Warren Buffett’s Big Equities Bets in Q3

Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) invested $23.9 billion during the third quarter, the most in at least 15 years as it accelerated stock purchases and broadened its portfolio beyond consumer and financial-company holdings.

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Last quarter, Berkshire Hathaway bought almost $7 billion of equity securities, compared with $3.62 billion in the second quarter and $834 million in the first, according to a November 4 filing. Stockholdings labeled “commercial, industrial, and other” climbed 62% to $17.4 billion on a cost basis, surpassing equity investments in financial and consumer-product firms.

Investments disclosed on November 4 include $6.9 billion of equities, $5 billion for preferred shares and warrants in Bank of America (NYSE:BAC), and the acquisition of Lubrizol Corp. for about $9 billion.

“Historically he has preferred consumer products and banking to industrial companies,” said James Armstrong, president of Berkshire shareholder Henry H. Armstrong Associates. “But the market changes, so the names he comes up with changes.”

The S&P 500 (NYSEARCA:SPY) fell 14% during the third quarter. On August 8, the first trading day after the S&P downgraded the U.S. government’s AAA credit rating, Buffett says Berkshire spent more on stocks than any other day this year.

During the third quarter, Berkshire’s (BRK.B) net income fell 24% to $2.28 billion as the stock market slumped and put pressure on Buffett’s equity derivative bets. Berkshire’s insurance units posted a $1.7 billion pre-tax underwriting gain, while net railroad earnings rose 8.5% to $766 million. On September 30, the market value of Berkshire’s stock portfolio advanced to $68.1 billion, up from $67.6 billion at the end of June.

The recent filing also shows that Berkshire’s holdings of banks (NYSEARCA:KBE), insurance (NYSE:KIE), and finance (NYSEARCA:XLF) stocks climbed 2.7% to $16 billion on a cost basis during the third quarter, while consumer products (NYSE:XLP) shares fell 5% to $12.6 billion. Buffett directed $1.9 billion to fixed-maturity securities and about $2.2 billion to property, plants and equipment during the third quarter.

So far this year, Buffett has bought $11.4 billion of stocks while selling $885 million of equities. Cash holdings dropped to $34.8 billion at the end of September, down from $47.9 billion on June 30, but are being replenished by maturing securities and profit from investments and the company’s more than 70 operating subsidiaries.

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“We’re ready to buy lots of things,” Buffett told Bloomberg Television’s Betty Liu on September 30. “If the stock is cheap, we will buy it.”