Earlier this month, Warren Buffett and his company, Berksshire HathawayThey discovered which shares held at the end of the fourth quarter 2024. In the 13F company application. Investors are eagerly awaiting this application to see what is moving Oracle from Omaha and his Lieutenant investment team that made every quarter. 2024 Berksshire sold many more shares than he bought, signaling that the market considers them overrated and do not see many opportunities.
However, one of the moves of the company in the fourth quarter caught me for guarding: Berksshire threw 73% of his stake in Citigroup(Nyse: c)Previously top 20 positions in Berksshire’s portfolio. Citigroup has done a significant job to improve the company in recent years, the shares are still cheap and has a healthy dividend yield or approximately 3%. Did Buffett make a mistake?
Buffett and Berksshire team have long been customers Bank shares. In fact, it would be difficult for you to find the main section on Wall Street that Berksshire did not own in the 21st century. However, Buffett started acidic in the industry after the pandemic start, when he sold many of his large banks. Berksshire was also Sale of main pieces your role in Bank of AmericaThe trend continued in the fourth quarter.
When Berksshire in the first quarter of 2022 launched a new share of Citigroup, I thought Buffett and Berksshire could be in it for a long time. After all, Citigroup traded with a significant discount and embarked on a promising transformation. Furthermore, in the 21st century, Buffett owned a Citigroup and sold many other shares of large banks, so I assumed that this time was different. But then Berksshire threw 73% of his stake in Citigroup in the fourth quarter.
Based on Berksshire’s 13F for the first quarter of 2022, when Berksshire bought almost all its position, the company purchased over 55.1 million shares at an average price of about $ 53.40. The Citigroup -the tangible bookkeeping value (TB) per share at that time was about $ 79, which means that Berksshire bought a Citigroup for about 68% of his tangible accounting value (TB) or the theoretical value of liquidation. Banks often trade in relation to their TBV, so growing TB can often turn into a higher stock price.
We do not know when Berksshire sold Citigroup in the fourth quarter, but the average cost of the company’s shares throughout the quarter was $ 67.32, which implied close to 27% in the increase in the shares that Berkshire sold. Assuming an average stock price in the fourth quarter, this means that Berksshire sold shares at about 75% of TB. Assuming Berksshire owned these shares of Citigroup for 2.75 years, this has appeared on an average annual refund of about 9.8%, quite in accordance with long -term annual yields of the wider market.
Buffett and Berkshire seems to have made a short -term decision here. For one thing, supplies have increased significantly since President Donald Trump triumphed in the November elections. It is also quite cheap compared to peers.
From the great recession, Citigroup disappointed investors with a lack of refund and transformations that did not work or work for too long. However, when Jane Fraser in 2021 took the post of executive director, she quickly moved.
Fraser immediately decided to sell 14 of the international banking divisions of the bank, which were capital withdrawal and had no scale for the competition. Fraser also made a difficult decision to reject the company with a strong consumer banking banking company in Mexico. Although this procedure lasted longer than expected, Citigroup is planning a initial public offer to divide potentially this year.
These moves will release the capital, allowing the bank to modernize its business, invest in highly successful companies and buy the shares, while the bank traded below TBV, which effectively helps with TBV growth. Ever since Berksshire bought a Citigroup in the first quarter of 2022, the bank has grown to TBs about 13% to $ 89.34.
In addition, Trump’s victory should be a bull for banking shares, which should see a deregulation. For large banks, the most obvious outcome would be lower regulatory capital requirements, which would give Citigroup more capital to buy shares.
Buffett and Berksshire sounded an alarm on the stock market, and maybe even the economy throughout 2024. Berksshire sold many more shares than he bought and kept money, so maybe the team sees a significant correction or a recession on the horizon. History shows that Buffett properly has time to fall in time. The banks are cyclical, so the recession could challenge their supplies.
That was said, Buffett and Berksshire often preach the long -term horizon of investment. It is difficult for me to see that Citigroup has now become a worse investment than it was in 2022. The administration simplified the bank and liberated capital and still traded with a significant discount on peers. If Citigroup traded at half -valuation Jpmorgan chaseThat would be a huge win for shareholders, which makes me feel that Buffett and Berksshire sold too early.
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Citigroup is an advertising partner Motley Fool Money. Bank of America is an advertising partner Motley Fool Money. Wells Fargo is an advertising partner Motley Fool Money. Jpmorgan Chase is an advertising partner Motley Fool Money. Bram Berkowitz There is no position in any of the shares mentioned. Motley Fool has positions and recommends Bank of America, Berksshire Hathaway and JPMORGAN Chase. Motley Fool has disclosure rules.
