Berkshire breaks out to record high with fourth-quarter rally reaching 19%

(This is the Warren Buffett Watch newsletter, news and analysis on all things Warren Buffett and Berkshire Hathaway. You can sign up here to receive it every Friday evening in your inbox.)Even more record highs as Berkshire's Q4 rally scores 19% gainBerkshire Hathaway's red-hot shares are ending a strong week with four consecutive fresh record high closes.Since the rally began with the start of the fourth quarter on October 1, the Class A shares have closed at record highs 11 times as they soared 19.1%.The much more widely held B shares closed at new highs just 10 times but are also up 19.1% from their near-term low.Berkshire's B shares are now 7.5 percentage points ahead of the benchmark for the year so far.Financials filing points to more Bank of America salesBerkshire Hathaway is due to disclose its quarterly equity portfolio snapshot on Monday when it files its Q3 13F with the SEC.We won't know for sure until then, but numbers in the company's third quarter 10-Q, released last Saturday, indicate Berkshire continued to reduce its Bank of America stake.It would be the ninth consecutive quarter of selling.As of June 30, Berkshire reported holding 483.4 million BAC shares valued now at $24.7 billion, it's fifth largest equity position.On June 30, 2024, before the selling began, Berkshire owned just over 1 billion shares valued at $41.1 billion.Since then, the number of shares in the portfolio has decreased by 53.2%, not including any Q3 sales, while the stock price has increased by 28.3%.If there had been no reductions, the position would be worth $52.7 billion.The belief Berkshire sold more BAC shares in the third quarter is based on a $372 million reduction in the cost basis for equities categorized by the company as "banks, insurance, and finance."The 10-Q also reports $2.2 billion of pretax gains from equity sales.Barron's notes Bank of America and American Express are the only financial stocks in the portfolio that have a cost basis low enough to generate a gain like that. Amex is one of the four stocks new CEO Greg Abel indicated would be held for "decades" to come in his February letter to shareholders.In any case, Berkshire's almost 23% stake in Amex would have required it to quickly disclose any sales.FILE PHOTO: Reflections are seen in the windows of a Bank of America branch in New York.Lucas Jackson | ReutersBased on the numbers in the 10-Q, the warrants Berkshire received as part of a 2011 $5 billion investment in the bank that it used in 2017 to buy 700 million shares at $7.14 each, and BAC's average stock price in the quarter, Barron's estimates 30 to 40 million shares may have been sold.That would be roughly in line with the 30.2 million shares sold in the second quarter.The case isn't as good, but Barron's thinks Berkshire may have bought more Alphabet shares in the period. That's based on a $2.3 billion increase in the cost basis for the category that includes Google's parent.Overall, it looks like it will be a relatively quiet quarter with $2.4 billion in equity purchases and $2.8 billion in sales.In the first quarter, Berkshire bought $15.9 billion and sold $24.1 billion of equities. In the second quarter, it purchased $23.5 billion and sold $3.7 billion.All those numbers exclude the company's buybacks of its own stock.Second yen bond sale of the year offers more attractive ratesIn a term sheet filed early Friday, Berkshire Hathaway says it is selling more than 182 billion yen ($1.1 billion) worth of bonds with maturities between 2029 and 2056 and annual interest rates between 2.6% and 4.6%.Bloomberg points out the rates, compared to benchmarks, are higher than its previous sale this year.It quotes a fund manager as saying market sentiment "has become more sensitive," forcing issuers to make their offerings more attractive.In April, Berkshire sold 272 billion yen ($1.7 billion) of bonds.Berkshire uses the proceeds from the yen-denominated bonds to protect its ongoing investments in Japanese stocks from currency fluctuations.BUFFETT & BERKSHIRE AROUND THE INTERNETSome links may require a subscription:Barron's on MSN: Berkshire May Be Buying Class A Stock Directly From Holders to Boost RepurchasesBarron's on MSN: Berkshire's Geico unit struggles despite turnaround; its profitability trails ProgressiveBusiness Insider on MSN: Warren Buffett isn't running Berkshire anymore. You wouldn't know it.Money: Missed Out on a Winning Stock? Warren Buffett Admitted He Missed Amazon and Google, TooHIGHLIGHTS FROM CNBC'S BUFFETT ARCHIVEBuffett lists Ben Graham's three vital investing principles (1996)WARREN BUFFETT: On investment books, if you're asking about that, I would recommend the first two books that Phil Fisher wrote back around 1960, "Common Sense [Stocks] and Uncommon Profits" and the second one ["Paths to Wealth Through Common Stocks"]. They're very good books.You know, I obviously recommend, first and foremost, [Benjamin Graham's] "The Intelligent Investor," with chapters eight and 20 are the ones that you really should read.Two of the — well, all of the important ideas in investing, really, are in that book, because there's only about three ideas. And those — two of them are emphasized in those two chapters...One is that — to think of yourself — to think of investing as owning a business and not buying something that wiggles around in price.And the second one is your attitude, which ties in with that, the attitude toward the market, that's covered in chapter eight. And if you have the proper attitude toward market movements, it's an enormous help in securities.And the final chapter is on the margin of safety, which means, don't try and drive a 9,800-pound truck over a bridge that says it's, you know, "Capacity: 10,000 pounds." But go down the road a little bit and find one that says, "Capacity: 15,000 pounds."BERKSHIRE STOCK WATCHFour weeksTwelve monthsBRK.A stock price: $889,793.83BRK.B stock price: $592.94BRK.B P/E (TTM): 16.55Berkshire market capitalization: $1,259,897,054,755Berkshire Cash as of Sept 30: $377.4 billion (Up 3.3% from June 30)Excluding Rail Cash and Subtracting T-Bills Payable: $352.3 billion (Down 1.9% from June 30)Berkshire repurchased $9.6 billion of its shares in Q3 2026.BERKSHIRE'S TOP EQUITY HOLDINGS - Nov. 13, 2026Berkshire's top holdings of disclosed publicly traded stocks in the U.S. and Japan, by market value, based on the latest closing prices.Holdings are as of June 30, 2026, as reported in Berkshire Hathaway's 13F filing on August 14, 2026, except for:Mitsubishi, which is as of April 30, 2026The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.QUESTIONS OR COMMENTSPlease send any questions or comments about the newsletter to me at alex.crippen@cnbc.com. (Sorry, but we don't forward questions or comments to Buffett himself.)If you aren't already subscribed to this newsletter, you can sign up here.Also, Buffett's annual letters to shareholders are highly recommended reading. There are collected here on Berkshire's website.-- Alex Crippen, Editor, Warren Buffett Watch