Berkshire tweaks bank play with $2.9 billion bet on Citi

Warren Buffett’s Berkshire Hathaway, which cut many bank holdings as the pandemic bore down on the U.S., is back with a roughly $2.9 billion bet on Jane Fraser’s Citigroup even as it said goodbye to a longtime stake in Wells Fargo.

The company also added a $2.61 billion bet on Paramount and a nearly $390 million stake in Ally Financial, according to a regulatory filing Monday. Buffett’s firm also disclosed new stakes in McKesson, Markel and Celanese.

Berkshire has spent recent years revamping its bank bets. It pulled back from big-name investments, including stakes in JPMorgan Chase and Goldman Sachs Group, while sticking with Bank of America and U.S. Bancorp. Wells Fargo, an investment made more than three decades ago by Berkshire, has been whittled down and finally disappeared from the quarterly filing this time around.

Warren Buffet, chairman and chief executive officer of Berkshire Hathaway Inc., plays bridge at an event on the sidelines of the Berkshire Hathaway annual shareholders meeting meeting in Omaha, Nebraska, U.S., on Sunday, May 6, 2019. The annual shareholders’ meeting doubles as a showcase for Berkshire’s dozens of businesses and a platform for its billionaire chairman and CEO to share his investing philosophy with thousands of fans.

Houston Cofield/Bloomberg

Berkshire’s now betting on Citigroup as new management takes over. Citigroup’s shares have been languishing even as new CEO Fraser seeks to refocus on higher-returning businesses like wealth management and treasury offerings. The shares have traded below book value — a sign that investors believe executives are actively destroying shareholder value — since 2018. A Citi spokeswoman declined to comment.

Citigroup shares rose as much as 5.4% in premarket trading.

Buffett, Berkshire’s chief executive officer and chairman, and his investing deputies have been on one of Berkshire’s biggest buying sprees, with about $41 billion of net purchases during the first quarter. That’s the most in data going back to 2008.

Buffett’s company had disclosed some ramped-up bets ahead of the filing. It expanded wagers tied to oil, with purchases of Occidental Petroleum stock and a bigger investment in Chevron that vaulted that holding among Berkshire’s top-four stock bets. The company also built out an investment in Activision Blizzard as part of a merger arbitrage play to wager that the deal with Microsoft will close. And it moved further into the technology realm with a wager on HP disclosed in April.

The filing Monday reveals that the buying spree went even deeper. Berkshire now owns a $1.13 billion stake in the chemical maker Celanese, as well as an $895 million holding in McKesson. The company also boosted stakes in General Motors and the furniture company RH. 

Berkshire pulled back on certain bets. The Verizon Communications stake was down 99% in the first three months of the year. The company’s filing no longer showed stakes in AbbVie and Bristol-Myers Squibb.

— With assistance from Jenny Surane and Joe Easton.

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