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When Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) released its third-quarter earnings report, we learned that Warren Buffett and his team had quite an active quarter in the stock market. The cost basis of Berkshire’s massive stock portfolio increased by about $9.6 billion, and it appeared that there had been some selling in the portfolio as well.

Well, on Monday afternoon we got a glimpse of what the Oracle of Omaha has been buying and selling with the release of Berkshire’s Form 13F, which institutional money managers are required to file 45 days after the end of each quarter. Here’s a breakdown of the recent moves investors should know about.

Here’s what Buffett and his stock pickers have been buying

We already knew about a couple stock purchases Buffett and his lieutenants made — specifically that they spent more than $2 billion adding to their already large position in Bank of America and invested $720 million in Snowflake’s recent IPO. But the company’s quarterly report indicated that this was just a tiny fraction of Berkshire’s stock buying activity.

With that in mind, here’s a rundown of what stocks Berkshire Hathaway added to its portfolio in the third quarter:

DATA SOURCE: BERKSHIRE HATHAWAY SEC FILINGS. MARKET VALUE AS OF 11/16/2020.

The biggest story on the buying side was the addition of not one but four big pharma stocks. Buffett (or one of his stock pickers) initiated stakes worth nearly $6 billion altogether, including three large and nearly equal-sized positions in AbbVie, Merck, and Bristol Myers.

Aside from this, the initiation of a new position in T-Mobile US is also noteworthy, although a $318 million investment is rather small by Berkshire’s standards. This isn’t totally a surprise — Berkshire reportedly considered a large investment in Sprint (now a part of T-Mobile) in 2017.

In addition to the stocks in the chart above, it’s also worth noting that Berkshire also repurchased more than $9 billion of its own stock during the quarter.

Berkshire also hit the sell button on a few stocks

While Berkshire was an active buyer of stocks in the third quarter, the quarterly report indicated that Buffett and company may have continued to pare back some of their other bank investments and that they may have taken some profits in their largest holding, Apple. Here are the particulars of these moves.

DATA SOURCE: BERKSHIRE HATHAWAY SEC FILINGS. MARKET VALUE AS OF 11/13/2020.

We knew Berkshire sold some Apple, and Berkshire’s SEC filing confirmed it. The same goes for bank stocks, with the Wells Fargo, JPMorgan Chase, and other bank-stock sales adding up to nearly $6 billion.

On the selling side, the biggest surprise is definitely the sale of the company’s entire Costco stake. This likely resulted in a big profit for Berkshire, as Costco stock is trading for about $380 per share right now, roughly 10 times what Berkshire likely paid for it.

Also surprising is that Berkshire sold more than 40% of its Barrick Gold investment, which was just initiated during the second quarter.

An active quarter that shows Berkshire is ready to put money to work

Between Berkshire’s massive buybacks, this quarter’s wave of other stock purchases, and some other investments Berkshire has made recently, it is crystal clear that Warren Buffett is now in capital deployment mode. And with about $140 billion in cash and equivalents still on the balance sheet, this could be just the beginning.

Author: Matthew Frankel, CFP

Source: Fool: Here Are the Stocks Warren Buffett Has Been Buying and Selling

These are some of the best “forever stocks” you’ll find.

I own about 45 different stocks in my portfolio, and I bought all of them with the intention of holding them forever. But, like any responsible investor, I occasionally sell stocks for a variety of reasons. Maybe a business’ competitive advantages are fading, maybe management is making some troubling decisions, or maybe future growth prospects are drying up.

With that in mind, there are a select few of my stocks that – unless the entire company is acquired — I’m virtually certain will still be in my portfolio 50 years from now. Here’s why Realty Income (NYSE:O), Apple (NASDAQ:AAPL), and Bank of America (NYSE:BAC) are in my portfolio and why I plan to hold each one for decades to come.

Reliable and growing income no matter what

Realty Income is a real estate investment trust, or REIT, that focuses on single-tenant commercial properties, most of which are occupied by retailers.

