Buffett bets on Ally Financial and US economy

Financials

Warren Buffett’s Berkshire Hathaway made a big bet on motor and home lender Ally Financial in the second quarter while increasing its wager on iPhone maker Apple despite signs that an economic slowdown is beginning to weigh on consumers.

The investments, along with purchases of shares in video streaming service Paramount Global and oil groups Occidental Petroleum and Chevron, showed that Buffett and his investment team continue to bet on the US economy even as the Federal Reserve embarks on a string of sharp interest rate rises.

Berkshire more than tripled its position in Ally to 30mn shares valued at $1bn at the end of June, according to a securities filing. That makes Buffett’s group one of the lender’s largest shareholders, with a 9.7 per cent stake, according to data provider Refinitiv.

Berkshire built the first part of its stake in Ally in the first quarter, when it bought just under 9mn shares.

Buffett has long been a significant investor in the US financial sector. His company’s holdings in Bank of America and American Express rank among its five largest. In the first quarter, Berkshire bet on Citigroup with an investment of $2.9bn.

The shifts in Berkshire’s portfolio are closely followed by investors as a gauge of where the “Sage of Omaha” sees value, as well as his view on the health of the US economy.

He eschewed the financial sector during the depths of the coronavirus pandemic, dumping shares of JPMorgan Chase and Goldman Sachs as lenders started setting aside tens of billions of dollars for potential credit losses.

The filing also showed Berkshire had lifted its stake in Apple, the single largest investment in the company’s $328bn stock portfolio, by 3.9mn shares in the second quarter. Berkshire owns roughly 5.6 per cent of the iPhone maker.

Berkshire also purchased 2.3mn shares in Chevron, lifting the value of its stake in the oil group to more than $23bn; 9.5mn shares in Paramount; and 22.2mn shares in Occidental. Berkshire has disclosed further buying in Occidental since the quarter ended, lifting its stake in the energy company to more than 20 per cent.

The second quarter marked a significant slowdown for Buffett, who moved aggressively at the start of the year as stock values slid. Berkshire bought $6.2bn of stocks in the quarter, down from $51.1bn between January and March.

It also sold $2.3bn of shares in the second quarter, cutting its stakes in General Motors, US Bancorp and grocer Kroger, and exited its positions in Verizon and Royalty Pharma.

ERIC PLATT AND IMANI MOISE, NEW YORK