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1 Big Buy and an Even Bigger Sell for Buffett

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Any move made by the Oracle of Omaha is immediately investigated and analyzed. Even just a headline saying that Buffett bought into a stock will undoubtedly send prices up. It's a flawed strategy, as many times the stock in question has already made its move. Nonetheless, it is worth keeping an eye what the world's greatest investor is up to. Lately, Buffett hasn't been too active, but he has put sizable money in one sector while taking out even more from another.

Omaha 66
Warren Buffett's Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) has been a holder of oil giant ConocoPhilips (NYSE: COP  ) since around 2006. The company was, for a while, Berkshire's biggest energy-sector holding. Last year, Conoco spun off a refining and marketing company, Phillips 66 (NYSE: PSX  ) , giving one share of the new company for every two shares of Conoco. Since then, Berkshire's stake in Conoco has been reduced, and the Phillips 66 shares have been held steady -- until recently.

Buffett, or one of his two new money managers, has identified further value in the spinoff. As of the latest 13-F, Berkshire has invested $1.1 billion more in the company currently trading near its 52-week high.

Phillips is the refining and marketing portion of its former parent company. The company's refining business brought in an adjusted $853 million during the second quarter, up from $353 million the year before. Management cites better margins and improved operating efficiency as the reasons for the substantial gains. The company also authorized a $1 billion share repurchase.

Even though Phillips 66 is trading near its 52-week high, it still trades at less than eight times forward earnings. Several analysts consider the stock to still be an attractive value play.

Berkshire's bullish call on Philips, though at a lower cost than available now, is worth looking into for value-oriented investors.

One of Buffett's longer holds has been Johnson & Johnson (NYSE: JNJ  ) . It fits the profile of an investment Buffett has been attracted to in the later years of his career, given the large capital base of Berkshire Hathaway. The classic American company provides a bevy of consumer goods and pharmaceuticals.

Though, recent mishaps have investors -- and Buffett himself -- cooling off on the near-$200-billion conglomerate. In fact, Buffett was quoted earlier this year as saying, "[Johnson & Johnson] obviously messed up in a lot of ways over the last few years."

The company has suffered through product recalls, manufacturing mistakes, and legal trouble. In a court battle, a J&J subsidiary was ordered to pay a $1.2 billion fine for concealing some of the dangers of an antipsychotic drug.

In the 13-F filing, we find that Buffett and Berkshire have dropped the majority of their stake in the classic American company -- approximately 2/3 of the nearly $2 billion position.

Buffett had mentioned earlier that if he were looking to free up capital, Johnson & Johnson would be on his "sell list." Well, Berkshire has plenty of cash on the books, so unless Buffett is readying for a major capital outlay, it looks as though he just became too disenchanted with J&J's operations to remain invested.

Berkshire still holds on to roughly 10 million shares of the company, so it's not a total abandonment, but investors are wise to look at this as a suggestion to reconsider the strength of Johnson & Johnson.

Following the best
Investing on the heels of the greatest investors is not always a bulletproof method. Overpaying and choosing portfolio laggards are frequent problems with this strategy. Though, overall, I find it enriching to keep an eye on what the superstar investors are up to.

In this special free report, our analysts have outlined some other intriguing stocks that are owned by some of the investing world's greats, including Mr. Buffett. Click here to read the free report now.

Fool contributor Michael Lewis owns none of the stocks mentioned above. You can follow him on Twitter @MikeyLewy. The Motley Fool owns shares of Berkshire Hathaway and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway and Johnson & Johnson; and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (5) | Recommend This Article (10)

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 15, 2012, at 2:18 PM, Doubledip41 wrote:

    Seems to me he is making the same mistake that he did when he bought COP. He bought at the high. Now he is selling COP and buying PSX when refiners are at their highs. PSX is probably one of the better refiners but the industry is high and very cyclical. Maybe Buffet will trade his stock for their pipelines.

  • Report this Comment On August 15, 2012, at 2:55 PM, Seanickson wrote:

    well this one wasnt by buffett, but by one of the other money managers. And I think its likely that they bought in around $30 and not at the high of $40.

  • Report this Comment On August 17, 2012, at 12:36 AM, Daveoffv wrote:

    I thought Buffett held stocks forever.

  • Report this Comment On August 17, 2012, at 1:02 PM, sallenkv wrote:

    Correction....PSX is not trading at a 52 week high. They are trading at an all time high. PSX has only been trading publicly since mid-April. This fact is even more impressive to consider PSX's performance.

  • Report this Comment On August 17, 2012, at 1:20 PM, DoctorLewis4 wrote:

    Buffett has said the ideal holding period for a stock is forever. If you follow Buffett history he has not held back when he's lost faith in a company - he's sold out of many positions over the years. Berkshire is quietly building a big cash position for a major buy. Stay tuned...

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