Berkshire Hathaway Inc. Reveals Some Major Changes to Its Portfolio

In this segment from Market Foolery, the team reviews the latest portfolio updates from Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.26%) and its legendary CEO, Warren Buffett. The company sold off its position in a major retailer while picking up stakes in the airline industry and more. So what does Buffett see, and how should retail investors react?

A full transcript follows the video.

This video was recorded on Feb. 15, 2017.

Mac Greer: Let's begin with Warren Buffett. On Tuesday, Berkshire Hathaway reporting its latest portfolio news. Jason, some really interesting moves here. Berkshire really loading up on shares of Apple and unloading most of its Wal-Mart positions. They're also adding new stakes in Monsanto, Sirius XM, and Southwest Airlines.

Jason Moser: Yeah, a lot of fascinating moves there. We talk a lot about watching the investors that we respect and the moves that they make. We never advocated just going and blindly following, but I think it's always interesting to see different perspectives on things. Personally, what really stood out to me was the dumping of the Wal-Mart shares. We've talked a lot about this before, how general retail is being disrupted. Amazon is really the company out there doing it. It's interesting, what the market is telling us is basically all you need to know. You look at Wal-Mart today, the market values it, it's somewhere in the neighborhood of $200 billion, and it's bringing in over $400 billion in sales every year. Well, Amazon brings in maybe a quarter of the total sales that Wal-Mart brings in, yet Amazon's market cap is double that of Wal-Mart. So, it's clear to see that the market, being that it's forward-looking, is looking into the future and thinking, this is the direction that things are going. Amazon is really the one leading the way. Wal-Mart got caught asleep at the wheel. And I think that now Wal-Mart is paying the price.

David Kretzmann: I wonder if Berkshire, in the next three years, adds Amazon to its portfolio. They're warming up to tech with Apple. Maybe Amazon is next. To me, what really stuck out is, a couple weeks ago, Buffett, in an interview, he mentioned that since the election, Berkshire has invested about $12 billion, which is roughly 8% of that $150 billion or so portfolio that they have investing in public stocks. That's a lot to be investing as the market is hitting new highs. Obviously, we tend to think of Buffett and Berkshire as value investors. On the surface, you wouldn't expect those kind of investors to be investing quite a bit as the market is hitting new highs. So, I think that says a lot.

They also unloaded their stake in Deere and Verizon, and Kinder Morgan was another that we follow at the Fool. So, interesting to see Berkshire dumping Kinder Morgan after less than a year of holding it -- Kinder Morgan is an infrastructure company, a natural gas and oil pipeline -- then, to be loading up on airlines, which tend to benefit from lower energy prices. So, maybe they're seeing something or expecting something with energy prices to remain low, which would benefit airlines and could hurt some energy infrastructure companies like Kinder Morgan.

Greer: So, if I am an investor and I'm considering some of these stocks, to what extent should I try to mimic what Buffett and Berkshire are doing? Because obviously, he's had an incredible track record. Should I mimic some of these moves? Or is he playing a different game?

Kretzmann: I don't think you ever want to blindly follow any investor. I think what you want to mimic is the process and the strategy. Obviously, we do that at the Fool with David and Tom Gardner, they're great investors here. Peter Lynch, Warren Buffett. If you're just blindly following any investor, you're not really going to learn a whole lot as an investor. You really want to understand the thought process that goes behind those decisions. I think that's what's key to be a successful investor.

Moser: Yeah, I think a very good example of that -- because I think David is spot on there -- if we look at a business like Markel, which we talk about often here, and we refer to it as a baby Berkshire in many ways, because the business is set up very much in the same way. It's an insurance business that owns a portfolio of stocks, and now holding businesses as well. Tom Gayner, the co-CEO, generally, he's known for the investing success there at the company. If you look at the holdings in Markel's portfolio, they own Apple. They also own Amazon. They don't own Wal-Mart. They own Facebook.

So, there's a business where they do a lot of things that Berkshire does as well, but even they aren't mimicking those moves, despite the fact that Gayner and company are professed Berkshire fans, they have a wonderful brunch they're out there the day after the Berkshire Hathaway meeting. There's a lot of similarities in the business there. It's very small comparatively speaking, but you can see there as an example in Markel's portfolio. Sure, they follow some of Buffett's leads there, but they also do their own thinking and come to their own conclusions. We encourage investors out there to do the same.