Now, retail may sound like a scary place to invest, but Realty Income isn’t your typical retail company. Specifically, the vast majority of Realty Income’s tenants are in industries that are recession-resistant and aren’t at serious risk of being disrupted by e-commerce. Think of businesses like convenience stores, warehouse clubs, dollar stores, and grocery stores. (And, they are mainly “essential” businesses that have remained open throughout the COVID-19 pandemic.)

Realty Income’s tenants sign long-term leases with annual rent increases built in, so all the company has to do is acquire a property, put a tenant in place, and enjoy year-after-year of predictable income. You may think this business sounds “boring,” but the results are not. Realty Income has delivered a 14.6% annualized return for its shareholders since its 1994 NYSE listing, handily beating the S&P. And July’s dividend payment will be the 600th consecutive monthly distribution to its investors.

A tech powerhouse whose ecosystem is only getting stronger

The largest publicly traded U.S. company (of any kind), Apple doesn’t need much of an introduction. If you aren’t a user of Apple’s products yourself, you’re probably at least familiar with the iPhone, iPad, Apple Watch, and other hardware offerings, as well as their fiercely loyal user bases.

Now, I don’t necessarily think Apple will be as innovative on the hardware side of the business going forward as it has been over the past couple decades. But that’s not why I’m excited to be an Apple shareholder for the next half century.

The most exciting reason to be an Apple shareholder right now is its services business. This includes things like Apple Music, Apple TV+, Apple Arcade, and more — basically, everything that produces a recurring revenue stream for Apple. In the 2019 fiscal year alone, Apple’s service revenue grew by 19% and is showing no signs of slowing down. And it’s worth noting that most Apple TV+ subscribers aren’t even paying for the service yet. The upcoming 5G refresh cycle should just add fuel to the fire, and I could see Apple’s service business alone worth more than $1 trillion within the next few years.

Excellent management makes all the difference

If you had asked me what the best big U.S. bank to invest in was a decade ago, Bank of America probably wouldn’t even have been on my list. Suffice it to say that the company didn’t weather the financial crisis well, its asset quality wasn’t great, and it wasn’t exactly the most efficient bank.

That’s all changed. Thanks to the superior leadership of CEO Brian Moynihan and his team, Bank of America is arguably the most improved U.S. bank in the decade or so since the financial crisis. It has continually improved its efficiency and profitability and is now one of the most profitable big banks in the Unites States. Bank of America has also emerged as a leader in mobile and online banking technology, which should not only continue to improve efficiency, but should give the bank a competitive advantage over peers as time goes on.

Will I actually keep all of these stocks for 50 years?

As long as the reasons I discussed here still apply, I don’t see myself ever selling these stocks. Having said that, it’s entirely possible that something will change with the businesses and I’ll change my mind. So, buy with the intention of holding for the long run, but keep in mind that it’s still important to do your homework and keep up with how each business is doing.

Author: Matthew Frankel

Source: Fool: 3 Stocks to Buy and Hold for the Next 50 Years

Most Social Security recipients will be paid automatically, but there are some big exceptions.

The U.S. Treasury Department recently announced that Social Security beneficiaries who aren’t typically required to file a tax return won’t need to take any special action to get a $1,200 stimulus payment. Because of this, most Social Security beneficiaries don’t have to take any special action — the payment will be automatically paid in the same manner as their Social Security benefits.

On the other hand, there are some Social Security recipients who may still need to take action, especially if they want to maximize the amount stimulus check. Here’s a quick rundown of the latest guidance from the Social Security Administration (SSA) so you can decide if you need to file some information with the IRS.

Who needs to take action?

The Treasury recently launched a Web portal that allows people who don’t typically file tax returns to register and provide payment account information for their Economic Impact Payments (the official name for the stimulus checks). According to the Treasury’s, Social Security beneficiaries don’t need to use it — even if they haven’t filed tax returns for several years.

However, Social Security Commissioner Andrew Saul released new guidance that states that some Social Security beneficiaries should use the new non-filer tool, which can be found on the IRS’s website, to enter their information.

