The FDA will decide on Merck’s COVID-19 pill soon, but Buffett won’t be waiting for the news.
In Q3, Berkshire sold 9.16 million shares of the multinational pharmaceutical company, exiting its position entirely.
But the sale shouldn’t come as a complete surprise. Berkshire already unloaded millions of Merck shares in Q1 and Q2.
Buffett’s company also sold 6.13 million shares of drug giant AbbVie and 4.25 million shares of Bristol-Myers Squibb in Q3.
The COVID-19 pandemic gave investors a new reason to check out big pharmaceutical companies, but that doesn’t mean every stock in the segment has outperformed.
Year to date, AbbVie is up about 10%, Merck has gained roughly 2%, and Bristol-Myers is actually down 8%. Meanwhile, the S&P 500 is up nearly 25% in 2021.
But what really makes these drugmakers stand out? Dividends.
Each of the companies mentioned above currently provides an annual dividend yield of above 3%, much higher than the S&P 500’s 1.3%.
Financial stocks have had a solid bull run over the past year. And Buffett is cashing some chips in.
In Q3, Berkshire sold 276,108 shares of Mastercard, lowering its stake in the credit card giant by roughly 6%. It also cut its position in Visa by 4%.
Buffett also sold 2.47 million shares of U.S. Bancorp, the fifth-largest bank in the country. But it was just a 2% reduction in Berkshire’s stake.
Buffett isn’t exactly turning bearish on financials.
After all, Berkshire continues to hold more than one billion shares of Bank of America, a position with a current market value of roughly $45 billion. Berkshire also still owns approximately 151.6 million shares of American Express.
At the end of Q3, Bank of America and American Express were Berkshire’s second- and third-largest holdings, respectively.
These established financial firms pay regular quarterly dividends, which can be great for retail investors looking for passive income. And financials tend to do well in rising interest rate environments, making them a particularly timely opportunity.
These days, you can build your own blue-chip stock portfolio just by using some digital nickels and dimes.
Make passive income your priority
Even if you’re not bullish on these dividend-paying stocks, generating regular income should be a top priority for risk-averse investors.
And you don’t have to limit yourself to the stock market to do that.
For instance, some popular investing services let you lock in a steady rental income stream by investing in premium commercial real estate properties — from R&D campuses in San Jose to industrial e-commerce warehouses in Baltimore.
You’ll gain exposure to high-end properties that big-time real estate moguls usually have access to.
And the best part? You'll receive regular passive income in the form of cash distributions without any headaches or hassles.
Fine art as an investment
Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.
That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.
Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.