Buffett Is Selling

Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) Warren Buffett has been a seller in the most recent quarter. That's the headline from the quarterly SEC filing revealing Berkshire Hathaway's securities holdings. Buffett reduced his stake in 13 holdings, with four being eliminated from the portfolio altogether.

Sizeable sales
Buffett's most substantial sales were Kraft and Procter & Gamble.

Company

No. Shares Sold Q1 2010

% Share Decrease vs. Q4 2009

Estimated $Sale Proceeds*

Shares Held by Berkshire Hathaway 3/31/10

Kraft Foods
(NYSE: KFT  )

31.5 million

23%

$908.3 million

106.7 million

Procter & Gamble (NYSE: PG  )

8.4 million

10%

$527.9 million

79.1 million

*Based on average close price for Q1 2010.
Source: Company reports, Yahoo! Finance.

Buffett expressed dismay at Kraft's deal to acquire Cadbury, describing it as "dumb" at the Berkshire annual meeting. The sale points to putting his money where his mouth is, though Berkshire's stake in Kraft remains large. Of course, the Kraft and Procter & Gamble sales may be nothing more than a tax-efficient way to replenish cash coffers following the Burlington Northern acquisition; Berkshire does not have large, unrealized gains in Kraft and Procter & Gamble. 

Spring cleaning
In addition to the major sales shown above, Buffett eliminated holdings of health insurers, Wellpoint and UnitedHealth, from the portfolio. The remaining SunTrust Bank shares were sold, as was a small stake in Travelers.

The three buys
Amid all the selling, Buffett added to positions in Becton Dickinson, Iron Mountain, and Republic Services.  

Company

No. Shares Bought
in Q1 2010

% Share Increase
vs. Q4 2009

Shares Held by Berkshire
Hathaway 3/31/2010

Becton Dickinson (NYSE: BDX  )

244,128

16%

1.7 million

Iron Mountain (NYSE: IRM  )

794,800

11%

7.8 million

Republic Services (NYSE: RSG  )

2.5 million

31%

10.8 million

Source: Company reports, Yahoo! Finance.

At over $322 million, Berkshire's stake in garbage hauler Republic Services is the largest of the three holdings, and it captured the lion's share of Buffett's reported buying. While modest currently, Berkshire's stake in Republic could become more significant, as it has Buffettesque qualities -- limited competition, and route system driven economies of scale reminiscent of Burlington Northern. Interestingly, Buffett friend and Berkshire board member, Bill Gates has an interest in Republic as well. Gates' charitable foundation and private investment vehicle, Cascade Investments, own about 15% of the company, so Buffett's influence over the company may exceed Berkshire's 2.8% ownership. 

A surprise yet to come?
Finally, it is important to note that Berkshire's Q1 2010 cash flow statement suggests more equity securities buying -- $1.6 billion, to be exact -- than the purchases of Becton Dickinson, Iron Mountain, and Republic reflect. The Oracle of Omaha may have a surprise up his sleeve. A foreign equity is one possibility -- the quarterly SEC filing of securities holdings excludes foreign securities not traded as ADRs on a U.S. exchange.

Thoughts on Buffett’s moves? A theory on his mystery stock(s)? Fire away in the comments section below.

More on Berkshire Hathaway and Buffett:

Fool contributor April Taylor owns Berkshire Hathaway B shares. Berkshire Hathaway is a Motley Fool Inside Value and Motley Fool Stock Advisor recommendation. Procter & Gamble and Republic Services are Motley Fool Income Investor recommendations. The Fool owns shares of Berkshire Hathaway and Procter & Gamble. The Motley Fool has a disclosure policy.


Read/Post Comments (26) | Recommend This Article (115)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 19, 2010, at 5:28 PM, plange01 wrote:

    buffett simply needed a huge amount of money to pay for his poorly timed and greatly overpriced purchase of burlington.another of his rapidly growing list of mistakes...

  • Report this Comment On May 19, 2010, at 5:30 PM, dragracerdad wrote:

    Your headline "Buffet is Selling!" sends a message to those who havent read the article as, "Oh my god we better sell all our stock".

    We dont need anymore unfounded fear broadcasted.

  • Report this Comment On May 19, 2010, at 5:39 PM, ragedmaximus wrote:

    well feb march april was all up months,he's protecting profits as may is usually a sell and go away month.I'm sure he'll be back in in sept or after the next big correction

  • Report this Comment On May 19, 2010, at 5:47 PM, iinsic412 wrote:

    You guys at MF seem to worship the Oracle of Omaha as the zenith of investing acumen. Yet we in MDP were just advised to buy UHS at the same time ol' Warren was dumping his stock. So ... are you smarter than he is?

