The Smart Money is Making Big Changes

Every quarter, Wall Street's biggest names, Warren Buffett, Seth Klarman, Bill Ackman, Monish Parai, Michael Burry, and so on, quietly file one document that gives us a rare glimpse inside their portfolios. And just last week, we got the latest installment. So, in this video, we're diving into the brand new 13F filings for Q1 of 2025. And as per usual, there are some seriously eyebrow-raising moves being made by the smart money right now. So, with that said, here are the five most notable stories coming out of this quarter's 13F filings that you need to know about. And the first comes from the GOAT himself, Mr. Warren Buffett. While the main story of the quarter was how Buffett continued to struggle finding opportunities, growing his cash pile even further to $350 billion, there was a notable cell at the top of his portfolio, and that was in Bank of America. And this is quite significant. Bank of America has been one of Buffett's crown jewels ever since the aftermath of the GFC. To him, it's not just a holding, it's been a high conviction bet for well over a decade. As you can see, Bank of America has been Buffett's second largest holding since 2018. But over the past three quarters, he has been selling, and the company has now fallen to Berkshire's fourth largest position, occupying just 10% of the portfolio. So, why the sell? Well, there are a few possible explanations, with the primary one being that he is simply de-risking. He's already exited names like Goldman Sachs and Wells Fargo in recent years. And even this quarter, he was caught selling out of Citigroup and reducing his stake in Capital One. So, given the current macro backdrop, higher interest rates, tightening credit conditions, and growing concerns about commercial real estate, Buffett might just be taking a more cautious stance on the financial sector more broadly. While banks often benefit from higher interest rates at first, that advantage can fade reasonably quickly as borrowing costs rise, fewer people and businesses take out loans, that slows loan growth, and it hurts revenue. And then at the same time, the risk of defaults increases, especially among more vulnerable borrowers, forcing banks to set aside more for potential losses. So, there are two reasons, and then the biggest red flag right now is arguably commercial real estate. So, office buildings are still struggling with low occupancy, and many are refinancing at much higher rates, a recipe for defaults that could hit bank balance sheets hard. So, it's not surprising that Buffett, ever the risk-conscious investor, is starting to step back. Add to that the fact that Bank of America shares had risen an eye-popping 88% from their late 2023 lows through early Q1. At the same time, the business itself was reporting only modest earnings growth. And you can see the logic. Buffett has always said he likes to buy when others are greedy, and this may just be one of those moments. Okay, and that takes us into the second big news story of the quarter, and that is that Li Lu, the Chinese investor famously close with Charlie Munger, is also selling Bank of America. Li Lu is a very talented investor running Himalaya Capital, and not to flex too hard, but here I am with him a few years back. Yeah, he did answer a phone call during my photo op. But anyway, Bank of America is actually Li Lu's biggest position, and has been a major part of his portfolio since Q1 of 2020. So, the fact that he is now trimming, you know, it's pretty significant. In fact, his sell-off was slightly more aggressive than Buffett's. He cut about 29% of the Bank of America position this quarter. But that wasn't the only eyebrow-raiser in the latest 13F. Perhaps even more surprising was Li Lu's decision to cut his stake in Google by 19.47%, specifically the Class C shares. Now, that's interesting because while Bank of America is a cyclical financial stock sensitive to macro conditions, Google is a wide moat tech powerhouse, arguably one of the most durable compounders in the whole world. And Li Lu isn't known for making short-term bets. He's a Buffett-style investor through and through, focused on high-quality businesses he can hold for decades. So, why the reduction? Well, there's no way to know for sure, but there are a few possibilities. One is simply portfolio concentration. As Google's stock surged over the past year, it may have grown too large a slice of the pie, prompting a bit of a rebalance. It's also worth noting that he holds Google A shares as well. And after the reduction in the C shares, both positions are now back to 17% of the portfolio each. So, it could very well be a rebalancing situation. But another potential reason is that Li Lu, like Buffett, and his Apple reduction may be seeing warning signs around competition in the tech sector, particularly for Google competition around large language models like OpenAI's ChatGPT. Now, although it may be several years away, many investors are already considering that AI models could very well disrupt the status quo in internet search, which in a worst-case scenario could erode Google's moat and threaten the longer-term future of the business. So, that's certainly one possibility that could be going through Li Lu's mind. Or, let's not forget, this also could simply be him making an opportunistic trim after a big run-up in the share price. You know, Google has climbed around 90% since its lows in late 2022, and that gain was as high as 137% during Q1. So, for a disciplined value investor, that might have been his chance to lock in some gains. Whatever the reason, when someone as patient and as deliberate as Li Lu starts reducing exposure to names like Google, it is certainly worth watching closely, especially because not everyone is following suit. And that brings us to our third big move of the quarter. Seth Klarman is adding to his Google position. Seth Klarman runs the BaoPost group and is one of the few people that Warren Buffett has said that he'd feel comfortable trusting money with. So, very, very high praise. And Seth has a long history with Google stock. It's been in his portfolio since Q1 2020, but since 2023, it's been right up there at the top as one of the dominant stocks in his portfolio. And