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Buffett Sold These 3 Stocks. Should You?

By Todd Campbell – Feb 21, 2016 at 8:20AM

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Berkshire Hathaway eliminated Chicago Bridge & Iron from its portfolio and reduced its stake in both WABCO Holdings and AT&T in the fourth quarter.

Warren Buffett's legendary success as an investor and status as one of the globe's wealthiest people make him someone investors might want to imitate. Given that markets have gotten a bit hit-or-miss lately, following in his footsteps may not be a bad idea, even if it means selling some or all of your stake in these three companies.

No. 1: Chicago Bridge & Iron (CBI)
Chicago Bridge & Iron has the dubious honor of being the only one of the 48 stocks in Berkshire Hathaway's (BRK.A 1.05%) (BRK.B 1.08%) portfolio that Buffett exited altogether.

Berkshire Hathaway was Chicago Bridge's biggest shareholder not too long ago, but it has been steadily trimming back its stake in the global energy infrastructure company and got rid of the remaining shares it owned in Q4.

Buffett hasn't said exactly why he soured on the business, but it could be that the Oracle of Omaha is nervous that a pick-up in interest rates could reduce demand by making new projects too expensive, particularly in light of the global downturn in energy markets that has energy producers trimming supply to stabilize prices.

Admittedly, cuts in domestic drilling and recently announced plans out of the Middle East to cap oil production have helped crude oil prices bounce, but there's no telling how long that momentum will continue or how long it may be before an upturn in prices translates into project demand. For those reasons, it might be best to own other companies in your portfolio right now.


No. 2: WABCO Holdings, (WBC)
Also intriguing is Buffett's decision to pare back his ownership in WABCO Holdings, Inc., a global builder of commercial vehicles.

Despite WABCO's 10.5% operational ex-currency year-over-year sales growth handily outpacing a 1% decrease in global commercial vehicle builds last quarter, Buffett trimmed Berkshire Hathaway's position by about 6.5% into year end.

A double whammy of tough economic sledding overseas and currency headwinds tied to a strong dollar led to WABCO's sales falling 7.8% last year and those obstacles could continue to weigh on growth this year. However, WABCO is guiding for 6% to 11% ex-currency growth in 2016 and that underlying strength may be why Buffett only took a little off the table for now.

Because global economies are struggling and currency headwinds remain, Buffett's could still decide to walk away from WABCO in the coming quarters, so investors may want to rein in their own exposure now and then keep circling back to see if he continues selling.

No. 3: AT&T (T 1.40%)
Last quarter, Berkshire Hathaway unloaded 20% of its stake in the telecom operator AT&T in a move that could signal Buffett and his talented minions are beginning to worry a little about cracks in AT&T's armor.

Historically, as fellow Fool Dan Kline points out, AT&T has enjoyed a significant quality advantage over less expensive rivals T-Mobile and Sprint, but the gap is narrowing and that could force AT&T to begin competing on price -- something that could weigh on its profit margin.

There's also a bit of uncertainty tied to the integration of DirecTV. The gargantuan deal netted AT&T the nation's second largest pay-TV operator and broadband provider and provides the company with cross-selling opportunities, but it's not a given that all the benefits of the combination that were pitched when the two combined will come to pass.

Nevertheless, investors might want to hesitate before unwinding too much of their stake in AT&T. The company still pays a very healthy 5.3% dividend yield and Berkshire Hathaway's remaining 50 million shares still make it one of AT&T's top 20 largest investors.  

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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