Warren Buffett Could Be Dead Wrong About His Recent Stock Sales

Drugmakers

Just last week, the FDA approved Merck's antiviral COVID-19 pill for at-home use. But Berkshire wasn't around to benefit from the good news.

In Q3, Buffett sold 9.16 million shares of the multinational pharmaceutical company, exiting his position entirely.

But the sale shouldn’t come as a complete surprise. Berkshire already unloaded millions of Merck shares in Q1 and Q2.

Buffett’s company also sold 6.13 million shares of drug giant AbbVie and 4.25 million shares of Bristol-Myers Squibb in Q3.

The COVID-19 pandemic gave investors a new reason to check out big pharmaceutical companies, but that doesn’t mean every stock in the segment has outperformed.

Over 2021, AbbVie rose about 30%, Merck was flat, and Bristol-Myers was up slightly. Meanwhile, the S&P 500 rose nearly 30% in 2021.

But what really makes these drugmakers stand out? Dividends.

Each of the companies mentioned above currently provides an annual dividend yield of above 3.4%, much higher than the S&P 500’s 1.2%.

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Financials

Financial stocks have had a solid bull run over the past year. And Buffett is cashing some chips in.

In Q3, Berkshire sold 276,108 shares of Mastercard, lowering its stake in the credit card giant by roughly 6%. It also cut its position in Visa by 4%.

Buffett also sold 2.47 million shares of U.S. Bancorp, the fifth-largest bank in the country. But it was just a 2% reduction in Berkshire’s stake.

Buffett isn’t exactly turning bearish on financials.

After all, Berkshire continues to hold more than one billion shares of Bank of America, a position with a current market value of roughly US$45 billion. Berkshire also still owns approximately 151.6 million shares of American Express.

At the end of Q3, Bank of America and American Express were Berkshire’s second- and third-largest holdings, respectively.

These established financial firms pay regular quarterly dividends, which can be great for retail investors looking for passive income. And financials tend to do well in rising interest rate environments, making them a particularly timely opportunity.

These days, you can build your own blue-chip stock portfolio just by using some of your spare change.

Steady income beyond stocks

Even if you’re not bullish on these dividend-paying stocks, generating regular income should be a top priority for risk-averse investors.

And you don’t have to limit yourself to the stock market to do that.

If you want to invest in something insulated from stock market swings, take a look at a market that has moved very differently form stocks: fine art.

Traditionally, investing in sectors like art or or multifamily apartment buildings have only been options for the ultrarich. But with the help of a new app, you can buy fractions of multi-family residential or commercial properties.

You can even use a fractional investing platform to buy fractions of pricey shares like Apple, meaning that even if you only have a little cash to spare, you can still share in the profits to be made in pricey assets.