Submitted by
Sizemore
Investment Letter
as part of our
contributors
program
It's filing season again, that time of year when we get to peek
at what big, high-profile investors are buying. And perhaps
no portfolio is waited for in more anticipation that Warren
Buffett's
Berkshire Hathaway (NYSE:
$
BRK-A
).
Buffett is still bullish these days, even with all the talk of
the fiscal cliff. If we fell over the cliff and the economy
got whacked with higher taxes and massive spending cuts, Congress
and the White House would hash out a deal before the economy
slipped into recession. "We're not going to permanently
cripple ourselves," he said recently in a CNN interview.
That may be true, but I'm a little more worried than Mr.
Buffett. I agree that a deal will get made eventually, but
the psychological damage can still be huge. And we could
easily get a deep stock correction or a recession in the
meantime. Policy paralysis has consequences.
With that said, what is Buffett and his team buying and selling
these days?
To start, he's buying broadcast TV. Berkshire Hathaway
bought nearly 20% of
Media General (NYSE:$ MEG).
This is a small holding for a portfolio of Berkshire's size, but it
does show bullishness on the part of Buffett for traditional
media.
I like to think I am a contrarian investor. But then I
look at Warren Buffett and I realize that I'm not nearly as big of
a contrarian as I thought. I wouldn't touch traditional media
right now because I can't see where the profits will come
from. Advertising is an industry in flux, and TV competes
with the internet for eyeballs.
But then, there is a proper price for everything, and Buffett
seems to believe that, at .16 times sales, Media general is simply
too cheap to ignore.
Buffett additionally made three additions in the gritty
industrial sphere, buying nearly 4 million shares of
Deere & Co (NYSE:$ DE),
the producer of tractors and others heavy-duty equipment, 1.2
million shares of
Precision Castparts Corp (NYSE:$ PCP
), which is essentially a metal shop with a worldwide
presence, and 1.5 million shares of
Wabco Holdings Inc (NYSE:$ WBC),
a world leader brake and control systems for large commercial
vehicles.
Truck parts and tractors. Buffett clearly believes that
industrial activity will be picking up in the years ahead, both in
the United States and overseas.
Now, what's Buffett and his team selling?
He sold out of
Dollar General (NYSE:$ DG), Moldelez International
(Nasdaq:$ MDLZ), Ingersoll-Rand PLC (NYSE:$ IR)
and
CVS Corp (NYSE:$ CVS)
.
The sales have little obvious in common, other than all but
Ingersoll-Rand have a strong consumer focus. Dollar General
is a discount retailer of assorted sundries, CVS Corp is national
chain of pharmacies, and Mondelez is a producer of packaged
foods. Yet Berkshire still maintains enormous positions
in
Coca-Cola (NYSE:$ KO), Procter & Gamble (NYSE:$
PG)
and
Wal-Mart (NYSE:$ WMT),
so you can't reach the conclusion that Buffett is bearish on
the consumer.
Still, Berkshire's portfolio has been consistently drifting away
from consumer-oriented stocks for months and towards grittier
industrial stocks and business services stocks such as
IBM (NYSE:$ IBM).
Disclosures: Sizemore Capital is long PG and WMT.
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