Warren Buffett's Berkshire Hathaway built an $8 billion stake in JPMorgan, then virtually eliminated it in 6 months. Here's a look at its unusual bet on the banking giant
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- Warren Buffett's Berkshire Hathaway amassed north of $8 billion of JPMorgan stock, only to sell almost all of it this year.
- The billionaire investor's conglomerate owned about 60 million of the bank's shares at the end of December 2019, but slashed the holding to fewer than 1 million shares worth less than $100 million last quarter.
- Berkshire's selling is surprising, given Buffett personally owned the stock in 2012, two Berkshire executives sit on JPMorgan's board, and he's a longtime admirer of CEO Jamie Dimon.
- "If Jamie decides he wants to make more money, all he has to do is call me and I'd hire him at Berkshire," he told The Wall Street Journal in 2014.
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Warren Buffett's Berkshire Hathaway built a stake in JPMorgan worth more than $8 billion at its peak, only to virtually eliminate the position in the space of six months as the COVID-19 pandemic ravaged the US economy.
The famed investor's company began buying the banking giant's stock in the third quarter of 2018, ending the period with roughly 36 million shares worth $4 billion. It boosted the holding over the next six months to about 60 million shares valued at $6 billion.
Buffett and his team didn't touch the position for the next nine months. The investment cost it about $6.6 billion, gave it 1.9% ownership of JPMorgan, and was worth $8.4 billion at the end of December 2019, the Berkshire chief said in his 2019 letter to shareholders.
It's been a totally different story this year. Berkshire trimmed the holding by 3% in the first quarter, slashed it by more than 60% in the second quarter as it soured on several financial holdings, then sold 96% of the remaining shares last quarter. It held fewer than 1 million shares at the end of September, a stake worth less than $95 million.
Berkshire's firesale of JPMorgan stock is surprising given the links between the two companies. Todd Combs, one of Buffett's two portfolio managers, sits on the bank's board of directors. Stephen Burke, one of Berkshire's directors, also sits on that board.
Buffett is also a fan of the company and CEO Jamie Dimon. He told CNBC in 2012 that he personally owns some of the bank's shares, and has praised Dimon many times in recent years.
For example, he described Dimon as a "fabulous banker" to Bloomberg in 2011, and a "first-class guy" to the Financial Times in 2014.
The investor also defended a massive pay rise for Dimon in 2013, a tough year for the bank. "If Jamie decides he wants to make more money, all he has to do is call me and I'd hire him at Berkshire," he told The Wall Street Journal.
Moreover, Buffett suggested the banking chief would be an excellent treasury secretary during a Marketplace interview in 2018. "I think he knows more about markets than probably anybody you could find in the world," he said.
Buffett and Dimon have also collaborated in the past. The pair penned a Wall Street Journal op-ed in 2018 that warned about the risks of short-termism. It also called for an end to quarterly earnings guidance.
They also partnered with Amazon CEO, Jeff Bezos, that year to launch Haven, a joint venture with the goal of providing better and cheaper healthcare for their employees.
Buffett's decision to take a knife to JPMorgan, despite his fondness for Dimon and close ties to the bank, suggests he doesn't allow personal relationships to fog his investing logic. Given his exit from Costco and evisceration of Wells Fargo last quarter, it seems there are no sacred cows at Berkshire.
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