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Why Warren Buffett Can't Quit the Old Economy

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  • (0:40) - What Can We Learn From The New 13F Filings
  • (5:10) - Warren Buffett Buys Verizon: Breaking Down Berkshire Hathaway’s Portfolio
  • (19:50) - Understanding Warren Buffett’s Investment Strategy: The Annual Letter
  • (31:45) - Should You Be Investing In The Old Economy?
  • (38:20) - Episode Roundup: VZ, CVX, OXY, WFC, BAC, JPM, AAPL, GOLD, PNC, MTB, KSU, UMP, CSX
  •                 Podcast@Zacks.com

 

Welcome to Episode #227 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

At the beginning of March, Berkshire Hathaway put out its 2020 Annual Letter.

This followed the release of Berkshire’s fourth quarter 13-F filing with the SEC which indicates all of the company stock buys, and sells, in the quarter.

What did we learn about what the world’s greatest value investor was doing with his portfolio?

Selling the Banks and Gold

Berkshire continued to lighten up on its financial holdings, specifically in the banks.

It completely exited its position in several banks, including JPMorgan Chase (JPM - Free Report) .

It also sold its one gold miner, Barrick Gold (GOLD - Free Report) , after just buying it in the second quarter of 2020. That was a very quick trade.

Two New Big Old Economy Additions

At the same time, Buffett put some of his cash to work by buying new positions in Verizon (VZ - Free Report) and Chevron (CVX - Free Report) , both old economy stocks.

Verizon is trading with a forward P/E of 10.9. It’s cheap.

It’s a value stock but it has low revenue and earnings growth.

Chevron had sunk again in the fourth quarter of 2020 before the news of the Pfizer vaccine lit a fire under the energy stocks. It was the perfect time to buy it as shares were on sale.

Chevron pays a dividend which is considered to be safe, for now. It’s yielding 5% even after the big run in the stock.

Buffett Has a Long, Winning History in the Old Economy

Chevron isn’t the first energy company Buffett has owned. Berkshire already owns some energy of its own.

Additionally, the portfolio owned Occidental Petroleum as recently as last year.

Berkshire also owns the largest railroad in America in BNSF.

In the annual letter, Buffett described it as being one of the company’s four “crown jewels.”

BNSF was founded in 1850.

It doesn’t get much more “old economy” than a railroad.

But the railroad industry has consolidated into a few big names in the last several decades. These are the winners.

Another railroad, Kansas City Southern (KSU - Free Report) , has been such a strong performer, that it was the 6th best performing S&P 500 stock in the 30-year period between 1990 and 2020, beating out Apple, which was 14th.

What should you know about investing in the Old Economy in 2021?

Listen to this week’s podcast to find out.

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