With an avowed favorite holding period of "forever", it's
always interesting when Warren Buffett's Berkshire Hathaway
decides to bail out on stocks in its investment portfolio. But
even Oracles can lose patience. And Buffett lost plenty in the
second quarter. Berkshire Hathaway (
) drastically reduced its holdings in Johnson & Johnson (
), Kraft (
) and Procter & Gamble (
Only Kraft has managed to nudge out the performance of the
S&P 500 index over the past three years, as seen in this
, but it's on the verge of splitting into two separate entities
It's not simply underperformance that likely sparked the
moves. Buffett values quality management, and neither Procter
& Gamble (see YCharts editor Betsy Morris's takedowns
of Procter & Gamble) or recall-plagued Johnson & Johnson
has been a B-school "How To" case study of late.
The most interesting sale in Berkshire's second-quarter 13-F
filing was the closing out of its Intel (
) position. This was a holding initiated by Buffett investing
consigliere Ted Combs in the third quarter of last year. It's not
common for Berkshire to invest for such a short-time frame, but
there was indeed a nice profit to be booked….
…and Intel's value proposition -- driven by a rising
-- has clearly changed since the third quarter of 2011.
INTC PE Ratio
To be clear, it's not likely any of the Berkshire Hathaway
sales were generated to raise cash, as Berkshire doesn't seem to
be in imminent need.
BRK.B Cash and ST Investments
Buffett has stated he likes keeping at least $20 billion on
hand, so that leaves another $20 billion for deal making and
More likely, these sales were simply because the team -
Buffett, Combs and Ted Wechsler, the other investing lieutenant
-- no longer saw a compelling value.
And it's not like the team was only selling. Berkshire added
to its already sizable stakes in Wells Fargo (
) and IBM (
); both of which are considered to be the result of Buffett's
direct trading hand.
The only new holding was a 2.8 million share investment in
National Oilwell Varco (
), which looks like it was snagged on a second-quarter dip.
Wechsler and Combs also added to some of their direct
holdings, including DaVita(
), DirectTV (
), and Viacom (
For the quarter Berkshire's the value of investment portfolio
slumped slightly by $1 billion to $75.3 billion.
Carla Fried is an editor for the
YCharts Pro Investor Service
which includes professional