Berkshire Hathaway is still on a buying spree and announced a few new purchases such as Citigroup, Paramount, Chevron, Activision Blizzard, Ally Financial, Celanese, Markel and McKesson.
It also sold Verizon, AbbVie, Bristol-Myers Squibb and Wells Fargo.
Berkshire has deployed a third of its cash pile within 3 months – holding $106.3 billion of cash and equivalents at the end of Mar 2022, down from $146.7 billion in the last quarter.
Berkshire has always been a fan of bank stocks as they sit in the centre of capitalism. It used to hold JPMorgan Chase and Goldman Sachs but has since exited the positions.
Now it is completely out of Wells Fargo after having invested in it for the past 33 years. Buffett was disenchanted from the saga in 2016 where the bank falsely open accounts in customers’ names without permission.
Buffett remarked, “there’s never just one cockroach in the kitchen.”
Berkshire still holds Bank of America, US Bancorp and BNY Mellon in its portfolio. The latest bank stock addition being Citigroup, a position estimated to be 0.8% of its portfolio or 1.3% of Citigroup share base.
If you like US Bank stocks too, check out our pick of the Best US Bank Stocks to buy
Why Citigroup is the most undervalued big US bank
The top 5 largest banks in the US by assets are
- JPMorgan Chase
- Bank of America
- Citigroup
- Wells Fargo
- Goldman Sachs
Let’s compare the price multiples among these banks.
In terms of PB:
- Citigroup 0.6x
- Goldman Sachs 1.0x
- Wells Fargo 1.0x
- Bank of America 1.2x
- JPMorgan 1.4x
In terms of PE:
- Goldman Sachs 5.6x
- Citigroup 5.8x
- Wells Fargo 8.5x
- JPMorgan 8.9x
- Bank of America 9.8x
In terms of dividend yield:
- Citigroup 4.0%
- JPMorgan 3.3%
- Goldman Sachs 2.6%
- Bank of America 2.3%
- Wells Fargo 2.3%
Citigroup stood out as the cheapest among the biggest US banks with the lowest PB ratio and the highest dividend yield. But Berkshire doesn’t buy just because a stock is cheap. It looks out for quality too. Citigroup was in the news for exiting 7 of its 13 consumer markets.
- Taiwan to DBS
- Malaysia, Thailand, Indonesia and Vietnam to UOB
- Australia to National Australia Bank
- Philippines to UnionBank
It will focus on wealth hubs in Singapore, Hong Kong, London and the UAE.Maybe Berkshire saw a turnaround coming and Citi would improve its business fundamentals in time to come. Moreover the price is attractive now.
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