Lessons from the Berkshire Barrick Gold Sale
– By Rupert Hargreaves
When Berkshire Hathaway’s (NYSE: BRK.A) (NYSE: BRK.B) Q2 13F was released, it caused quite a stir in the financial media. One position, in particular, has attracted the most attention.
The report revealed that Berkshire had acquired 21 million shares in gold miner Barrick Gold (GOLD). The position was intriguing as Berkshire CEO Oracle of Omaha Warren Buffett (Trades, Portfolio) previously said he didn’t think gold was a good long-term investment. Some have interpreted the conglomerate’s position in Barrick as a sign that it no longer feels that way.
A closer look at operations
As I predicted at the time, reading too much in this position would have been a mistake. Positions in 13F should never be taken at face value. The report did not disclose why the stake was acquired, who acquired it, and whether it was a hedge position or part of a more complex strategy.
Additionally, the fact that the position was only worth around $ 700 million was a strong sign that it was one of Berkshire’s other portfolio managers who had acquired the stock rather than Buffett himself. In recent years, the billionaire investor has taken a step back from the day-to-day management of the conglomerate’s portfolio. Reports suggest he needs to give the green light to any position above $ 1 billion, but for anything below that he may not have made any input on participation and why he was there. acquisition.
This means that from the start it was possible that the holding was not a long term position. Whenever Buffett buys stocks, he does so with the goal of holding them forever. The same cannot be said of its portfolio managers Ted Weschler and Todd Combs, who inevitably have their own investment strategies. The 13F filings published in recent years show that these managers negotiate more often and have no particular time constraints with new positions.
This appears to be exactly what happened with Barrick. After adding the position to the portfolio during the second quarter of 2020, it appears the portfolio managers were selling shares of the gold mining giant throughout the three months ending in late September. It was possible that it was always meant to be short-term detention.
According to Berkshire at the most recent 13F, the company held just 12 million Barrick shares at the end of the third quarter, down 42% from the previous quarter. The position now only represents 0.15% of the overall portfolio.
Do your own research
These changes show why it makes no sense to take 13F ratios too seriously. They provide an overview of the type of stocks that the portfolio managers buy, but they do not explain why the positions were acquired, at what prices they were acquired, or what strategy they are part of.
In addition, the reports are retrospective. All they’re telling us is that the asset manager in question owned the stock at some point, in this case September 30. It was weeks ago. Berkshire may have sold the remainder of its position during this time or doubled it. By the time the last report was released, the conglomerate may have even started selling its holdings in Barrick.
Investors who have followed Berkshire into Barrick may now be faced with a dilemma. Is it time to sell or is it worth it to hang on? It would be easy to answer this question if one had done one’s own rigorous research in the first place. Without doing your own due diligence, there is a dramatically increased possibility of making a big mistake while investing.
Disclosure: The author owns shares in Berkshire Hathaway.
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This article first appeared on GuruFocus.