Warren Buffett's Berkshire Hathaway Inc. (BRK.B) revealed through a 13-F filing Monday that it had reduced holdings in the second quarter (Q2) of leading drugmaker names Bristol-Myers Squibb Company (BMY), AbbVie Inc. (ABBV), and Merck & Co., Inc. (MRK).

The Omaha-based company also trimmed its positions in industrial conglomerate General Motors Company (GM) and energy bellwether Chevron Corporation (CVX) while slightly increasing its holding in supermarket giant The Kroger Co. (KR).

Key Takeaways

  • Berkshire Hathaway decreased stakes in Bristol-Myers, AbbVie, and Merck.
  • Improving performances in the company's insurance, railroad, energy, and manufacturing businesses helped grow earnings 21.3% from the June 2020 quarter.
  • Look for entry points in Berkshire Hathaway stock around $280, where the price should find support from a multi-month uptrend line connecting the October and July swing lows.

Berkshire offloaded a portion of the drugmaker stocks it purchased through the height of the pandemic in 2020. According to the SEC filing, Berkshire sold 4.7 million shares of Bristol-Myers, taking its stake in the company to 26.3 million shares, or $1.8 billion. Meanwhile, it reduced its AbbVie holding by 2.4 million shares to 20.5 million and significantly reduced its Merck position by 8.7 million shares, leaving a balance of 9.2 million.

The company purchased an additional 10.7 million shares of Kroger during the quarter, taking its total holding size to 61.8 million, while reducing its stake in General Motors to 60 million shares, now with a market value of $3.2 billion. Although Berkshire trimmed its Chevron balance by about 600,000 shares, the company still has a sizeable 23.1 million share stake in the energy giant.

Other small adjustments to Berkshire's holdings during the period included clearing its small position of 643,000 Biogen Inc. (BIIB) shares and accumulating roughly 300,000 units of British multinational professional services firm Aon plc (AON), taking its holding to 4.4 million shares.

Accumulating shares refers to increasing the position size of an asset that is built up over multiple transactions.

Earlier this month, Berkshire topped Wall Street's Q2 earnings projections, reporting operating earnings of $6.7 billion on revenues of $69.1 billion. The bottom line grew 21.3% compared to the corresponding quarter last year, driven by improving performances in the conglomerate's insurance, railroad, energy, and manufacturing businesses.

Through Tuesday's close, Berkshire Hathaway stock has a market capitalization of $654.28 billion and is trading nearly 25% higher on the year. Valuation-wise, the company currently trades at 26.6 times forward earnings, roughly in line with its five-year average earnings multiple of 25.6 times.

From a technical perspective, Berkshire's share price trended steadily higher between October and May but has remained mostly range bound over the summer months. More recently, the shares have crossed back above the 50-day simple moving average (SMA), trading within earshot of their all-time high at $295.08 set on May 10. Those looking to buy the stock should look for an entry point around $280, where the price is likely to find support from a multi-month uptrend line connecting the October and July swing lows.

Chart depicting the share price of Berkshire Hathaway Inc. (BRK.B).

TradingView.com

Support, or a support level, refers to the price level that an asset does not fall below for period of time. An asset's support level is created by buyers entering the market whenever the asset dips to a lower price.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.