Berkshire's newly purchased "mystery stock" will be revealed on Thursday

It's that time again on Wall Street for "guessing games"—the latest investment target of the "Oracle of Omaha," Warren Buffett, is about to be revealed.

August 14 (this Thursday) is the deadline for Berkshire Hathaway to submit its U.S. stock holdings report (13-F filing) to the Securities and Exchange Commission (SEC) as of June 30. This document is expected to unveil new investment targets that the company has kept confidential over the past few quarters.

According to the latest report from Barron's, based on clues from the company's Q1 and Q2 financial reports, this mysterious investment is likely to be an industrial company, with a total holding size potentially nearing $5 billion. Thursday marks the 45-day deadline for Berkshire to submit the 13-F form, and the company typically waits until the last day to file.

In addition to this mysterious investment, the market is also focused on whether Berkshire continued to reduce its stake in Bank of America during the second quarter. According to clues from its quarterly report (10-Q), Berkshire was a net seller of stocks overall during the quarter.

Highly Likely an Industrial Company

Speculation about this mysterious investment mainly stems from Berkshire's disclosed quarterly financial reports. The company did not detail smaller-scale investments outside of its major holdings like Apple, American Express, Coca-Cola, Chevron, and Bank of America in its 10-Q report, but instead categorized its nearly $300 billion in equity investments into three broad categories: financials, consumer goods, and "commercial, industrial, and others."

According to Barron's analysis, the clues are hidden within the "commercial, industrial, and others" category. In the first quarter of this year, the cost basis for investments in this category increased by nearly $2 billion, but no corresponding large industrial stock purchases appeared in the 13-F filing disclosed in May.

In the second quarter's 10-Q report, the cost basis for this category increased again by $2.8 billion. Combining the data from both quarters, the cumulative purchase amount for this mysterious investment could be as high as $4.8 billion, leading the market to widely speculate that the target is a large industrial company.

Confidentiality Tradition and Market Effect

For Berkshire, applying for confidentiality of holding information during the accumulation period is a common strategy. CEO Warren Buffett typically requests confidentiality from the SEC when he continues to buy a particular stock for more than a quarter.

The core purpose of this move is to prevent the premature exposure of investment strategies. Due to Berkshire's significant influence in the market, once its accumulation behavior is made public, it often attracts a large amount of follow-on buying, which can quickly drive up the target company's stock price and increase Berkshire's own accumulation costs.

Historical cases have confirmed the effectiveness of this strategy. Berkshire's most recent mysterious holding was in the insurance company Chubb, with an investment valued at about $7 billion that remained confidential during the accumulation period from late 2023 to early 2024, only being officially disclosed in May 2024. Similarly, when the company bought shares of Chevron and Verizon from late 2020 to early 2021, it also applied for confidentiality

Bank of America Reductions May Continue

Another focus of the market is the changes in Bank of America's holdings. From July 2024 to the first quarter of this year, Berkshire Hathaway has reduced its stake in Bank of America by nearly 40%, to 631 million shares.

According to estimates, the details of realized equity gains disclosed in the second quarter 10-Q report suggest that Berkshire may have further sold approximately $4 billion worth of Bank of America stock during the quarter. This series of reductions reflects Berkshire's ongoing strategic adjustments to its financial stock holdings in the current market environment.

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk