Warren Buffett’s Berkshire Hathaway has dumped the bulk of the stake in Goldman Sachs that it acquired in the depths of the financial crisis, a regulatory filing revealed on Friday night.
Berkshire said it had sold more than 10m shares in Goldman in the first quarter, a holding that was worth $2.3bn at the end of last year and represented 2.9 per cent of the investment bank. It had just 1.9m Goldman shares left at the end of the quarter, a stake of less than 0.6 per cent.
Berkshire also trimmed its holding in JPMorgan Chase from 1.94 per cent to 1.88 per cent.
The Goldman disposal by Mr Buffett is the clearest sign yet the world’s most prominent investor is intent to sit on the sidelines of the stock market. Since coronavirus sparked a market sell-off in February, Berkshire has not clinched one of the multibillion-dollar investments for which it is known, and Mr Buffett has signalled the market rebound fuelled by central bank interventions has made it less likely it will soon do so.
Revelation of the sale is also noteworthy after Mr Buffett addressed the differences between the 2008 market panic in which he acquired the stake and the present crisis.
“The range of possibilities on the economic side are still extraordinarily wide,” Mr Buffett told shareholders at Berkshire’s virtual annual meeting this month. “We do not know exactly what happens when you voluntarily shut down a substantial portion of your society.
“In 2008 and 09 our economic train went off the tracks and there were some reason the roadbed was weak . . . but this time we just pulled the train off the tracks and put it on its siding . . . and I don’t know of a parallel.”
Berkshire came to the rescue of Goldman in 2008 when it invested $5bn, initially through preferred stock, during the fallout of Lehman Brothers’ failure.
The original investment, which earned Berkshire about $500m a year in dividends, was costly for Goldman. In 2013 the two sides agreed to new terms that made Mr Buffett’s company one of Goldman’s largest shareholders.
“We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago,” Mr Buffett said at the time.
Goldman Sachs has underperformed its biggest rivals for several years, as management struggled to reshape its 150-year-old trading business for market conditions that were fundamentally changed by the financial crisis.
The bank’s new chief executive David Solomon attempted to answer some of that criticism at an inaugural investor day in January when executives promised to lift returns at the trading business and aggressively grow new areas such as transaction banking as well as existing ones including asset management.
Berkshire’s filing with US securities regulators on Friday also showed that it had increased its stakes in two of the largest US airlines in the first quarter, just weeks before Mr Buffett decided the purchases were a mistake and dumped his entire portfolio of airline stocks at a loss in April.
The company bought almost 1m shares of Delta Air Lines and 218,966 units in United Airlines during the quarter, the filing showed. It was unclear if Mr Buffett, or one of his lieutenants, had bought before or after coronavirus reached US shores, when airline stocks were hit particularly hard.
Mr Buffett told Berkshire shareholders this month that the company had spent between $7bn and $8bn to amass its stakes in American Airlines, Delta, United and Southwest since 2016.
“It turns out I was wrong,” he said at Berkshire’s virtual annual meeting in May. “The airline business — and I may be wrong and I hope I’m wrong — I think it has changed in a very major way.”
Before his U-turn, Berkshire had become one of the largest shareholders in the four airlines, holding an 11 per cent stake in Delta, 10 per cent in American and Southwest and 9 per cent in United at the end of last year.
Berkshire Hathaway shares have fallen 25 per cent this year, compared to an 11 per cent decline by the broader market.