I go over Berkshire Hathaway’s latest buys and sells in their common stock portfolio each quarter, after their latest 13F is released. I’m a huge fan of Warren Buffett, as are millions of other investors around the world. And so it’s a great honor to see what he’s up to. You can see the excerpt below, which is part of a full article I wrote for Daily Trade Alert. Enjoy!
Warren Buffett’s latest trades were just revealed via Berkshire Hathaway Inc.’s (BRK.B) 13F filing, which is a filing that gives us information on all of the transactions that took place over the third quarter of 2016 — the quarter ending September 30 — in the stock portfolio managed by the legendary investor.
This filing can provide some valuable insight into where Warren Buffett thinks the best investments might lie.
Now, it might not make sense to piggyback on his trades and simply buy and/or sell whatever he has because these filings are generally released 45 days after the most recent quarter ended, but it would appear to be an intelligent move to investigate exactly where the most successful investor of all time is (and isn’t) putting his capital to work.
It’s also important to note that Buffett allows two other executives – Todd Combs and Ted Weschler – to authorize smaller transactions, so it’s difficult sometimes to decipher who bought and/or sold what.
Below, I’m going to go over every transaction and give some quick thoughts on each respective company.
Image courtesy of: DonkeyHotey via Flickr.
Jason,
Nice write up as usual. Love seeing your breakdown every quarter.
In addition to being a more favorable industry due to consolidation, I also sense his airlines moves may be a bit of a low-oil play. Selling entirely out of Suncor and Exxon, gobbling up PSX (which is more independent of oil price) and now going hard into airlines…Just confirms to me the feeling Buffett strongly feels oil will continue to be lower in the short-moderate term.
I can see why he sold Deere, but selling his whole stake baffled me a bit. Still seems like a very solid company for the long term, despite obvious over-valuation. Same with VZ. His exit of WMT is less surprising.
Guy
Guy,
Thanks so much!
Yeah, it’s so hard to say exactly what’s going on with the airlines. I thought last quarter that Buffett had nothing to do with it, as he’s been vehemently against the idea of investing in that industry for a long time now. I believe he was burned by an airline investment a while ago. Maybe back in the 80s? But he said something on Charlie Rose to the effect that he was directly behind the idea. Could be an oil thing, but he’s also said many times that he doesn’t make any attempt to guess where oil is going, which is part of his belief on not chasing macroeconomic trends. My best guess is that it’s a more of a valuation/consolidation thing, but it’s hard to say.
Some of those sales make sense to me. WMT especially. Deere, I believe, is a valuation call. It looks expensive here.
Cheers!
Yes, Buffett had a rocky investment in US Air decades ago, although he managed to exit the position more or less intact. I’m surprised he’s back in airlines now, especially after commenting once that a farsighted investor would have done us a favor by “shooting Orville down.” The best answer I can come up with is that he feels the industry dynamics have changed because of consolidation, as you suggest. If so, that would line up with his comments about railroads when he bought BNSF. He said then that railroads had been a terrible investment for a century or more, but that they had finally become attractive because the industry had boiled down to just a handful of players.
Jim,
Yeah, I agree. I think the consolidation is the main reason here, which is also helping propel these major players to all-time numbers (along with the low fuel costs). I’m still surprised by it, but it’ll be interesting to see how these airlines perform over the next, say, 5-10 years, especially if the price of fuel sharply rises. This business is way too cyclical for me, but perhaps it’s becoming more favorable. Time will tell.
Cheers!
Hey Jason!
I am not surprised he’s starting to sour on Walmart. I know that they have low prices and Amazon and other online retailers are starting to make up ground on them, but what kills me is when ever I go into their stores I feel dirty. This isn’t just one store or one experience, but the stores by me and in my home town of Chicago are generally not well maintained, not well cleaned, stock is all over the place and/or not in stock to begin with. I personally don’t know anyone who is a brand advocate for Walmart like I do their competitors over at Target.
Apple was a bit of a surprise and one I’m interested to see what he does and if this was his pick or one of his successor to be’s as he’s generally technology adverse. I wonder if this is something he’s starting to understand with the Apple ecosystem or one of the others convinced him that this was a long standing bet in the right direction. Based on the direction of the stock in 2017 he has $1.1 billion in paper profit already!
