- Warren Buffett has likely seen an $8 billion hit to his financial stocks from SVB’s collapse.
- Berkshire Hathaway saw about $6.6 billion wiped off its Bank of America and America Express stakes.
- Bill Ackman has suggested Buffett may capitalize on the chaos and buy cut-price bank stocks.
Warren Buffett’s Berkshire Hathaway has likely seen around $8 billion wiped off the value of its financial stocks in just three trading days, after Silicon Valley Bank’s collapse sparked a firesale in the sector.
The famed investor’s company owned about $74 billion of banking, insurance, and financial-services stocks at the end of December, its latest portfolio update shows. Its largest holdings included Bank of America ($33 billion) and American Express ($22 billion).
Bank of America’s stock price tumbled 12% over the course of Thursday, Friday, and Monday. As a result, Berkshire’s stake in the bank shrunk in value by about $4 billion in three days, assuming it hasn’t touched the position this year.
Similarly, American Express stock has slumped 10% over the past three trading days, slashing the value of Berkshire’s stake in the credit-card titan by $2.6 billion.
Berkshire’s other financial stocks dropped as well, including Ally Financial (-22%), US Bancorp (-20%), Jefferies (-15%), Citigroup (-12%), BNY Mellon (-11%), and Globe Life (-10%). Overall, its 15 financial holdings have shed $8 billion of value in the past three trading days, a Markets Insider analysis shows.
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SVB’s implosion marked the biggest US bank failure since 2008. The Federal Deposit Insurance Corp. seized control of the lender on Friday, and the Federal Reserve, Treasury, and FDIC agreed to guarantee SVB customers’ deposits on Sunday.
The bank’s collapse sparked fears that similar companies could fold under pressure, leading investors to cut their exposure to the financial-services sector.
Buffett famously invests for the long run, so he’s unlikely to be fazed by a short-term blow to his portfolio. In fact, he’s known for capitalizing on market panic, and might seize the chance to bolster his financial bets at a discount.
“I would be surprised if Warren isn’t putting capital to work in his favorite regional banks now,” Bill Ackman, another bargain hunter whose fund owned nearly $1 billion of Berkshire stock in early 2019, tweeted on Monday.
It’s also worth emphasizing that Berkshire has racked up huge unrealized gains on several of its biggest financial holdings.
It only spent $1.3 billion for its stake in American Express, worth $24 billion as of Monday’s close. Similarly, it paid roughly $15 billion for Bank of America stock valued around $29 billion today, and only $248 million for Moody’s shares now worth $7 billion.
Moreover, Berkshire listed its net unrealized gains on its banks, insurance, and finance stocks at $44 billion in total as of December 31, compared with a cost base of $26 billion. In other words, it would take a crash of epic proportions to turn some of Buffett’s most lucrative bets into losers.
Here’s a chart showing the blow to Berkshire’s financial stocks over the past three trading days: