eResearch | Last week, U.S. hedge funds and institutions such as Berkshire Hathaway, Inc. (NYSE: BRK.A), Paulson & Co., Inc., and Pershing Square Holdings Ltd. (AMS: PSH), filed 13F Reports for Q2/2020, as money managers shifted out of industries impacted by the pandemic, while starting positions in new opportunities.
The U.S. Securities and Exchange Commission (“SEC”) requires all hedge funds and institutions with at least US$100 million in Assets Under Management (“AUM”) to file 13F Reports quarterly with changes in portfolio holdings.
Last month, the SEC announced a proposed shift in requirements for 13F Reports, with hedge funds and institutions required to file only if they have at least US$3.5 billion in AUM, which would significantly reduce visibility into the actions of money managers.
The proposed change would leave only 550 of the world’s largest investors required to report changes in their portfolios, allowing all other hedge funds and institutions to keep their trading activities secret.
CHART 1: Value Stocks Outperformed Growth Stocks After 2000 but Growth Stocks have Outperformed Value Stocks Since 2007
After the Dot-Com Bubble burst in 2000, Value stocks outperformed Growth stocks. However, since the Global Financial Crisis (2007-2009), Growth stocks have significantly outperformed Value stocks, with the “Great Eight” showing market dominance: Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Facebook (NASDAQ:FB), Microsoft (NASDAQ: MSFT), Netflix (NASDAQ: NFLX), NVIDIA (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA).
(See Chart 1)
Portfolio managers focusing on Value stocks have seen their performance decline versus the market as the Growth stocks have moved indices higher. Here are three recent filings from money managers as examples of portfolio rotation during the current pandemic.
Berkshire Hathaway
In Q2/2020, Berkshire, a holdings company led by Warren Buffett, filed its 13F Report with 44 holdings in its portfolio, valued at US$202 billion.
In the banking and financial industries, Berkshire fully exited its US$297 million position in Goldman Sachs Group Inc. (NYSE: GS), while reducing stakes in:
- JPMorgan Chase & Co. (NYSE: JPM),
- Mastercard, Inc. (NYSE: MA),
- Wells Fargo & Co. (NYSE: WFC), and several other banks and financial firms.
However, Berkshire maintained a US$22 billion position in Bank of America Corp. (NYSE: BAC), its second largest equity position behind Apple, Inc. (NASDAQ: AAPL), in which Berkshire holds an US$89 billion position.
In the airline industry, Berkshire fully exited out of:
- Delta Air Lines, Inc. (NYSE: DAL): US$2.1 billion position
- Southwest Airlines Co. (NYSE: LUV): US$1.9 billion position
- United Airlines Holdings, Inc. (NASDAQ: UAL): US$699 million position
- American Airlines Group, Inc. (NASDAQ: AAL): US$511 million position
Berkshire surprised investors by entering a US$564 million position in Barrick Gold Corp. (TSX: ABX; NYSE: GOLD), a Canadian mining company focused on gold and copper, as Warren Buffett is known to have a history of negative commentary on precious metals as an investment due to lack of intrinsic value.
Berkshire increased stakes in:
- STORE Capital Corp. (NYSE: STOR), a U.S. REIT focused on single-tenant real estate: increased position by 31%.
- Suncor Energy Inc. (TSX: SU), a Canadian energy company: increased position by 28%.
- Kroger Co. (NYSE: KR), a U.S. grocery chain: increased position by 16%.
Paulson & Co.
In Q2/2020, Paulson & Co., an investment management firm founded and led by John Paulson, filed its 13F Report with 30 holdings in its portfolio, valued at US$3.1 billion.
Paulson exited out of:
- Allergen plc, an Ireland-based pharmaceutical company who recently merged with AbbVie Inc. (NYSE: ABBV): US$107 million position.
- Sprint Corporation, a U.S. telecommunication company who recently merged with T-Mobile US, Inc. (NASDAQ: TMUS): US$44 million position.
- Tech Data Corp., a U.S. information technology company who was recently acquired by Apollo Global Management Inc. (NYSE: APO): US$26 million position.
Paulson reduced exposure in the media industry and lowered stakes in:
- ViacomCBS Inc. (NASDAQ: VIACA): decreased position by 73%.
- DISH Network Corp. (NASDAQ: DISH): decreased position by 27%.
- Discovery Communications Inc. (NASDAQ: DISCA): decreased position by 25%.
Paulson also reduced exposure in the mining industry and lowered stakes in:
- AngloGold Ashanti Ltd. (NYSE: AU): decreased position by 39%.
- NovaGold Resources, Inc. (TSX: NG): decreased position by 12%.
Paulson started new positions in:
- TD Ameritrade Holding Corp. (NASDAQ: AMTD), a broker owned by Charles Schwab Corporation (NYSE: SCHW): US$35 million position.
- Equinox Gold Corp. (TSX: EQX), a Canadian mining company: US$28 million position.
- Qiagen N.V. (NYSE: QGEN), a German pharmaceutical technology company: US$24 million position.
- Taubman Centers, Inc. (NYSE: TCO), a U.S. REIT focused on shopping centers: US$11 million position.
Paulson increased stakes in:
- Bausch Health Companies, Inc. (NYSE: BHC), a Canadian pharmaceutical company: Increased position by 24%.
Pershing Square
In Q2/2020, Pershing Square., a U.S. hedge fund founded and run by Bill Ackman, filed its 13F Report with 7 holdings in its portfolio, valued at US$7.8 billion
Pershing Square exited out of:
- Berkshire Hathaway, Inc. (NYSE: BRK.B), a U.S. multinational holdings company: US$997 million position.
- Blackstone / GSO Strategic Credit Fund (NYSE: BGB), a U.S. fixed income fund: US$25 million position
- Park Hotels & Resorts, Inc. (NYSE: PK), a REIT focused on hotels: US$5 million position.
Pershing Square reduced stakes in:
- Howard Hughes Corp. (NYSE: HHC), a U.S. real estate development and management company: decreased position by 10%.
Pershing Square increased stakes in:
- Restaurant Brands International, Inc. (TSX: QSR; NYSE: QSR), a multinational fast-serve restaurant chain: increased position by 67%
- Lowe’s Companies, Inc. (NYSE: LOW), a home improvement retail chain with stores in the U.S. and Canada: increased position by 4%
Pershing Square maintained its stake in the rest of its portfolio, which includes:
- Chipotle Mexican Grill, Inc. (NYSE: CMG), a multinational fast-serve restaurant chain: US$1.2 billion position
- Agilent Technologies Inc. (NYSE: A), a global healthcare equipment manufacturer: US$1.1 billion position
- Hilton Worldwide Holdings Inc. (NYSE: HLT), a multinational hospitality company: US$1 billion position
- Starbucks Corp. (NASDAQ: SBUX), a multinational coffee chain: US$746 million position
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