  • Report this Comment On May 19, 2010, at 5:47 PM, AuditorFool wrote:

    dragracerdad, if someone sells because of a Motley Fool HEADLINE then they shouldn't be managing a dime.

  • Report this Comment On May 19, 2010, at 5:50 PM, AuditorFool wrote:

    ragedmaximus, you have no idea how Buffett invest do you. He is not a trader.

  • Report this Comment On May 19, 2010, at 5:52 PM, TMFAleph1 wrote:

    Nice article, Morgan.

    There is one imprecision, though. You write that: "Berkshire does not have large, unrealized gains in Kraft and Procter & Gamble."

    That is true for Kraft, but certainly not for P&G -- many of those shares were "inherited" from a long-held position in Gillette. At the end of 2009, Berkshire's cost basis on P&G shares was barely more than one-tenth of their market value!

    Best,

    AD

  • Report this Comment On May 19, 2010, at 6:30 PM, TheHappyHiker wrote:

    I am happy to see Buffett dispose of WLP and UNH. I think both companies are ethically challenged, even though their corporate cultures may prevent them from being aware of it.

  • Report this Comment On May 19, 2010, at 8:01 PM, marginjim wrote:

    I was pleased to see TheHappyHiker's comments re UNH, indicating that he thinks the company is "ethically challenged." I've had inklings of that as well, a report of comments from a person who had done some work for them. It wasn't substantiatable (is that a word?) enough to put it on a board; but it was enough to persuade me to find other places to put my money and to keep my eyes open. Your observation adds a bit more weight. I would appreciate seeing your rationale if there is enough to it to make it worth sharing.

  • Report this Comment On May 19, 2010, at 8:12 PM, haywool wrote:

    Just an humbling observation. I think that I own a large number of shares when I have 2-3 <b>thousand</b>. But I see Buffett cut his Proctor&Gamble holdings by a measley 10% which only amounted to (gads!) 8.4 <b>MILLION</b> (gulp!). He must really have a lot of mulla ! And I own only 600+ of BRK!

    Rich (haywool)

  • Report this Comment On May 19, 2010, at 9:06 PM, XMFTheATrain wrote:

    Hi TMFMarathonMan,

    Buffett has a small unrealized gain in P&G. Per the Q1 2010 10Q (http://sec.gov/Archives/edgar/data/1067983/00011575231000298..., the unrealized gain is $268 million on a cost basis of $4.46 billion for P&G. This compares to huge unrealized gains in Coca Cola and American Express of $9.7 billion and $4.97 billion respectively. If Buffett wants to raise a significant amount of cash in a tax efficient manner, he would go to his large positions that have small or no unrealized gains first, so Kraft and P&G seem like good choices.

    Thanks for reading.

    Best,

    April (TMF contributor / TheATrain)

  • Report this Comment On May 19, 2010, at 9:39 PM, DBrown7 wrote:

    Sales and purchases of relatively small positions are quite often made by Lou Simpson of Geico, not by Buffett.

  • Report this Comment On May 19, 2010, at 10:14 PM, tempodulu wrote:

    Buffet is not God. And Cadburys is a great company - simple as.

  • Report this Comment On May 19, 2010, at 10:55 PM, baldheadeddork wrote:

    Huh. I bought KFT last October in part when the stock had been pulled down because of the Cadburry deal. Since then it's up 17%, thirteen points more than the S&P - and that's before the 4.5% dividend.

    Hmmm. Maybe I should auction a chance to have lunch with me. If Buffet is the Oracle of Omaha, I'll be the Prince of Dorkness.

  • Report this Comment On May 20, 2010, at 7:15 AM, TMFAleph1 wrote:

    Hi April,

    I took a look a look at the 10-Q and of the 4 individual stock holdings for which the cost basis is included, only Procter & Gamble shows a discrepancy with the table on page 14 of the 2009 Shareholders' Letter (http://www.berkshirehathaway.com/letters/2009ltr.pdf).

    Indeed, the table on page 9 of the 10-Q shows a cost basis of $4.962 billion for P&G shares at Dec. 31, 2009, against just $533 million in the 2009 Shareholders' Letter.

    The only explanation I can find for this conundrum is a footnote to the 'cost' column heading in the table in the Shareholders' Letter:

    *This is our actual purchase price and also our tax basis; GAAP “cost” differs in a few cases because of write-ups or write-downs that have been required.

    As such, I think my observation holds true: With regard to a potential tax liability on the sale of shares, Berkshire's unrealized gains on his Procter & Gamble holdings are substantial.

