Like Santa and his elves, the Oracle of Omaha stayed busy during the fourth quarter of 2009. While Berkshire Hathaway's (NYSE: BRK-A ) (NYSE: BRK-B ) acquisition of Burlington Northern dwarfed other moves, the buying and selling of the world's greatest investor is always worth investigating, and this past quarter was no exception. Aside from Burlington Northern, Buffett sold more stocks than he bought.
The big sells
Norfolk Southern and Union Pacific (NYSE: UNP ) left Berkshire's portfolio, as expected. Buffett wouldn't want to raise the eyebrows of antitrust regulators or take on the appearance of a modern-day railroad robber baron.
It also seems likely that some of Buffett's Q4 selling came from a need to shore up cash reserves in anticipation of the Burlington Northern deal closure, which required $15.9 billion of cash in addition to Berkshire stock. However, the stocks Buffett chose to sell are instructive.
Buffett further reduced his stake in big oil, most notably selling 19.7 million shares (or 34% of his stake) of ConocoPhillips (NYSE: COP ) . Buffett has cited his 2008 purchase of ConocoPhillips shares as a mistake -- evidently one he continues to repair.
Buffett also sliced his health-care holdings, selling more than half of his remaining shares of United Health and WellPoint. More surprisingly, Buffett reduced his stake in Johnson & Johnson; he added more than 4 million shares to his stake in the company as recently as Q2'09.
The big buys
In a quarter of selling, Buffett added to his stakes in only five stocks, suggesting a high level of conviction in those companies.
|
Company Name
|
No. Shares Bought in Q409
|
% Share Increase vs. Q309
|
Total No. Shares Held by Berkshire Hathaway YE '09
|
|
Becton Dickinson (NYSE: BDX )
|
300,000
|
25%
|
1.5 million
|
|
Iron Mountain (NYSE: IRM )
|
3.6 million
|
108%
|
7 million
|
|
Republic Services (NYSE: RSG )
|
4.7 million
|
129%
|
8.3 million
|
|
Wal-Mart Stores (NYSE: WMT )
|
1.2 million
|
3%
|
39.0 million
|
|
Wells Fargo
|
6.7 million
|
2%
|
320.1 million
|
In Wal-Mart, Buffett has the opportunity to put a large amount of money to work, and given its underperformance in 2009, he may see good value in the stock. Failing to purchase Wal-Mart in the 1990s is among Buffett's admitted "errors of omission."
Berkshire's positions in Becton Dickinson and Republic Services were added in Q2 2009 and Q3 2009, respectively. Buffett's continued additions could indicate that he has yet to amass his target stake.
With Republic Services, Buffett is investing with friends; the Bill & Melinda Gates Foundation and the Gates' private investment vehicle, Cascade Investments, own roughly 15% of the company. Finally, Buffett added to longtime holdings Iron Mountain and Wells Fargo.
Needles, syringes, garbage hauling, discount retailing, and records management and storage -- the companies Berkshire bought shares in might not be the most exciting, but it's hard to argue with the durability of their products and services. They look like classic Buffett investments.
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