Warren Buffett’s Berkshire makes big bet on US lender Ally Financial

Warren Buffett’s Berkshire Hathaway made a big bet on auto and home lender Ally Financial in the second quarter while increasing its wager on iPhone maker Apple despite signs that an economic slowdown is beginning to weigh on consumers.

The investments, along with purchases of shares in video streaming service Paramount Global and oil majors Occidental Petroleum and Chevron, showed that Buffett and his investment team continued to bet on the US economy even as the Federal Reserve embarks on a string of sharp interest rate rises.

Berkshire more than tripled its position in Ally to 30mn shares worth $1bn at the end of June, according to a US securities filing made public on Monday. That makes Buffett’s investment group one of the lenders’ largest shareholders with a 9.7 per cent stake, per data provider Refinitiv.

Berkshire built the first part of its stake in Ally in the first quarter when it bought just under 9mn shares.

Buffett has long been a significant investor in the US financial sector. The company’s stakes in Bank of America and American Express both rank among its five largest holdings. In the first quarter, Berkshire bet on Citigroup with an investment worth $2.9bn.

The shifts in Berkshire’s portfolio are closely followed by investors as a gauge of where the “Sage of Omaha” sees value as well as his view on the health of the US economy.

He eschewed the financial sector during the depths of the coronavirus pandemic, dumping shares of JPMorgan Chase and Goldman Sachs as lenders started setting aside tens of billions of dollars for potential credit losses.

Shares of Ally climbed more than 3 per cent in after-hours trading on Monday, partially offsetting a 25 per cent plunge in value so far this year.

The filing also showed Berkshire had lifted its stake in Apple — the single largest investment in the company’s $328bn stock portfolio — by 3.9mn shares in the second quarter. Berkshire owns roughly 5.6 per cent of the iPhone maker.

Berkshire also purchased 2.3mn shares in Chevron, lifting the value of its stake in the oil major to more than $23bn; 9.5mn shares in Paramount; and 22.2mn shares in Occidental. Berkshire has disclosed further buying in Occidental since the quarter ended, lifting its stake in the energy company above 20 per cent.

The investments in the second quarter marked a significant slowdown for Buffett, who moved aggressively at the start of the year as stock values slid. Berkshire bought $6.2bn worth of stocks in the quarter, down from $51.1bn between January and March.

It also sold $2.3bn of shares in the second quarter, cutting its stakes in General Motors, US Bancorp and grocer Kroger, and exited its positions in Verizon and Royalty Pharma.

Earlier this month, Berkshire disclosed that it had shifted to purchasing its own shares in June, a move it often makes when its investment managers think more appealing investments — including multibillion-dollar corporate takeovers and well-priced purchases of publicly traded stocks — are not on offer.