Buffett Buys: A New Stock and Doubling Down on J&J

Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) Warren Buffett was back in buying mode during the second quarter, according to the latest SEC filing revealing his equity holdings. The big moves were the addition to Berkshire's stake in Johnson & Johnson (NYSE: JNJ  ) and establishment of a new position in Fiserv (Nasdaq: FISV  ) .

First the big bites

Company Name

No. Shares Bought Q2 2010

% Share Increase vs. Q1 2010

Estimated $Purchase*

Shares Held by Berkshire Hathaway 6/30/10

Johnson & Johnson

17.4 million

73%

$1.1 billion

41.3 million

Fiserv

4.4 million

N/A – New Holding

$219 million

4.4 million

Source: Company reports, Yahoo! Finance.
*Based on average daily close prices during Q2 2010.

While Buffett sold J&J shares as recently as last quarter, he apparently had a change of heart in the second quarter, doubling down on the company's shares. With a steady stream of product recalls, including infant's and children's versions of its marquee Tylenol brand, J&J has been under pressure, and its shares have underperformed both the S&P 500 and the Dow over the last year. The Oracle must see opportunity in this situation, and apparently so do many Fools, as the company sports a five-star CAPS rating.

Fiserv, a new holding for Berkshire, is an information technology and back-end services provider to the financial services industry. With 16,000 customers and a focus on essential but dull activities like check clearing, Fiserv enjoys the benefits of economies of scale and high customer switching costs, characteristics that both Buffett and Motley Fool Inside Value advisor Joe Magyer favor.  

Small nibbles
In addition to its J&J and Fiserv purchases, Berkshire Hathaway added small amounts to four existing positions. A consistent buyer of Becton Dickinson and Iron Mountain, Berkshire bought more of both for the third straight quarter.  Small additions were also made to its position in pharmaceuticals giant sanofi-aventis and Nalco, best known recently as the maker of chemicals used to disperse oil in the Gulf of Mexico following the BP spill.

The selling
Buffett continued to shrink his stake in ConocoPhillips (NYSE: COP  ) , a holding that he likely regrets. He also trimmed his stakes in Procter & Gamble (NYSE: PG  ) , Kraft (NYSE: KFT  ) , and M&T Bank.

Company Name

No. Shares Sold
Q2 2010

% Share Decrease vs. Q1 2010

Estimated Sale Proceeds*

Shares Held by Berkshire Hathaway 6/30/10

ConocoPhillips

5.1 million

15.0%

$271 million

29.1 million

Procter & Gamble

1.0 million

1.3%

$63 million

78.1 million

Kraft

1.5 million

1.4%

$45 million

105.2 million

M&T Bank

199,000

3.6%

$17 million

5.4 million

Source: Company reports, Yahoo! Finance.
* Based on average daily close prices during Q2 2010.

Surprises of omission
When I opened Berkshire's latest filing, I expected to see continued buying of Republic Services, a garbage hauler Buffett began buying last year, but no activity was reported.

In addition, Buffett reported no sales of Moody's shares, likely a judicious move given his testimony before the Financial Crisis Inquiry Commission in June. Berkshire has been reducing its Moody's stake over the last year, and I expect those sales to resume next quarter.  

What are your thoughts on Buffett's recent moves or guesses about what's next on the Oracle's buy (or sell) list? Let us know in the comments section below.

More on Buffett and Berkshire Hathaway:

Fool contributor, April Taylor, owns shares of Berkshire Hathaway. Berkshire Hathaway is a Motley Fool Inside Value recommendation. Berkshire Hathaway is a Motley Fool Stock Advisor pick. Johnson & Johnson and Procter & Gamble are Motley Fool Income Investor picks. The Fool owns shares of and has written covered calls on Procter & Gamble. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of Berkshire Hathaway and Fiserv. The Motley Fool has a disclosure policy.  


Read/Post Comments (7) | Recommend This Article (27)

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 August 17, 2010, at 4:35 PM, sagitarius84 wrote:

    Johnson & Johnson is the best dividend stock in the world:

    http://www.dividendgrowthinvestor.com/2010/06/johnson-johnso...

    The company has raised dividends for 48 years in a row!

  • Report this Comment On August 18, 2010, at 5:27 AM, wax wrote:

    I have a very hard time understanding why BRK would own Iron Mountain? What could Mr. Buffett possibly think this stock will do for the BRK portfolio?

    Sorry having looked at the company's FY09 financials, I have to wonder about the accuracy of the article. Surely there is a mistake.

    Wax

  • Report this Comment On August 18, 2010, at 8:27 AM, XMFTheATrain wrote:

    Hi Wax,

    Iron Mountain and the other stocks mentioned in the article are listed in Berkshire's 13F filing with the SEC. Here is a link -

    http://sec.gov/Archives/edgar/data/1067983/00009501231007800...

    Thanks for reading.

    April

  • Report this Comment On August 18, 2010, at 9:33 AM, plange01 wrote:

    another success for buffett his company is #16 on the just released national disgrace list! thats the top 25 companys who have layed off workers he came in at 16 with 17,000 lay offs.for this great achievment buffett gets tosses in the nearest dumpster...

  • Report this Comment On August 18, 2010, at 1:03 PM, bricks79 wrote:

    Buffett is also a big player in derivatives that he said were "financial instruments of mass destruction". Check out Bershire's writeoff of losses on these instruments last quarter. I agree JNJ is a steal under $58.25 given fair value around $70. Long: JNJ, COP, KFT, PG

  • Report this Comment On August 18, 2010, at 6:05 PM, TMFAleph1 wrote:

    brick79,

    There are no write-offs -- the losses on the derivatives positions you refer to are mark-to-market losses that have no economic impact on Berkshire.

    Depending on the quarterly performance of various broad stock market indexes (including the S&P 500), Berkshire may post multi-billion dollar losses or gains (as he has done in previous quarters) on those contracts.

    Alex D

  • Report this Comment On August 18, 2010, at 6:07 PM, TMFAleph1 wrote:

    @plange01,

    That figure isn't scaled to the total number of employees, so it doesn't tell you much.

    What you neglected to mention is that Berkshire Hathaway is the 28th largest employer in the U.S. with 222,000 employees. That's a much more productive way of looking at things.

    Alex D

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