Warren Buffett once said his favorite holding period is forever.
But that doesn’t mean he’s not going to sell any of the stocks in his portfolio.
In fact, every quarter, Buffett’s holding company Berkshire Hathaway would make adjustments to its portfolio.
For instance, while Berkshire’s latest SEC filings suggest it has made new purchases, it also reduced its positions in quite a few companies.
It might feel tempting to sell in today’s market environment. The S&P 500 has fallen 17% year to date.
But remember, Buffett also famously said to be “fearful when others are greedy and greedy when others are fearful.”
Ultimately, no one is right 100% of the time. For average investors looking for high-quality companies, you might even find an opportunity in some of the stocks that Berkshire recently sold — Wall Street also sees upside in these names.
U.S. Bancorp (NYSE:USB)
As the parent company of U.S. Bank, U.S. Bancorp is one of the largest banking institutions in the country.
As of Oct. 31, Berkshire owned 52,547,023 shares of U.S. Bancorp, or 3.5% of the bank’s total shares outstanding.
While that’s still a sizable stake in a large financial institution, it’s down 56% from the 119,805,135 shares of U.S. Bancorp that Berkshire held at the end of June.
U.S. Bancorp hasn’t been a hot commodity as the stock has tumbled 23% year to date.
But interest rates are on the rise, and that could serve as a tailwind for banks.
Banks lend money out at higher interest rates than they borrow, pocketing the difference. As interest rates increase, the spread earned by banks widens.
JPMorgan analyst Vivek Juneja sees upside in U.S. Bancorp. The analyst has an ‘overweight rating’ on the bank and recently raised the price target to $47 — around 7% above the current levels.
Bank of New York Mellon (NYSE:BK)
Bank of New York Mellon came into existence from the merger of The Bank of New York and Mellon Financial in 2007.
Today, it stands as the world’s largest custodian bank, which safeguards clients’ financial assets.
In Q3, Berkshire sold 10,146,575 shares of BNY Mellon, representing a 14% reduction. However, Buffett’s company still owned 62,210,878 shares of the custodian bank at the end of September, amounting to a 7.7% stake.
Just like U.S. Bancorp, BNY Mellon hasn’t been a market darling — shares are also down 23% in 2022.
But not everyone is turning bearish. Citigroup analyst Keith Horowitz has a ‘buy’ rating on BNY Mellon and raised the price target from $46 to $50 after seeing the company’s Q3 results.
Considering that BNY Mellon shares currently trade at around $44.90, the new price target implies a potential upside of 11%.
Berkshire also trimmed its stake in grocery giant Kroger in Q3, selling 2,168,472 shares.
However, in an era where physical stores are under serious threat from online merchants, Kroger remains a brick-and-mortar beast.
Shares of the supermarket chain are up 8% in 2022, in stark contrast to the S&P 500 Index’s double-digit loss.
The economy moves in cycles, but people always need to shop for food. As a result, Kroger can make money through our economy’s ups and downs.
The company has expanded its online presence, too. Kroger’s digital sales in 2021 clocked in 113% higher compared to two years ago.
You can see Kroger’s resilience in its dividend history: the company has increased its payout to shareholders for 16 consecutive years.
Evercore ISI analyst Michael Montani recently upgraded Kroger from ‘in line’ to ‘outperform’ with a price target of $56 — implying a potential upside of 15% from where the stock sits today.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.