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Strategies & Market Trends : Technical analysis for shorts & longs

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To: Johnny Canuck who wrote (62514)

2/18/2025 10:15:49 PM

From: Johnny Canuck

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Warren Buffett Sold This High-Yield Dividend Stock. Should You?
Mohit Oberoi - Barchart - Tue Feb 18, 6:30PM CST Columnist
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Berkshire Hathaway Inc_ Warren Buffett-by Kent Sievers via Shutterstock

Berkshire Hathaway’s (BRK.B) fourth-quarter 13F filing revealed that Warren Buffett continued his selling spree in the final quarter of the year. Based on the trades in Q4, the conglomerate’s cash pile looks set to have hit yet another record high after rising to $325 billion at the end of Q3.

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There were some key takeaways from Berkshire’s Q4 13F. It built a new stake in Constellation Brands (STZ) during the quarter while exiting Ulta Beauty (ULTA). The Oracle of Omaha left his Apple (AAPL) stake unchanged after selling the iPhone maker’s shares relentlessly over the previous few quarters.

Warren Buffett Sold Citi Stock in Q4Buffett trimmed the company’s stake in Bank of America (BAC) and also sold 70% of its stake in Citigroup (C) as he continued selling financials in Berkshire’s portfolio. While Buffett has been selling BAC for the last several quarters, he sold Citi shares for the first time. Citi was a relatively recent investment for Berkshire as the conglomerate first bought a stake in 2022. The purchase came amid the bank’s transformation under CEO Jane Fraser, who is trying to lower its cost base.

www.barchart.comCiti has one of the highest dividend yields among financial companies and while the yields have come down amid the rally in its shares, its current yield of 2.65% is twice what an average S&P 500 Index ($SPX) constituent pays. In this article, we’ll examine whether it would be prudent to sell Citi and follow Buffett or whether investors would be better off sticking with the stock.

Why Is Buffett Selling Stocks?It wouldn’t be fair to single out Citi, and if anything, Buffett kept the stock in Berkshire’s portfolio even as he exited other banks like JPMorgan Chase (JPM), Bank of New York Mellon (BK), U.S. Bancorp (USB), Wells Fargo (WFC), and Goldman Sachs (GS). Moreover, the selling is not limited to financials. Buffett sold the majority of his stake in Apple last year. In a previous article, I noted the various reasons behind Buffett’s stock-selling spree. These range from fears of a capital gains hike, Buffett expecting a market crash, or even leaving powder dry for his successor.

We should learn more about the reasoning behind these stock sales in Buffett’s annual letter, which will accompany the annual report that's scheduled for later this month. This will be followed by the shareholder meeting in May. Incidentally, at last year’s meeting, Buffett alluded that an expected hike in capital gains was among the reasons he was selling Apple shares.

Coming back to Citi, we can be reasonably sure that Berkshire will soon exit the company based on selling in Q4.

Bank Stocks Have Performed Well Since Trump’s ElectionWhile Buffett might have his reasons for dumping Citi shares in Q4, the stock has continued to rally in 2025 and is up around 20% in the year to date, outperforming the Financial Select Sector SPDR Fund (XLF). Notably, while President Donald Trump has accused banks including BAC and JPM of what’s known as “debanking” and alleged that they don’t serve conservatives, banking stocks have gained in his tenure.

Citi stock too has gained significantly since Trump’s election in hopes of an easier regulatory environment. The bank has faced regulatory scrutiny much more frequently than some of its peers, which has been among the factors that have weighed heavy on its share price. During Citi’s Q4 earnings call last month, CFO Mark Mason alluded to possible regulatory changes under Trump and said that the bank would determine its capital actions as the “regulatory environment evolves.”

Should You Sell Citi Stock?Citi is a play on a valuation rerating amid its turnaround. The company had a tangible book value of $89.34 at the end of 2024, which is slightly below its current price levels. However, the discount between stock price and book value has narrowed gradually over the last two years amid the rally in C shares. While Citi still trades at a discount to its banking peers, almost all of which trade well above their book value, the stock's margin of safety is much lower now than it was a few quarters ago.

www.barchart.comCiti continues to progress in its transformation and is working to improve its profits, and by extension return metrics. Management has set a return on tangible common equity target of between 10% and 11% in 2026, which while below the 11%-12% that it was previously targeting, is “a waypoint, not a destination,” per Fraser. During the Q4 earnings call, she added, “We intend to improve returns well above that level and deliver Citi’s full potential for our shareholders.”

All said, while Citi remains a relatively undervalued pick in the banking space, it won't hurt to take some profits off the table after the over 37% rally in the preceding 6 months.

On the date of publication, Mohit Oberoi had a position in: C , AAPL , BRK.B . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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