A market-beating investor sold Apple shares to buy Berkshire Hathaway.
A better-than-the-market registered investment advisor has made a change to their portfolio that is paying off so far.
HM Payson sold positions in
(ticker: AAPL), and used the product to buy more class B
) in the first trimester. The RIA disclosed the stock transactions in a form he filed with the Securities and Exchange Commission.
Apple and Berkshire Hathaway both beat the
S&P 500 Index
so far in the second quarter, but the advantage belongs to Berkshire Hathaway. Apple stock is up 6.8% from April to June, while Berkshire Hathaway stock is up 7.3%; the index gained 4.9% during this period. Warren Buffett’s company also overtook Apple in the first quarter, with Berkshire Hathaway shares rising 10.2%, compared to an 8% drop in Apple shares; the S&P 500 rose 5.8% this quarter.
The only mutual fund managed by HM Payson,
Payson Total Return Fund
(PBFDX), is impressive performance. For the one, three and five year periods ended March 31, the fund recorded average annual total returns of 61.37%, 18.76% and 17.81%, compared to the respective S&P 500 returns of 56 , 35%, 16.78% and 16.29%.
Peter E. Robbins, CEO and CIO of HM Payson, notes that the Portland, Maine company has $ 5.8 billion in assets under management. The trust assets for which he acts as a trustee or co-trustee are approximately $ 1.6 billion, and approximately $ 1.2 billion are institutional and municipal relationships.
“We believe we are the oldest financial firm in the United States still operating under its original structure, founded in 1854,” Robbins wrote in an email to Barron’s. HM Payson sold 295,987 Apple shares in the first quarter to the end of March with 1.6 million shares of the iPhone maker.
“In fact, around August of last year, we assumed that Apple,
(AMZN), and others had become expensive relative to their sales and earnings per share. We thought it was a good time to come up with better ideas with reasonable multiples but above average margins, ”Robbins wrote. “It was difficult to part with our Apple in which we had a significant positive equity stake since we bought it at around 13 times profit and sold it around 28 times.”
Apple just wrapped up a developer conference earlier this month, and CEO Tim Cook recently spoke up to champion the company’s app review process.
HM Payson bought 44,284 Class B Berkshire Hathaway shares, bringing its investment to 250,387 shares at the end of March.
Robbins wrote that the purchase of Berkshire Hathaway shares was the “primary use” of the proceeds from the sale of Apple shares. He also provided a rationale for purchasing shares in Buffett’s investment firm after a long period of underperformance.
“By marking BRK’s assets – investment portfolio, business portfolio (See’s Candy, Fruit of the Loom, etc.), railroad and utilities – BRK is worth $ 358 per share, or over 40% of up from where we started to increase position size.
“The entry point was created by A) the overhang of BRK’s lack of aggressive action near market lows last March and April to buy individual stocks and / or own stocks, coupled with B) l BRK’s direct exposure to the COVID recession through its investment portfolio, business portfolio and railroad.
“Well aware of the fact that cheap stocks can stay cheap for an uncomfortably long period of time, once the economic recovery emerged last November following the crisis.
(PFE) vaccine announcement on November 9, we became more comfortable underwriting a potential increase in BRK’s fundamental business momentum. Additionally, the stock’s relative strength versus the S&P 500 began to increase after a prolonged period of underperformance.
“Adding it all up – cheap valuation, forward-looking improvement in fundamental business momentum and increasing relative strength – we thought the weight of evidence supported an inordinate ‘active’ weighting of the stock. “
Barron noted in December that it was time to buy shares in Berkshire Hathaway. In fact, until Friday’s close, Berkshire Hathaway stock is up 18.2% while Apple stock is down 1.7% year-to-date. The rise of the S&P 500 so far this year is 10.9%.
Inside Scoop is a regular feature of Barron that covers the stock trading of corporate executives and board members (called insiders), as well as big shareholders, politicians, and other prominent people. Due to their insider status, these investors are required to disclose stock transactions to the Securities and Exchange Commission or other regulatory bodies.
Write to Ed Lin at firstname.lastname@example.org and follow @BarronsEdLin