One specific group that should register their information are Social Security beneficiaries who have dependent children under the age of 17. Simply put, if a Social Security beneficiary didn’t file a tax return in 2018 or 2019, the IRS won’t know they have dependents — and each dependent under 17 would increase their stimulus payment by $500. In other words, a Social Security beneficiary with a 16-year-old dependent child could receive $1,700 instead of $1,200 by taking a few minutes to enter their information.

Another group that should head to the IRS’s Economic Impact Payments page are Supplemental Security Income (SSI) recipients, especially those with dependents. Those on the other disability income program, SSDI, don’t need to take action unless they have qualified dependents and haven’t filed a recent tax return.

Finally, any Social Security beneficiaries who started receiving benefits after Jan. 1, 2020, and haven’t filed tax returns in 2018 or 2019 need to use the IRS tool to provide their information. This applies even if there are no dependent children to report.

Make sure you get your full stimulus payment

Just to be clear, even if you don’t do this, you can still get your full Economic Impact Payment. It just might not arrive anytime soon. In other words, if you’re a Social Security beneficiary who hasn’t filed a tax return in 2018 or 2019 and you don’t let the IRS know about your dependents soon, you’ll have to wait a while before you can get the additional $500 payment for each child.

To sum it up, there are three groups who should head over to the IRS’s Economic Impact Payments page and register their information ASAP:

  • Social Security beneficiaries (including retirement, survivors, and SSDI) who have dependent children under 17 and haven’t filed tax returns in 2018 or 2019.
  • SSI recipients, especially those with qualifying dependents.
  • New Social Security beneficiaries who didn’t file tax returns in 2018 or 2019, regardless of whether they have dependents.

If you fit into one of these three categories, it’s in your financial best interest to head over to the IRS Economic Impact Payments page and provide your information as soon as possible.

Author: Matthew Frankel

Source: Fool: Social Security Beneficiaries: You Might Need to Act Now to Get Your Stimulus Check

Here are answers to some of the most common stimulus check questions.

As part of the $2 trillion economic stimulus bill, hundreds of billions of dollars are being earmarked for one-time economic impact payments, or “stimulus checks” to most American households. While the size of the stimulus payments has been widely reported, there are some key details that are still unclear — such as how you’ll actually get your payment, what happens if you haven’t filed a tax return recently, and what if your information has changed.

While this is still a fluid situation and there are some important details the IRS and Treasury haven’t quite figured out yet (to be fair, the bill passed just a few days ago), the IRS recently issued their most up-to-date guidance yet. With that in mind, here are five things about the stimulus check that you need to know.

Are you eligible for a stimulus check?

Stimulus checks will provide a payment of as much as $1,200 per adult and $500 for every qualifying child. So, a family of four could get as much as $3,400.

I say “as much as” because in order to get a full stimulus payment, your income needs to fall below certain thresholds.

Specifically, if your adjusted gross income, or AGI, is less than $150,000 for married couples filing jointly or $75,000 for single filers, you are eligible for the full stimulus payment. Above these thresholds, the payment is reduced by $5 for every $100 in AGI, until eligibility disappears completely for taxpayers with AGI above $198,000 and $99,000 for joint and single filers.

If you’ve already filed your 2019 tax return, which is now due on July 15, the IRS will use it to determine your eligibility. If you have not filed a 2019 tax return yet, your eligibility will be based on your 2018 return.

Most people won’t have to do anything to get the money

If the IRS already has your direct deposit information — meaning that you had your refund direct deposited on your latest tax return — you don’t have to do anything. Once the IRS and Treasury are ready to send payments, your money will be directly deposited into the same account.

If the IRS doesn’t have your direct deposit information

The IRS says the Treasury is planning to develop a web-based portal for taxpayers to provide their bank account information for stimulus payments. The goal is to get the money in your hands as soon as reasonably possible, and the quickest way to do that is to allow everyone to use direct deposit if they so choose. We don’t know yet if there will be an option to choose a paper check.

What if you haven’t filed a tax return in 2018 or 2019?

