restoration Hardware.
  • Warren Buffett's conglomerate also added a new investment in Occidental Petroleum worth around $332 million.
  • Berkshire decreased its stake in Wells Fargo by 7.7% to about 378 million shares.
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Berkshire Hathaway reveals new stake in Restoration Hardware

Shares of RH surged 7.6% on Friday, a day after Warren Buffett's Berkshire Hathaway revealed it owned 1.2 million shares of the furniture retailer at the end of the third quarter.

Berkshire announced the stake in a filing with the Securities and Exchange Commission.

The stock of RH, formerly known as Restoration Hardware, has rallied more than 40% already this year.

Berkshire's new stake in RH is worth $206.3 million as of Sept. 30, making it the fourth biggest stakeholder in RH, according to FactSet. For Berkshire, it's a relatively small holding.

Corte Madera, California-based RH has transformed itself into a high-end luxury brand and has crushed earnings expectations this year as the brand's turnaround begins to pay off. The company changed its name to RH two years ago to rebrand itself as a "lifestyle" company. RH has opened about 70 so-called RH Galleries, expansive museum-style stores, and has adopted a membership model.

Berkshire's filing documents the company's holdings as of end of September. Some of the new investing decisions, including RH, could be the work of Buffett's investing proteges Todd Combs and Ted Weschler, who manage their own stock portfolios at Berkshire.

The filing showed Berkshire decreased its stake in Wells Fargo by 7.7% to about 378 million shares. Berkshire also trimmed its Phillips 66 stake by 6.7% to 5.2 million shares worth around $530 million, according to the filing.

Berkshire maintained its positions in Bank of America, Delta Air Lines, Bank of New York Mellon and Coca-Cola. It also owned 325 million shares of troubled Kraft Heinz by the end of September.

Buffett's conglomerate also revealed a new stake in Occidental Petroleum worth around $332 million, according to the company's 13-F filing. Berkshire had committed a $10 billion preferred stock investment in Occidental to help that company buy rival Anadarko Petroleum.