The third quarter was an active one for Berkshire Hathaway's
The portfolio changes -- particularly the sells -- reflect a company in transition. In August, Berkshire announced that longtime investment manager Lou Simpson would retire at the end of the year. Simpson has managed the investment portfolio of Berkshire subsidiary Geico and served as Buffett's de facto succession plan for years. Many of the smaller positions -- $400 million or less is small by Berkshire standards -- listed in the company's latest quarterly filing with the Securities and Exchange Commission are likely Simpson's stock picks rather than Buffett's. The sales made for the quarter were concentrated in those smaller positions, suggesting many of Simpson's positions are being closed ahead of his departure.
The biggest sales
|
Company Name |
Number of Shares Sold Q3 2010 |
% Share Decrease vs. Q2 2010 |
Estimated $ Sale Proceeds* |
Shares Held by Berkshire Hathaway as of Sept. 30 |
|---|---|---|---|---|
|
Republic Services |
10.8 million | 100% | $332.8 million | 0 |
|
Nike |
4.0 million | 52.3% | $291.7 million | 3.6 million |
| Comcast | 11.8 million | 98.4% | $203.2 million | 187,000 |
*Based on average price during Q3 2010.
Sources: Company reports, Gurufocus.com.
In addition to the sales listed above, Berkshire also eliminated stakes in CarMax, Iron Mountain, Home Depot, and NRG Energy. Holdings of Procter & Gamble, Moody's, Fiserv, Nalco, and Ingersoll Rand were reduced.
The buys
|
Company Name |
Number of Shares Bought Q3 2010 |
% Share Increase vs. Q2 2010 |
Estimated $ Purchase* |
Shares Held by Berkshire Hathaway as of Sept. 30 |
|---|---|---|---|---|
|
Bank of New York Mellon |
2.0 million | New stock | $50.7 million | 2.0 million |
|
Johnson & Johnson |
1.3 million | 3.2% | $77.6 million | 42.6 million |
|
Wells Fargo |
16.3 million | 5.1% | $426.1 million | 336.4 million |
*Based on average price during Q3 2010.
Sources: Company reports, Gurufocus.com.
Moving to the buys, Buffett made a significant addition to Berkshire's stake in Wells Fargo, reinforcing his confidence in this core holding. Weighed down by concerns over potential mortgage putbacks, Wells Fargo stock hit its lows for the year in the third quarter, giving Buffett a great opportunity to buy at a bargain price. Buffett also added to Berkshire's Johnson & Johnson stake for the second quarter in a row.
Bank of New York Mellon is a new holding for Berkshire. While the position is small, it seems safe to assume that Buffett is making this pick given his expertise in the financial services industry and Simpson's imminent retirement. The company's products and services are targeted toward institutional customers -- a bank for the banks -- and like Wells Fargo, Bank of New York Mellon's stock price hit its lows for the year in the third quarter.
Looking ahead
Expect to see additional selling next quarter, as more positions from Simpson's Geico portfolio are closed. Buffett is most likely to buy mega-cap stocks that allow him to establish a billion-dollar-plus stake, without exceeding 10% ownership. Finally, beginning in 2011, we can watch for Buffett's new hire, Todd Combs, to begin making a mark on the portfolio.
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