Warren Buffett once said his favorite holding period is forever.
But that doesn’t mean he’s opposed to taking profits off the table when the price is right.
In the most recent quarter, Buffett’s holding company Berkshire Hathaway sold nearly $2 billion more in stocks than it purchased — the company’s fourth straight quarter of net selling.
Berkshire’s cash hoard now stands at a whopping $149.2 billion.
That said, no one is right 100% of the time. For average investors looking for high-quality companies, you might even find an opportunity in some of the stocks that Berkshire recently sold.
One (or several) of these names could be worth pouncing on with some of your extra cash — especially as we head into the new year.
Just last week, the FDA approved Merck’s antiviral COVID-19 pill for at-home use. But Berkshire wasn’t around to benefit from the good news.
In Q3, Buffett sold 9.16 million shares of the multinational pharmaceutical company, exiting his position entirely.
But the sale shouldn’t come as a complete surprise. Berkshire already unloaded millions of Merck shares in Q1 and Q2.
Buffett’s company also sold 6.13 million shares of drug giant AbbVie and 4.25 million shares of Bristol-Myers Squibb in Q3.
The COVID-19 pandemic gave investors a new reason to check out big pharmaceutical companies, but that doesn’t mean every stock in the segment has outperformed.
Year to date, AbbVie is up about 30%, Merck is flat, and Bristol-Myers is up slightly. Meanwhile, the S&P 500 is up nearly 30% in 2021.
But what really makes these drugmakers stand out? Dividends.
Each of the companies mentioned above currently provides an annual dividend yield of above 3.4%, much higher than the S&P 500’s 1.2%.
Financial stocks have had a solid bull run over the past year. And Buffett is cashing some chips in.
In Q3, Berkshire sold 276,108 shares of Mastercard, lowering its stake in the credit card giant by roughly 6%. It also cut its position in Visa by 4%.
Buffett also sold 2.47 million shares of U.S. Bancorp, the fifth-largest bank in the country. But it was just a 2% reduction in Berkshire’s stake.
Buffett isn’t exactly turning bearish on financials.
After all, Berkshire continues to hold more than one billion shares of Bank of America, a position with a current market value of roughly $45 billion. Berkshire also still owns approximately 151.6 million shares of American Express.
At the end of Q3, Bank of America and American Express were Berkshire’s second- and third-largest holdings, respectively.
These established financial firms pay regular quarterly dividends, which can be great for retail investors looking for passive income. And financials tend to do well in rising interest rate environments, making them a particularly timely opportunity.
These days, you can build your own blue-chip stock portfolio just by using some digital nickels and dimes.
Steady income beyond stocks
Even if you’re not bullish on these dividend-paying stocks, generating regular income should be a top priority for risk-averse investors.
And you don’t have to limit yourself to the stock market to do that.
If you want to invest in something insulated from stock market swings, take a look at some lesser-known alternative assets.
Traditionally, investing in sectors like exotic vehicles or multifamily apartment buildings or even litigation finance have only been options for the ultrarich.
But with the help of new platforms, these kinds of opportunities are available to retail investors, too.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.