Warren Buffett's Berkshire keeps new stock pick secret — again. Here's what it means

Published Sun, Feb 18 20249:30 AM EST

Warren Buffett could be building a big stock position in the banking sector. For the second quarter in a row, his Berkshire Hathaway asked regulators to keep one or more stock purchases secret in the fourth quarter, according to a new 13F filing released last week. The news indicates that the "Oracle of Omaha" has spent two quarters buying something new. The Securities and Exchange Commission typically grants such a treatment when the disclosure of an ongoing investment strategy, by any asset manager with more than $100 million, "would impede competition and could cause increased volatility in the market place." Due to the sheer size of Berkshire's equity portfolio, which holds more than $360 billion worth of stocks, any bet would usually have to be in the billions in order to move the needle. It could easily take a few months to build a stake that big. So keeping a new stake confidential for the time being is beneficial for Berkshire as it keeps the volatility at bay until it's done buying or selling. A new stock pick from the 93-year-old Buffett almost always leads some investors to follow suit, quickly moving the share price. Requesting such a confidential treatment is rare for Berkshire. The last time it kept a purchase confidential was when it bought stakes in Chevron and Verizon in 2020. Of course, the latest request forconfidential treatment could also have been the work of one of Buffett's investing lieutenants, Todd Combs or Ted Weschler. They oversee about $15 billion each for Berkshire, and one of them introduced Buffett to Apple , which now accounts for about 45% of Berkshire's portfolio. What could it be? For Buffett watchers eagerly awaiting the name of the new stock, here's a clue. Berkshire's 10Q filing from the third quarter said that the conglomerate had bought "banks, insurance, and finance" stocks for $1.2 billion. Here's a look at what Omaha-based Berkshire already owns in this category. Berkshire's second-biggest holding at the end of 2023 was Bank of America , while American Express was third. Berkshire has been a longtime shareholder in credit rating agency Moody's , and bought a big stake in Citigroup in early 2022. The conglomerate also owns Mastercard and Visa . The last financial stock Berkshire bought was Capital One Financial in the first quarter of 2023. The McLean, Va.-based bank and credit card issuer fared relatively well during the regional banking crisis at the time. Buffett dumped a string of bank stocks in 2022 and early 2023, including Wells Fargo , Goldman Sachs , JPMorgan , U.S. Bancorp . and Bank of New York Mellon . David Kass, a finance professor at the University of Maryland's Robert H. Smith School of Business and a Berkshire shareholder, suspects that Buffett could be buying back JPMorgan. "Buffett has always admired Jamie Dimon and has praised him frequently," Kass said by email. "Todd Combs has been on JPM's board of directors since 2016 at age 44, and remains the youngest of its 12 directors today at age 52. JPM is generally acknowledged to be the best managed and most profitable bank." Shares of JPMorgan gained nearly 27% last year, far outperforming Bank of America's less than 2% return. That rally is also be a reason why JPMorgan may not be cheap enough now for the value-oriented Buffett. When will we know? If the new stake ever exceeds 5% of whatever stock it is, Berkshire would be required to report its holding with the SEC. Buffett might be asked to reveal the identity of the mystery stock at Berkshire's annual shareholder meeting in early May. Alternatively, in the unlikely event the new stock made it into Berkshire's top five holdings, it would show up in its next earnings report, which comes out on the same day as its annual meeting. If none of the above happens, investors might find out when Berkshire files its next 13F for the first quarter in mid-May. But even then, there's always a chance that Berkshire again asks regulators to keep it under wraps.

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