Warren Buffett's mystery investments are Verizon and Chevron. Here's why the 2 stocks make sense.

  • By Andrew Bary,
  • Barron's
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Warren Buffett’s Berkshire Hathaway has disclosed sizable stakes in Chevron and Verizon Communications at year-end 2020, after previously being allowed to keep those stockholdings undisclosed.

Berkshire (BRK/B) held 146.7 million shares of Verizon (VZ) worth $8.6 billion at the end of 2020 and 48.5 million shares of Chevron (CVX) worth $4.1 billion, according to a regulatory filing on Tuesday.

The Verizon stake is up sharply from the end of the third quarter, when Berkshire owned 58.4 million Verizon shares worth $3.4 billion. The Chevron stake rose more modestly in the fourth quarter, from 44.3 million at the end of the third quarter. These were disclosed in a 13-F filing for the end of the third quarter and an amended 13-F for the end of the third quarter.

The Verizon and Chevron purchases were likely orchestrated by Buffett, the CEO, who oversees the company’s huge equity portfolio.

Berkshire requested and received confidentiality from the U.S. Securities and Exchange Commission for the Chevron and Verizon stakes at the end of the third quarter, presumably because it was continuing to build positions in those stocks in the fourth quarter and didn’t want public disclosure in mid-November to disrupt its accumulation of both stocks.

Berkshire also got confidentiality at the end of the third quarter for a $386 million holding of Marsh & McLennan (MMC) that grew to $499 million at the end of the fourth quarter.

The disclosures settle the mystery of the confidential Berkshire purchases that set off speculation about what stock Buffett was buying. Many investors assumed it was one stock, not two major purchases.

Barron’s wrote earlier on Tuesday that the mystery holding likely was a commercial or industrial company based on Berkshire’s filings and that Chevron was a possibility.

Chevron was up about 2% in after-hours trading, to $95, on news of the Berkshire holding—the stock finished Tuesday’s regular session at $93.13. Verizon was nearly 3% higher after hours, to $55.70, after finishing at $54.15.

Both purchases are in keeping with Buffett’s value orientation. Verizon has a low valuation trading for around 10 times estimated 2021 earnings and yields 4.6%. It has trailed the S&P 500 in recent years and is down 7% in the past year while the index is up 16%.

Chevron has rallied off its lows of last spring as oil prices have recovered but is still off 17% in the past year. The company is viewed as the strongest of the global super-major energy companies, with a better balance sheet than rival Exxon Mobil (XOM) and big European rivals like Royal Dutch Shell (RDS/A). Chevron’s dividend yield is 5.6% and that payout is viewed as increasingly secure with the rise in oil prices.

Berkshire also pared its stake in Apple (AAPL) to 887.2 million shares, according to Tuesday’s filing.

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