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Home / Business / Warren Buffett reveals new investments, Cisco drops in Q4

Warren Buffett reveals new investments, Cisco drops in Q4



It was certainly a day to forget for stock market participants, when the S&P 500 took one of the worst hammerings in recent memory.

The bears are still itching during trading hours after the market, with some companies being hit with notable declines – although tonight's news is not bad for all stocks.

  Warren Buffett.
Warren Buffett.

Image Source: The Motley Fool.

Buffett trades and buys Amazon

Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) Warren Buffett's vehicle, revealed the latest moves in its listed stock portfolio. The regular quarterly regulatory disclosure describing such features was filed after the market closed today.

This filing reveals that the legendary investor company uploaded shares in Amazon.com (NASDAQ: AMZN) . Berkshire's Amazon stake amounted to 537,300 shares at the end of calendar Q2. This represents an increase of 11% compared to the figure stated in the previous quarterly disclosure.

Amazon is a relatively new stock for Berkshire – it revealed that it opened a position in it in May. Amazon as an investment represents a departure for the once famous tech-averse Buffett, though he has publicly expressed admiration for the company several times in the past.

However, Berkshire, as always heavily weighted in the financial sector, is a classic Buffett favorite. According to the latest portfolio coverage, Berkshire increased its already substantial Bank of America stake by 3.5%, while its position in US Bancorp was raised 2.4% higher.

As with Amazon, Bank of America has not been a decade long team for Berkshire. This began as more of an opportunistic commitment when Buffett agreed in 2011 to invest $ 5 billion of Berkshire's capital in return for a pile of preferred stock and warrants. After exercising these subscription rights in 2017, the value of that Bank of America share had grown to about $ 21 billion.

Separately, Pershing Square Capital – led by one of the most prominent activist investors, Bill Ackman – revealed in a regulatory filing that it has opened a position in Berkshire. Pershing Square bought about 3.5 million shares of Berkshire's B shares for a value of approximately $ 685 million.

Both classes of Berkshire stock trade more or less flat tonight, such as Amazon and the two aforementioned banks.

Cisco Q4: Low rates, poor guidance

We cannot say the same for Cisco (NASDAQ: CSCO) stock, which almost of 8%. It's not hard to figure out why – the network equipment giant released Q4 of accounting results from 2019 after hours, and they don't make investors happy.

For the quarter, Cisco generated revenue of $ 13.43 billion and the net a non-GAAP (adjusted) profit of $ 3.6 billion ($ 0.83 per share). These figures were higher than for Q4 2018, which came to $ 12.8 billion and $ 3.3 billion ($ 0.70), respectively. This despite the fallout from China-U.S. trade war, which has had a significant impact on the company – China's revenue was down a steep 25% year over year.

Cisco's Q4 2019 headline narrowly beat average analyst estimates. Overall, forecasters following the stock expected $ 13.38 billion on the top line, with adjusted net income per share of $ 0.82.

The little beats are probably not what drives the stock sales tonight. This is more likely attributable to Cisco's Q1 Guidelines for Fiscal 2020. The company estimates that turnover will be flat at 2% higher on an annual basis, while adjusted earnings per share should be $ 0.80 to $ 0.82. Both areas are slightly below the average of analysts' estimates of 2.5% revenue growth and $ 0.83 for earnings per share.

It looks like Cisco is being penalized for failing to hit an overestimate, and comes under slightly for the current quarter, or maybe both. This feels unwarranted, as the company is still able to grow despite the size and major challenges of the most important China market right now. And unusual for a tech stock, Cisco regularly pays a decent size.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fools board. Eric Volkman has no position in any of the shares listed. The Motley Fool owns shares in and recommends Amazon and Berkshire Hathaway (B shares). Motley Fool has the following options: short January 2021 $ 200 infringes Berkshire Hathaway (B shares) and long January 2021 $ 200 calls Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

This article was originally published on Fool.com


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