well, in Q1, Seth certainly doubled down, adding 45% to the position, making this a $324 million position, occupying the number two spot in his portfolio at 9.33%. So, that's not a small add, that's a bet. So, while some investors are trimming and de-risking after a strong run-up in tech, Klarman is definitely leaning in. And if I had to make a bet on this one too, I think I'd probably side more with Klarman. I mean, Google's moat is truly enormous, and their ad business is certainly not showing any signs of slowing down. Their revenue and net income charts are just consistently up and to the right, and they're investing heavily in AI to ensure that they can keep up with competitive threats. I think if they just weren't showing any inclination of incorporating AI into search, then sure, I would be worried, but that's just not the case. So, I do think they'll keep posting solid performance as they have done year after year, and clearly, so does Seth. And that's the other thing about Google. We've been talking for a long time about how overpriced big tech is at the moment, but right now, because the stock has come down across Q1, Google currently sits with a PE ratio of 19, which isn't too crazy considering it's an absolute financial fortress. So, Seth most certainly doubled down in that quarter, and that leads us to our fourth big news story of 13Fs. This is a biggie. Bill Ackman making a sizable investment in Uber. Now, let me tell you, this was a big deal, not just because of the dollar amount, but because it's a brand new position for Pershing Square. And not just any new position, this one shot straight to the top of the portfolio, instantly becoming Ackman's largest holding, making up roughly 18.5% of his US stock portfolio. And I find this move is particularly interesting because he tends to run a highly concentrated portfolio, often sticking with just a handful of high conviction bets. So, when he commits to a new name, especially one like Uber, which hasn't exactly had a smooth ride since going public, it signals real belief in the long-term thesis. On the 8th of February, Bill took to Twitter to say, quote, beginning in early January, we began acquiring a position in Uber. I've been a long-term customer and admirer of Uber, beginning when Edward Norton showed me the app in its early days. I was also fortunate to be a day one investor in the company through a small investment in a venture fund. While a great business, Uber has suffered from erratic management. Since he joined the company in 2017, Dara Khosrowshahi, CEO, has done a superb job in transforming the company into a highly profitable and cash generative growth machine. We believe that Uber is one of the best managed and highest quality businesses in the world. Remarkably, it can still be purchased at a massive discount to intrinsic value. This favorable combination of attributes is extremely rare, particularly for a large cap company. Now, that is certainly a glowing review. And it's true, when looking at the numbers, the CEO has turned Uber into a business that finally generates cash as opposed to eating it. Now, I'm not very knowledgeable on Uber, so I don't really have any comment around the valuation side, but it's certainly clear that at a current PE of 16, Bill is interested in the long-term growth prospects. Over the last five years, they have grown revenue at 28% per year and net income has shifted from negative $8.5 billion to now plus $9.8 billion as of their most recent annual report. So, Bill definitely assuming this growth will continue. And it's worth noting, he already would have done pretty well on this position as Uber has been on an absolute tear in recent months. In fact, from early January, which is when Bill said he started buying, up until today, the stock is up about 40%. So, already a really solid call from Bill Ackman. But with that said, that leads us to one of the most newsworthy stories from this quarter's 13Fs, and that is the man himself, Dr. Michael Burry, selling practically his entire portfolio. And not just selling, but actually turning around and betting against many of the same stocks he held just three months earlier by opening put option positions. Now, I have made a full video on this already, so I'm not going to talk too much in depth about it here. If you want to watch that video, it will be coming up on screen for most right now. But the short of it is that at the end of last year, Burry had around $77 million invested across 13 holdings, many of them high conviction Chinese tech names like Alibaba, JD, Baidu, and Pinduoduo. But this quarter, his portfolio shrunk to just $13 million with only one stock left, Estee Lauder. Everything else was gone. But even more surprising, he didn't just exit, he actively bet against many of those same Chinese tech stocks using put options, as well as betting against high flyers like Nvidia and Trip.com. So, what changed? Well, Burry's dramatic pivot seems to line up pretty perfectly with Trump's trade war with China. I think for Burry, these stocks went from recovery plays to geopolitical footballs, and Burry basically decided that the risk just simply wasn't worth it. Now, whether he still holds these positions, I should note, is anyone's guess. He's known to be a fast mover and act a bit more like a short-term trader, but it was a massive shift in his 13F filing nonetheless. And with that said, they are the 13F filings this time around. One more thing, if you saw recently, I actually got to interview my investing mentor, Phil Town. But in that video, I announced that myself and Phil will be holding a live three-day investing workshop later in the year in Atlanta, Georgia. It's going to be September 12th to 14th, and the best bit, it's going to be free entry. All you have to do is get yourself there. It will still be ticketed because we're maxed out at 300 people. So, please, if you do want to go on the wait list, please check out the link in the description below and sign up. I will be emailing that list first before anyone else. So, if you're interested, if you want to lock yourself in, please check out that link. But with that said, thanks very much for watching, guys. Please like the video if you enjoyed it. I'll see you guys in the next one.