We recently learned that while Warren Buffett and his team made several stock purchases in the fourth quarter of 2020, the largest addition by far was the new almost $9 billion stake in Verizon (NYSE:VZ). In this Fool Live video clip, recorded on Feb. 22, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss why Buffett might have decided to place such a big bet on the telecom giant.
Jason Moser: Matt, let’s tackle what’s been going on in Berkshire Hathaway’s portfolio. Let’s start with the newcomers. There are four new stocks in Berkshire’s portfolio. Correct me if I’m wrong; I feel like one of these new stocks he owned before, too. It’s like he re-established a position in, I think, one of these companies, didn’t he?
Matt Frankel: Yes. There were four. There was a company called E.W. Scripps (NASDAQ:SSP), which he technically bought in January, but we already knew about that one. That’s the publishing company. There’s Marsh & McLennan (NYSE:MMC), which is a financial services firm. Both of those are relatively small investments by Berkshire standards. When I say small, I mean only about a half a billion dollars. [laughs] The two big ones by far were Verizon and Chevron (NYSE:CVX). I know Buffett used to own Verizon to some extent, I think.
Moser: OK. I was thinking Chevron.
Frankel: Or was it Chevron?
Moser: For some reason, I felt like he maybe held an interest in Chevron before and then closed it out at some point.
Frankel: I think you’re right. I have to double-check on the particulars of that. But those were big investments. They’re not big compared to Berkshire’s, say, Apple (NASDAQ:AAPL) or Bank of America (NYSE:BAC) investment. But those were built up over time.
Frankel: For the Verizon, one in particular was almost $9 billion.
Frankel: That’s a lot for Buffett to spend on one stock to establish a position all at once. A lot of investors were not happy to see that those were the two big buys. I mean, $13 billion between Verizon and Chevron. Because a lot of people think of those as boring stocks. They thought Buffett lost his touch, things like that. A couple of things I would say to that. First of all, I would much rather $9 billion of Berkshire Hathaway’s capital be in Verizon than in cash.
Frankel: It’s a much more productive use of the money. Verizon pays a very nice dividend, I want to say in the 5% ballpark right now.
Moser: I’m looking at it right now — 4.4% yield. I mean, you can’t discount that.
Frankel: Right. What was it? Sitting in Treasury securities earning like 0.1%. So this is definitely a better use of capital.
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