Berkshire Hathaway Bets Big on Pharmaceutical Stocks in Q3

UTC by Godfrey Benjamin · 3 min read
Berkshire Hathaway Bets Big on Pharmaceutical Stocks in Q3
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Moreover, through Berkshire Hathaway Warren Buffett has made a number of other investments in several industries this year besides the pharmaceutical stocks.

Warren Buffett-owned Berkshire Hathaway Inc (NYSE: BRK.A) made huge bets up to $5.7 billion on some key pharmaceutical industry stocks in Q3 amid a general downturn in the healthcare sector stirred by the coronavirus pandemic. According to a Reuters report, the investment was made on AbbVie Inc (NYSE: ABBV), Bristol-Myers Squibb Co (NYSE: BMY), Merck & Co. Inc (NYSE: MRK), and Pfizer Inc (NYSE: PFE)

Per the Reuters report, the investment made by the Warren Buffett-led company in these stocks may serve as a boost for these large stock companies as it is believed that the “Sage of Omaha,” as Buffett is fondly called makes his due diligence before investing in any stock.

“It’s a recognition of, ‘Hey, there’s some value there,’” said Walter Todd, chief investment officer at Greenwood Capital, whose funds hold shares of Pfizer, and Merck amongst others.

The shares of Berkshire Hathaway were up 0.0017% to $349,546.00 at the time of writing while the shares of AbbVie surg4ed by 0.86% to $99.21. The shares of Merck closed 1.71% on Tuesday while Pfizer is correcting yesterday’s 3.53% closing loss with a 0.44% surge in the pre-market.

While these temporary gains are applaudable, the pharmaceutical stocks have generally underperformed in 2020 with Pfizer and Merck for instance losing 3% and 10% of their values this year respectively.

“Big pharma names have underperformed, and look cheap relative to historical valuations and the market overall,” said Jim Shanahan, an Edward Jones analyst who covers Berkshire. “These are large, dominant companies in an industry that has demonstrated strong, long-term growth.”

The issue of legislation has also been cited as one of the major drawbacks in the pharmaceutical sector as the industry continues to show concern based on lawmaker’s address of expensive drug prices.

With Berkshire Hathaway’s bet on the pharmaceutical stocks, the possibility to complement the recorded growth of 0.6% on the S&P 500 – Pharmaceuticals (Industry) (INDEXSP: SP500-352020) in 2020 is now higher.

Other Investment Portfolio of Berkshire Hathaway in Q3

Warren Buffett through Berkshire Hathaway has made a number of investments in several industries this year besides the pharmaceutical stocks. One of the industries the veteran placed its bet on was in airline stocks and with the impacts of the coronavirus pandemic on the airline industry, the investments turned out to be a bad call for the 90-year old investor. Buffett eventually exited his stakes in the airlines’ stocks as reported by Coinspeaker stirring a further down plunge at the time.

Other bets made by the company include Apple Inc (NASDAQ: AAPL), one of its biggest holding to date, Coca-Cola Co (NYSE: KO), Mastercard Inc (NYSE: MA), and Bank of America Corp (NYSE: BAC) amongst others.

Per the numbers, The Guardian reported that Berkshire Hathaway’s investment in the four big pharma includes $136m in Pfizer (PFE), $1.8bn in Bristol-Myers-Squibb at the end of September, and about $1.9 billion in the duo of Merck and AbbVie.

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