Buffett agreed in 2008, as credit markets were drying up, to buy $5 billion worth of preferred Goldman Sachs stock that paid an annual dividend of 10 percent. He also got warrants that he later used to get more than $2 billion of the bank’s shares in a cashless transaction.
‘Preferred to Keep’
While Buffett has said his preferred time to hold a stock is “forever,” he is willing to make sales when he finds other opportunities. In the financial crisis, when Buffett won favorable terms in deals that helped prop up companies like Goldman Sachs, he also reshaped Berkshire’s stock portfolio.
“To fund these large purchases, I had to sell portions of some holdings that I would have preferred to keep,” Buffett wrote in 2009 of Johnson & Johnson shares and stakes in Procter & Gamble Co. and ConocoPhillips. “However, I have pledged to you, the rating agencies and myself to always run Berkshire with more than ample cash.”
S&P put Berkshire on CreditWatch Negative after the Precision Castparts deal was announced in August, citing “uncertainty around the funding of the acquisition and how it may affect current cash resources and leverage metrics at the holding-company level.” The ratings firm said at the time that it could resolve the examination within 90 days, then said this month that it would extend the review, possibly for another three months.
Credit Rating
Berkshire is rated AA at S&P, the third-highest of 10 investment-grade scores. Buffett said in August that he planned to use about $23 billion in cash for the Precision Castparts deal while borrowing another $10 billion. Berkshire had more than $66 billion in cash as of Sept. 30, but needs to keep a large hoard to cover unexpected costs at insurance operations.
Goldman Sachs and Wal-Mart remain among Buffett’s top holdings. His investment in the bank was worth about $2.1 billion based on Friday’s closing price, while the Wal-Mart stake was valued at more than $3 billion. Berkshire’s largest positions are in Wells Fargo & Co., Kraft Heinz and Coca-Cola Co.
Monday’s filing showed no stake in media company Viacom Inc. as of Sept. 30. That compares with about 5.6 million million shares as of June 30.