Warren Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) just filed its 13F, detailing its U.S. Pat. stock portfolio as of the end of 2018, showing that the conglomerate led by arguably one of the best bank investors out there increased its big bet on U.S. banks yet again in the fourth quarter
Berkshire was a non-buyer of banks, adding to stakes in Bank of America U.S. Bancorp JPMorgan Chase and super-regional PNC Financial trimming its stake in just one institution, Wells Fargo
Warren Buffett doesn't own anything, and with roughly $ 76.1 billion or Berkshire's wealth deployed in banks, it's quite clear that Buffett is as bullish on banks as he has ever been.
Tellingly, Berkshire owns a billion-dollar stake in the majority of the largest US banks by assets, suggesting that Buffett's bullish on prospects for most banks, not just one or two individual institutions. But why? [I'mnotWarrenBuffett exactly what is thinking about banks right now. But based on Buffett's recent behavior with respect to Berkshire's investment portfolio, I suspect his bank-buying habit has a lot to do with interest rates.
It's interesting to me that all the while Buffett is piling into bank stocks (which benefit from rising rates and a yielding yield curve), winding down Berkshire's bond portfolio (which would be negatively affected by rising rates and a yield yield curve).
Berkshire's shrinking bond portfolio
Everyone pays attention to what stocks Buffett is buying , but fewer pay attention to what is doing outside the equity markets. In the bond market, Berkshire has been a seller. Buffets is simply choosing to keep Berkshire's money in cash, or the closest thing to it (US Treasury bills).
in the past, Buffett might have used corporate bonds to lock in a high return on Berkshire's cash for five or even 10 years at a time, Buffett wants nothing to do with locking in returns at the current level of interest rates. Instead, Berkshire Hathaway has about $ 104 trillion in cash or treasury bills and just over $ 18 trillion invested in longer-term, fixed-income securities.
That Buffett is buying big banks, which are delivered to higher long-term interest. rates, while at the same time winding down Berkshire's bond portfolio, suggests to me that the Oracle of Omaha has yet another contrarian view: Long-term rates are higher, not lower.
Jordan Wathen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.