Warren Buffett’s Berkshire Hathaway makes big bet on US lender Ally Financial

Warren Buffett’s Berkshire Hathaway made a big bet on auto and home lender Ally Financial in the second quarter while increasing its bet on iPhone maker Apple despite signs that an economic slowdown is starting to weigh on consumers.

Investments, as well as stock purchases in video streaming service Paramount Global and oil majors Occidental Petroleum and Chevron, showed that Buffet and its investment team continued to bet on the US economy even as the Federal Reserve embarked on a series of sharp interest rate hikes.

Berkshire more than tripled its position in Ally to 30 million shares worth $1 billion at the end of June, according to a securities filing made public on Monday. That makes Buffett’s investment group one of the lender’s largest shareholders, with a 9.7% stake, according to data provider Refinitiv.

Berkshire built the first part of its stake in Ally in the first quarter, when it bought just under 9 million shares.

Buffett has long been a major investor in the US financial sector. His company’s holdings in Bank of America and American Express are both among his five largest holdings. In the first quarter, Berkshire bet on Citigroup with an investment of $2.9 billion.

Changes in Berkshire’s portfolio are being watched closely by investors as an indicator of where the “Sage of Omaha” sees value as well as his view of the health of the US economy.

Line chart of year-to-date performance (%) showing Berkshire outperforming the broader US stock market in 2022

He avoided the financial sector in the depths of the coronavirus pandemic, stock dumping from JPMorgan Chase and Goldman Sachs as lenders began setting aside tens of billions of dollars for potential credit losses.

Ally shares soared more than 3% in after-hours trading on Monday, partially offsetting a 25% drop in value this year.

The filing also showed Berkshire increased its stake in Apple – the largest investment in the company’s $328 billion stock portfolio – by 3.9 million shares in the second quarter. Berkshire owns about 5.6% of the iPhone maker.

Berkshire also bought 2.3 million shares of Chevron, bringing the value of its stake in the oil major to more than $23 billion; 9.5 million shares in Paramount; and 22.2 million shares in Occidental. Berkshire revealed new purchases in Occidental since the end of the quarter, increasing its stake in the energy company to more than 20%.

Second quarter investments marked a significant slowdown for Buffett, who acted aggressively at the start of the year as stock values ​​fell. Berkshire bought $6.2 billion worth of stock in the quarter, down from $51.1 billion between January and March.

It also sold $2.3 billion worth of stock in the second quarter, trimming its stakes in General Motors, US Bancorp and grocer Kroger, and exited positions in Verizon and Royalty Pharma.

This month Berkshire revealed it switched to buying its own shares in June, a move it often makes when its investment managers think more attractive investments – including corporate buyouts billions of dollars and bargain-basement purchases of publicly traded stocks – aren’t over-delivering.

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