Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) CEO Warren Buffett is one of the most-followed and successful investors on the planet. Even though the "Oracle of Omaha" only managed to keep pace with the return of the benchmark S&P 500 over the past decade, there's little denying how impressive his investing prowess has been over the long run. After all, he has created more than $400 billion in wealth for his Berkshire Hathaway shareholders.
One of the ways Buffett builds wealth for himself and his shareholders is by investing a significant amount of Berkshire's money. Right now, Berkshire owns 48 securities with a market value of $251 billion. Suffice it to say that when Buffett buys or sells a stock, Wall Street and investors pay close attention.
In 2019, Buffett wound up opening a position in or adding to nine companies. But the Oracle of Omaha also sold shares in or completely sold out of nine stocks. Here are the companies Buffett lightened the load on last year.
No, your eyes aren't deceiving you -- Berkshire Hathaway did sell 750,000 shares of tech kingpin Apple (NASDAQ:AAPL) during the third quarter. Keep in mind, though, that Buffett and his team still hold 248.8 million shares and that at nearly $75 billion in value, Apple is Berkshire's largest position by a mile!
It's unclear why 750,000 shares were disposed of, but it seems pretty clear that Buffett wasn't behind the sale. Remember that while Buffett is in control of the lion's share of Berkshire's investment portfolio, a small number of his trusted team are also free to make investments. Buffett has suggested he has no intention of paring his Apple stake, so this sale likely represents a move by a member of his team and not the Oracle himself.
2. Sirius XM
During the third quarter, we also saw Berkshire Hathaway reduce its holdings in satellite radio operator Sirius XM (NASDAQ:SIRI) by 1.64 million shares. This, too, was a very small paring of about 1%, with Berkshire continuing to hold 136.3 million shares, or 3.1% of Sirius XM's outstanding share count.
Although Sirius XM's expenses rose considerably in 2019 following the closure of its acquisition of Pandora, Berkshire's modest sale doesn't appear to indicate any change in thinking from Buffett. Sirius XM remains the only game in town when it comes to satellite radio, and it should, in theory, crush its year-over-year comparisons as it realizes synergies from its Pandora acquisition and builds on its subscriber and streaming base.
3. Wells Fargo
Maybe the biggest eye-opener of 2019 was that Buffett sold a portion of his stake in money center bank Wells Fargo (NYSE:WFC) in the first and third quarters (according to 13F filings with the Securities and Exchange Commission). In total, Berkshire sold more than 48 million shares of its Wells Fargo stake last year and now holds close to 378.4 million shares.
Why sell a position that's been held for more than 30 years? Although the case could be made that Buffett is a bit gun-shy with Wells Fargo following its fake-account scandal in 2016, the reasoning looks to be more tied with Buffett lowering his stake to a more comfortable level. Berkshire began the year owning close to 10% of Wells Fargo's outstanding shares, and Buffett has long preferred to keep his stakes below that key threshold.
4. Phillips 66
The selling was even more pronounced with integrated oil and gas giant Phillips 66 (NYSE:PSX). Buffett shrank his company's stake in Phillips 66 by more than 6.7 million shares in 2019, representing a 56% haircut.
The likeliest reason behind this reduction has to do with Buffett pledging $10 billion to Occidental Petroleum (NYSE:OXY) to help facilitate its acquisition of Anadarko. This investment appeared to signal Buffett's view that Occidental is a more attractive oil and gas play than Phillips 66, which has increased more than 200% since Buffett's initial stake in 2012. Energy is not a big portion of Berkshire's portfolio, so it wouldn't be surprising if Buffett were also simply locking in some gains.
5. Red Hat
Berkshire Hathaway also completely disposed of its stake in cloud services company Red Hat, albeit this statement comes with an asterisk. That's because IBM (NYSE:IBM) acquired Red Hat in a $34 billion all-cash deal that closed in July. IBM has seen its sales fall precipitously for the better part of six years and is hoping that Red Hat's enterprise-focused suite of cloud products will help reignite top-line growth. Buffett, a previous (and disappointed) owner of IBM stock, was simply happy to take the cash from this deal and walk away.
6. Charter Communications
A somewhat regular fixture in Berkshire's sale column in recent years is cable services provider Charter Communications (NASDAQ:CHTR). Berkshire sold shares on a couple of occasions in 2019, ultimately reducing its stake by 1.61 million shares to 5.43 million.
Despite the consistent threat of cord-cutting, Charter's stock has been molten hot. Shares have tripled since Buffett took his initial stake in 2014, and the Oracle of Omaha's regular selling looks to be nothing more than modest profit taking to lock in gains. Considering that Charter's top line is growing by a mere 5% annually and the company's forward price-to-earnings ratio is an aggressive 37, I can't exactly blame Buffett for trimming his total.
7. Southwest Airlines
Despite Berkshire owning a stake in four airline stocks, only Southwest Airlines (NYSE:LUV) found itself cruising at a lower altitude in Buffett's portfolio in 2019. However, similar to Apple and Sirius XM, the sale proved to be modest. Buffett reduced his company's stake in Southwest by roughly 1.2 million shares, or about 2%.
Buffett became enamored with airlines in 2016, following West Texas Intermediate oil's brief collapse below $30 a barrel. With fuel representing a core expense for airlines, this drop in crude led to a windfall of profits. More specifically, it allowed major airlines to be more price competitive with the bare-bones-ticket airlines. But with the U.S. economy likely in the late innings of its economic expansion and the airline industry having a poor track record during recessions, it wouldn't be surprising to see Buffett further shrink his holdings in Southwest and his other airline stocks in 2020.
Similar to Red Hat, Berkshire "disposed" of its longtime stake in building products manufacturer USG Corp. in the second quarter following German-based Knauf's acquisition of USG for $43.50 in cash per share plus a $0.50-per-share special dividend. This worked out to about $7 billion in total market value. The deal ultimately combined two building material giants to create a company with improved operating efficiency and global scale in the drywall business.
Last but not least, Buffett sold his "whopper of a stake" (note: sarcasm is imminent) of telecom provider Verizon (NYSE:VZ) in the first quarter. That stake tallied 928 shares, with a market value of around $52,000. What's really odd is that Berkshire sold 99.99% of its Verizon stake in the fourth quarter of 2016 (a 15-million-share disposition) but left the remaining 928 shares in the portfolio for more than two additional years. Buffett stopped being a fan of telecoms a while ago, so why Verizon's token stake lasted this long remains a mystery.
But perhaps the bigger mystery is, what stocks might Buffett sell in 2020?