The short answer is that even if you haven’t filed a tax return for either 2018 or 2019, you can still get a stimulus check. However, it may require a bit of effort on your part:

  • If you are not typically required to file a tax return (say, your income is below the threshold that requires you to do so), you’ll need to fill out a simple 2019 tax return to qualify. The form isn’t available yet, but it’s mainly intended to gather information that would determine and facilitate your stimulus payment (filing status, number of dependents, and bank information).
  • If you are required to file a tax return and have simply not done so, the IRS encourages you to file as soon as possible so you can get a stimulus payment. And the IRS makes clear that the payments will be available to claim throughout 2020, so there’s no need to rush if you need to consult a professional tax preparer to get your 2018 and/or 2019 return(s) done.

Here’s where you can find the latest information

To reiterate, there’s plenty that the IRS and Treasury are still figuring out. Just to name a few unanswered questions:

  • What if the bank account you used on your last tax return for direct deposit has since been closed?
  • What if your AGI on your 2018 or 2019 tax return isn’t reflective of your current income?
  • What if you’ve had another child since you filed your most recent tax return?

Because of this, the IRS has set up an informational coronavirus page where it will post information and instructions as soon as they become available. If you’re expecting a stimulus check, and there are some details you aren’t sure about yet, it’s a good idea to check the IRS information page regularly for the most up-to-date information available.

Author: Matthew Frankel

Source: Fool: Stimulus Checks: 5 Things the IRS Wants You to Know

Here’s a company that’s well positioned to handle a market meltdown.

There’s really no way to sugarcoat it: The recent stock market action has been ugly. We’re now almost officially in bear market territory, down about 17% from the all-time closing high set less than a month ago.

Market action like this is certainly scary. Nobody enjoys watching the value of their portfolio drop.

However, now could be a fantastic time for patient long-term investors to put some money to work, and Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is near the top of my watch list. Not only is Berkshire well poised to handle the most massive recession or stock market crash, but it should emerge far stronger as a result. And the weaker the market gets, the more I’d want to hold Berkshire shares in my portfolio. There are two big reasons why.

Reason 1: A rock-solid business model

If you’re not too familiar with the current state of Berkshire Hathaway’s business, here’s a quick summary. Berkshire is an insurance company at its core but has evolved into a collection of more than 60 subsidiary businesses in a variety of industries, such as homebuilding, railroads, manufacturing, consumer goods, and, yes, insurance.

This diversity means that the company’s performance isn’t too reliant on any of its businesses. For example, if its See’s Candies business had a bad year, it would have a minimal impact on Berkshire’s bottom line.

More importantly, however, is the nature of the businesses. CEO and billionaire investor Warren Buffett specifically looks for “forever” businesses with durable competitive advantages. Just to name a few examples:

Berkshire’s GEICO subsidiary should be just fine no matter what happens, because even in rough economies, people still need auto insurance.
Berkshire Hathaway Energy, the conglomerate’s utilities business, should continue to generate nice profits as people need electricity despite any adverse economic conditions.
Berkshire’s BNSF railroad business provides a necessary service (shipping), and with depressed oil prices, it could actually benefit.

To be sure, this isn’t a universal truth among Berkshire’s operating businesses. Businesses like Nebraska Furniture Mart and the aforementioned See’s Candies could certainly suffer. But as a whole, Berkshire’s businesses are quite crash-resistant.

Also, don’t forget about Berkshire’s massive over-$200 billion stock portfolio, much of which was handpicked by Warren Buffett himself. Much of the portfolio is also in forever businesses, and many of its stocks generate dividend income that can be reinvested.

Reason 2: Cash, cash, and more cash

While I love Berkshire’s business, I’m even more excited about what Berkshire doesn’t own yet.

The general idea behind Berkshire’s business model is that its operating businesses and stock portfolio generate billions in profit, which can then be used to acquire more businesses and stocks. However, Buffett and his team have had a tough time in recent years when it comes to finding anything to buy at a reasonable valuation. As a result, Berkshire ended 2019 with more than $120 billion in cash on its balance sheet.

Of course, Berkshire wouldn’t ever use all of this, no matter how attractive the market got. Buffett insists on keeping at least $20 billion on hand at all times. Even so, this gives it a 12-figure war chest to work with.

