Berkshire Hathaway revealed a $55 million stake in Macy’s after Buffett’s hint.
Similar to Warren Buffett's value investing philosophy, Berkshire Hathaway, owned by Macy's Inc. It showed a new $55 million position in its latest quarterly filing. The stake, representing about 3 million shares, was disclosed in Berkshire's 13F filing for the first quarter.
Macy's stock jumped 5.9% in after-hours trading once the announcement was made.
Berkshire bought it right
For Berkshire Hathaway, the $55 million position represents 0.02 percent of its total equity portfolio, which is more than $300 billion.
The roughly 3 million shares give Berkshire a modest position in the retail giant with nothing close to a controlling interest.
Why Macy's and why now
Macy's has been on a restructuring campaign aimed at cutting costs, closing underperforming locations and extracting more value from its real estate portfolio.
Macy's owns or holds long-term leases on prime commercial real estate in major U.S. cities. The flagship Herald Square location in Manhattan sits just atop the most expensive junkyard in the world.
Berkshire's entry suggests that someone at the conglomerate ran the numbers and decided that the market undervalued what Macy's owned. At Berkshire's scale, positions of less than a few hundred million are often managed by a lieutenant — Ted Weschler or Todd Combs — rather than Buffett's boss.
The result of the buffet signal
An after-hours bounce of nearly 6% in Macy's stock followed the 13F filing. Berkshire has taken losses in airline stocks during the pandemic and has occasionally cut positions at inopportune times.
What does this mean for investors?
The 13F filing reflects positions at the end of Q1, which means weeks have passed since the shares were purchased. The after-hours price jump means anyone buying now is paying a premium over what Berkshire paid.
The $55 million position that goes to zero can be recorded on Berkshire's income statement. For the individual investor who focuses a meaningful percentage of their portfolio on stocks, the calculus is completely different.
Macy's competes not only with e-commerce giants, but also with off-price retailers like TJX Companies and Ross Stores. What's worth watching is whether Berkshire will increase its position in the coming quarters, as its next 13F filing will show whether the stake will grow, be flat or decline.
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