Back to Main

Be Like Buffett

By: Ted Allrich
Posted: 8/18/2010 1:11:00 PM
Referenced Stocks: BDX;COP;FISV;GE;IRM;JNJ;KFT;KO;MTB;NLC;PG;WMT;WPO

This past week, Warren Buffett's holding company, Berkshire Hathaway, gave an update on what its stock holdings look like, what stocks were added, which ones added to, and which ones it was selling.  Though there aren't many major changes in the list, there are some telling points that most investors can study and learn how to invest like Mr. Buffett. 

These are stocks he's added to or added in the last quarter:
BDX: Becton Dickinson, up 155,000 shares (total owned: 1.889 million shares).
FISV: Fiserve, Inc.  This is a new position of 4.4 million shares.
IRM: Iron Mountain  Increased position by 206,000 shares.  Has been buying this over the last several quarters with a starting position of 3.3722 million shares.
JNJ: Johnson & Johnson  Added significantly to this position to 41.13 million shares, up from 27 million in the last quarter.  At one point, owned 62 million shares.
NLC: Nalco Holding  Added 150,000 shares to 9.15 million.

These are the stocks sold:
COP: Conoco Phillips: down 5 million shares to 29.1 million shares.  He's been a consistent seller of this stock for several quarters, starting with 62.485 million.
KFT: Kraft Foods.  Sold about 1.5 million shares, putting position at 105.21 million.
MTB: M & T Bank   Sold 200,000 shares.  Position is now 5.363 million which was 6.71 million shares two quarters ago.
PG: Procter & Gamble  Sold position to 70.071 million.  Was as high as 96.3 million three quarters ago.

(For a complete list of all holdings, as of June 30, see: http://www.cnbc.com/id/22130601/)

As you can see, there are only two significant increases in holdings: JNJ and FISV.   Johnson & Johnson is a company deeply entrenched in the medical world.  This makes sense as the population ages and has more health concerns.  An investor can make money from more expenditures for medical devices, surgeries, and even band-aids.  The one new name is Fiserve, Inc., a  service company to the banking industry, specializing in transaction processing, bill pay, etc.  The fact that the master has been selling PG and COP over the last several quarters suggests he is less sanguine about each company's growth and profit potential.

What does all this mean for investors?  First, notice that most of the names are very recognizable, names like Coca-Cola, Wal-Mart, Johnson & Johnson, and General Electric.  Very large companies that are drivers in the American economy.  Nothing magical about finding these stocks.  They're everywhere.  Investors just have to look around next time they're shopping at the grocery store or mall, and they'll see these names.  Buffett has made a fortune by simply buying well established, profitable companies.  You can too.

Second, most of the stocks have been held a long time.  As Mr. Buffett is fond of saying, "My favorite holding period is forever."  He's not a trader.  While he adds to some positions over time, he also sells some of his positions.  Most likely he's less enamored with the growth potential of a stock and because of his large positions is slowly getting out of one that is in disfavor.  But he doesn't try to get in and out of a "hot" stock, hoping to trade for profits.  Rather, he looks at a business as a long term investment, one that will take time to grow to its full potential.  He's owned stocks like Coca-Cola, and Washington Post for decades.  He's not selling those.  The lesson for investors: do your homework well, then be patient.....for years.

Of course, just picking a company from the list, even JNJ, isn't an assurance of success.  Investors need to do their own homework, then decide what price makes sense.  But if you want to get investing ideas from one of the greatest, probably the greatest stock investor ever, then going over his investments, especially the ones he's recently added or increased, is a good place to start.

For the complete list of his changes, please see: http://www.reuters.com/article/idUSN1627428520100816

These stocks are held at the Berkshire Hathaway Company, not by Buffett personally, though he may hold some or all of them.  They are published quarterly.  Highly recommended: the annual letter Mr. Buffett sends to his shareholders.  It's available at the Berkshire Hathaway Web site: www.berkshirehathaway.com

- Ted Allrich
August 17, 2010