Here’s the point: Buffett has an incredible track record when it comes to being opportunistic in bear markets and times of panic. For example, he made a NYSE:BAC) in the wake of the financial crisis, which resulted in billions in profits. Several other of Berkshire’s largest stock positions originated in the same way.

And Berkshire has never been in such a cash-rich position going into a crash or bear market. For example, at the end of 2007, Berkshire had roughly $44 billion in cash and equivalents on its balance sheet.

Time for Berkshire to be a bit greedy

As Warren Buffett has famously said, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” And it’s pretty clear that there’s quite a bit of fear in the market.

In a nutshell, times like this are when Berkshire shines. And Buffett and his team have tons of money available right now to do what they do best. If I were to pick one company that had the best chance of emerging from this market turbulence in significantly better shape than before, it would be Berkshire — hands down.

Author: Matthew Frankel

Source: Fool: This Could Be the Biggest Winner of the Stock Market Crash

The market is near record highs, but there’s no guarantee it’ll stay that way

It might sound silly to talk about a crashing stock market in 2020. After all, the Dow Jones Industrial Average seems to hit a fresh record high almost every day, and there’s no sign that things will turn south anytime soon.

However, it’s still smart to prepare for the worst — especially when the market has been on such an amazing run. Many experts are comparing January 2020’s stock market to early 1999, and we all know how that turned out. Plus, with the unresolved trade dispute, threat of a global recession, and the uncertainty surrounding the 2020 presidential election in the U.S., there’s quite a bit that could go wrong.

With that in mind, here’s a simple three-step playbook if the stock market experiences a correction or even a full-on crash in 2020.

  1. Check your emergency fund and short-term spending plans.
  2. Don’t do anything while the market is plunging.
  3. Put some money to work while stocks are on sale.

Let’s take these one at a time.

1. Check your short-term spending plans now

Here’s something you should do on a regular basis, regardless of how strong or weak the stock market is.

Simply put, the stock market isn’t a great place for any money you’ll need within the next five years. This is true no matter what you think the market is going to do. There’s simply too much uncertainty that can move the market in the near term, so there’s no good reason to risk your 15-year-old child’s college savings or the money you plan to use for next year’s family vacation.

The average bear market causes stocks to lose about 30% of their value, and it takes an average of about 22 months before prices recover to their previous highs.

The point is to make sure your spending needs over the next five years or so will be met, regardless of what the stock market does. This could mean moving some of your money into lower-risk assets like CDs, and although you might end up losing out on some returns if the market continues higher, you’ll be glad you made this move if things take a turn for the worse.

2. Don’t sell while the market is volatile

Now let’s get to what you should do if the market starts to plunge. And you might be surprised at this advice.

The best thing most long-term investors can do when the stock market is actively plunging or seems to be moving up or down by several percentage points every day, is nothing at all.

Here’s why I say this. We all know that the goal of investing is to buy low and sell high. However, when the market gets volatile, human emotions tend to get the best of us. Our instincts tell us to sell when the market plunges before things get any worse (selling low), which is the exact opposite of what you should do. If anything, volatile times can be a good opportunity to search for bargains, but selling your stocks in response to a market crash is the worst possible reaction.

3. Put some money to work while stocks are on sale

I get it. Bargain hunting with money that’s already in your brokerage account is one thing, but it can seem scary to put even more money into the market after you just watched your account values plunge. After all, what if the market drops even more?

This is a common mentality, but that’s the wrong way to think about a stock market crash. If you were shopping at your favorite store, and you heard an announcement that everything in the store was 20% off for an unspecified amount of time, would you panic and get out? Or would you hold off on purchasing anything because the discount could jump to 25% or 30%? No — you’d probably take advantage of the bargains while you could. The same logic applies here.

When stocks are down, it’s a great time to max out your IRA or contribute more to your brokerage account. If some of your favorite stocks have declined, it can be a great opportunity to add to your positions.

Simply put, stocks can be scary in the short term, but they always deliver strong returns when you’re measuring performance in terms of decades. So, if the stock market crashes in 2020, the best thing you can do is to take a deep breath and keep your eye on the long term.

Author: Matthew Frankel

Source: Fool: 3 Smart Moves to Make If the Stock Market Crashes in 2020

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