10 percent threshold: Possible reason: That’s why Buffett sold so many shares in April | message

—• Buffett has divested Delta, Southwest and Bank of New York Mellon stocks
• Sales of shares put Berkshire below the 10 percent threshold
• Possible reason for selling shares

When Warren Buffett buys or sells stocks, investors usually take a closer look. After all, the 89-year-old is considered an icon of value investors. Buffett’s investment horizon is long-term, so if he joins companies, he believes their business model and equity outlook are future-proof. However, if he parted company with shares, this could mean the opposite, namely that he no longer has confidence in the company’s long-term business prospects. But there is another reason that may have caused Buffett to sell numerous equity holdings in April.

Buffett only makes partial sales

One thing is particularly striking about Warren Buffett’s sales transactions in April: Buffett has only sold enough shares to reduce its equity holdings to below 10 percent. The star investor sold 2.3 million Southwest Airlines shares in early April. This reduced his stake in the airline by four percent to 9.92 percent – previously Buffett held 10.4 percent of the airline through his holding company Berkshire Hathaway.

And Delta Air Lines shares also flew from the investment company’s custody account: the Buffett company tossed 13 million shares on the market in April, reducing its stake by 18 percent. Before the sale, 11 percent of Delta shares were held by Berkshire, after which Berkshire held 9.24 percent of the airline shares.

A similar picture emerged from a third Buffett transaction in April: the investor also sold shares in the Bank of New York Mellon in April. 869,103 shares were sold – 88.1 million shares in the financial house and thus 9.96 percent of the company remained in the Buffett portfolio.

Noticeable 10 percent threshold

The partial sales brought the Buffett company Buffett as a major shareholder below the 10 percent share threshold, which is the real reason why the transactions became known. Because the report to the US Securities and Exchange Commission would have been due 45 days after the end of the quarter, so Berkshire could have taken the time to report it. However, since a reporting threshold was violated when the 10 percent mark was undershot, other rules apply to reporting to the SEC.

This is particularly due to the fact that large shareholders with a share of more than 10 percent gain extensive insight into the course of business and are therefore considered insiders. In the case of bank stocks in particular, a share position of more than 10 percent also brings with it possible restrictions for the shareholder: The biggest problem for Berkshire in this context is the rules for bank holding companies, writes The Motley Fool. “Owning 10% or more of a banking institution could force the insurer to follow the same rules that key financial players in the banking sector must comply with, including capital requirements and supervision by the Federal Reserve and other banking regulators.”

This may be the reason why Buffett reduced its stake in the Bank of New York Mellon. Airline stocks, meanwhile, are actually among the stocks that are being hit the most in the market as a result of the corona pandemic and global lockdown efforts. Delta shares lost around a third of their value in a month, while Southwest Airlines fell 17 percent at the same time. And the outlook is more than uncertain: As long as the measures to limit the pandemic continue, the business of the airlines has been idle. Perhaps also one of the reasons why Buffett wanted to decimate his risk with the partial sale of shares.

Editorial office finanzen.net