    Best,

    Alex D

  • Report this Comment On May 20, 2010, at 8:14 AM, x3abodx wrote:

    Greetings all, I think MTF should start with positive headlines and should seek opportunities that is accompanying the correction were as " crises build wealth " it important to start spreading positive news in the market from my trading and investing experience someone is buying cheap out there Really the majority of sellers are more individual than firms or funds, hence they are playing on investors and traders psychology in my opinion we should be buying now, however it also important to know what to buy and how to buy for when to buy is NOW, I learned from MTF to seek grate investments of companies that over perform on the long run. If Buffet is selling positions in Kraft & PG that doesn’t mean he pulling out of the market, I think he has found a great long term investment that he will start acquiring in the coming couple of weeks and we will hear about it, I don’t think it has anything to do with crises in the EU or even in the US additional if buffet is pulling out because of a financial crises he would have got ridden of bank of America & Amex instead. Motley Fools founders I advise you to start supporting individuals in their wealth were as things are going to turn around soon and we better buy gradually in firms that were pushed down starting now I don’t see the DOW braking 10,000 points and if it breaks it I think it will have a true rebound between 9800 and 9600 max so let's start our engines and seek the opportunities good luck every one

  • Report this Comment On May 20, 2010, at 8:16 AM, sept2749 wrote:

    well, I guess I should sell Kraft and PG - Wrong!

  • Report this Comment On May 20, 2010, at 9:16 AM, MoneyWorksforMe wrote:

    As of two days ago, I am all cash. The change in sentiment since the EU crisis began, has been impossible to ignore, as the markets continued to sell off despite strong corporate earnings and on par future revenue forecasts. The problem has been two conflicting premises: a growing U.S. with solid corporate earnings, vs. the emergence of systemic problems in China and Europe. My problem is that these issues are beginning to seriously snowball after a good earnings quarter across the board in the U.S. This means analyst and corporate estimates are WAY off their recent lows, setting the stage for broad misses next quarter. This is in turn will lead to a justification of the fears that systemic problems abroad will increase pressures here domestically, adding further momentum to the sell-off. Ironically, S&P companies with broad exposure to China and Europe could see the worse misses, making investing in equities even more tricky. If you still want some exposure to equities look for Wal Mart, P&G, Exxon Mobil, Family Dollar Store, Dollar Tree, etc. These companies significantly outperformed the S&P, prior to the March 09 lows. Money seems to be quickly flowing into more defensive positions.

  • Report this Comment On May 20, 2010, at 10:20 AM, XMFTheATrain wrote:

    Hi Alex,

    Hmm – interesting discrepancy between the 2009 letter and both the 2009 10k and 2010 Q1 10Q for P&G. I see your point regarding the note in the letter – good catch. - thanks for pointing it out.

    The Kraft shares sold during Q1 were trading at prices (avg close during qtr) ~13% below Buffett’s cost basis, as reported in the annual letter. In addition to the Kraft and P&G sales shown in the article, Buffett also sold 3.5 million shares of ConocoPhillips. During Q1, ConocoPhillips traded at prices that were on average 31% below the cost basis in the annual letter. Taken together, these should have offset a decent chunk of gains generated from the P&G sales, and of course assumes shares of average cost basis were sold. Buffett would have likely tried to sell share lots with the highest cost basis to minimize taxes.

    April

  • Report this Comment On May 20, 2010, at 12:37 PM, mikecart1 wrote:

    Buffet is an idiot. That is all.

  • Report this Comment On May 20, 2010, at 2:29 PM, cordwood wrote:

    INSIC 412.....

    UHS??????

    Where is UHS mentioned??

    UHS is one of my best investments,\.

    Clue us in as to what you mean.

  • Report this Comment On May 20, 2010, at 9:00 PM, Dannysea wrote:

    Greetings,

    a lot of coulda woulda shoulda if we were the man, but what about "the Oracle of Omaha may have a surprise up his sleeve?"

    As a weekly flyer used to advertise, "Inquiring minds want to know!"

    The headline was disconcerting, but brought me full-focus to look the article up ASAP!

  • Report this Comment On May 21, 2010, at 8:55 AM, belihe wrote:

    x3abodx, i think your smart! what you say makes complete sense. thanks for sharing.

  • Report this Comment On May 21, 2010, at 1:20 PM, UpFromDownunder wrote:

    While it's interesting reading, (and perhaps educational to try to understand why Buffett does what he does), then what? At this point in Buffett's career, he is playing a whole different game than the rest of us, with a whole different pile of capital. There's things he can do with his roll that no way I can do with mine. Likewise, there's things I can do with my tiny roll that he can't do with his because it's just too big.

  • Report this Comment On May 21, 2010, at 8:27 PM, 1sweet1 wrote:

    Have to appreciate baldheadeddork's insertion of some humor. Too seldom seen in these comments, while "stupid moron-ish" comments are frequent. I think you can callet Warren Buffett an idiot when you match his wealth and achievement in the market.

    Lots of good comments in this section.

  • Report this Comment On May 22, 2010, at 3:57 AM, mrshastri wrote:

    Buffet knows best.

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