Buffett's Been Selling This Stock

The Dow Jones Industrial Average (INDEX: ^DJI  ) and the broader S&P 500 (INDEX: ^GSPC  ) are up 0.59% and 0.7%, respectively, at 9:45 a.m. EDT. The markets are partly buoyed by the U.S. Department of Labor's report that weekly unemployment claims fell to 369,000 last week, roughly in line with expectations.

The only Dow stock reporting earnings today is branded consumer-products giant Procter & Gamble (NYSE: PG  ) , which did so before the market opened this morning. As the table below shows, P&G roughly met expectations on the top line and soundly beat on profit. The market is patting Procter on the back for its effort, sending shares up 3.8% as of 10:15 a.m. EDT.


Consensus Estimate

Actual

Earnings per share

$0.96

$1.06*

Revenue

$20.78 billion

$20.7 billion

*Ex-items.

At the beginning of the month, I wrote in this very column: "At 18 times the next 12 months' earnings-per-share estimate, the valuation exhibits hardly a scratch, let alone a wound. At a glance, the shares look hard-pressed to produce anything above passable returns from current levels."

Apparently, an investor with some talent shares my concern. In an interview with CNBC yesterday, Berkshire Hathaway (NYSE: BRK-B  ) CEO Warren Buffett said he had sold some shares of P&G "on valuation." Although Berkshire remained the company's largest active investor (i.e., not an index fund) at the end of the second quarter, it reduced its stake by nearly a fifth in the second quarter. It'll be interesting to see what adjustment Buffett made in the third quarter once Berkshire files its 13F with the SEC, which we can expect within the next three weeks.

No one disputes that P&G is a terrific business, but valuation matters tremendously in determining expected returns. However, if you're looking for similar value-creation monsters, click here to receive our free report: "3 Dow Stocks Dividend Investors Need."

Fool contributor Alex Dumortier holds no position in any company mentioned. Click here to see his holdings and a short bio; you can follow him @longrunreturns. The Motley Fool owns shares of Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Procter & Gamble and Berkshire Hathaway. 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.


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