DD,
The sale of WMT is no surprise to me. They’ve been selling it off for a little while now, so it was only a matter of time before they sold out. I imagine the rest of the shares will be gone very soon. I haven’t personally experienced dirty stores, but I’ve heard of that. It’s a shame that they’re letting the moat erode. The next dividend increase should be announced very soon. If it’s another penny a quarter, I’ll probably have to move on. ~2% dividend growth just isn’t enough to keep me on board when you consider the yield, underlying operational growth, and erosion. We’ll see.
Apple is definitely interesting. But other than the whole tech thing, it otherwise fits the mold for the company. There’s really not much to dislike when you look at the fundamentals, competitive advantages, and valuation.
Thanks for dropping by!
Best regards.
Hi Jason,
For me it is not informative at all to get know about the number of shares Buffett buys or sells. It would be much better to get know about the value in millions USD.
Anyway, thank you for your work!
Andreas,
That’s no problem. The “Buffett Tracker” that DTA runs shows all the amounts that Berkshire is working with for these positions. I don’t run it separately for fear of redundancy. Or you could just multiply out the shares times the per-share price to arrive at the figure.
Cheers!
Hi Jason,
Nice write up and analysis. I also sold out of my DE position at the beginning of the year and re-deployed that capital into other investments like CVS, GILD, AMNF and ABBV.
A totally separate question- do you know if BRK buys stocks directly and holds them or do they use a brokerage house? With trades that big, isn’t there a concern about any failure of a brokerage house?
-Mike
Mike,
I totally hear you there on DE. I just sold out of it today. I mean, I think they’ll do well over the long run. But there appears to be a pretty big disconnect between the fundamentals and the price of the stock. Plus, the dividend hasn’t grown in quite a while. Overvaluation, a frozen dividend, and a low yield. Tough to make an investment case there.
As for Berkshire, I don’t follow all the ins and outs of the company. But I’m sure they use institutional brokers. And it’s not like the shares are held in street name. I can tell you that, last I knew, Buffett had all of his shares of Berkshire in a safe deposit box at a local bank. Physical shares. His biography describes him going down to the bank to take out (A) shares to donate, back when he decided to give away most of his money. How surreal.
Thanks for dropping by!
Cheers.
Awesome right up! Buffett is the man. Love my Berkshire stock that got me a 20% return last year. Now if only I could go back in time and tell my parents to invest with him years ago. Truly amazing what he has been able to do over the long-term.
GFY,
He’s definitely one of a kind. For all of his investment/business acumen, I actually admire his overall outlook on life, frugality, and philanthropy far more. Love following his stuff, so it’s a real treat for me to be able to write these posts. 🙂
Cheers!
He definitely is. I recently read “The Snowball: Warren Buffett and the Business of Life.” If you haven’t read it I would recommend checking it out. Really interesting insight into his life from early childhood on. He’s a super interesting dude in a lot of ways.
GFY,
Great book. I’ve read it twice. Some of the frugality he exhibited when he was young is pretty incredible. Legendary.
Cheers!
Interesting to see that they have dropped Deere and picked up Monsanto. Both are quite big in the agriculture field.
BHL,
Well, they’re in the same general industry, but they’re very different businesses. Monsanto has the arb opportunity, but I think it makes sense on a standalone basis, too. Deere is quite cyclical and hasn’t done as well over the last decade, yet the stock is at an all-time high. What’ll be interesting is if/when Deere’s stock price goes back to where it should be, will Berkshire buy back in? That’d be interesting to see.
Cheers!
Is there a time where after he sold he bought back in, I think after he sells usually he doesn’t believe the fundamentals are aligned with what he believes in.
D4F,
I’ve been following these updates for a few years now. I’ve seen Berkshire sell a stock, then buy some, then sell it again. I believe they’ve done this with BK and some of the Liberty stuff. That’s just off the top of my head. So there’s some trading there. Berkshire/Buffett is known to be buy-and-hold-forever, but I actually think the holding periods aren’t that long, save a few core positions (KO, AXP, WFC, etc.). It’d be interesting to know the average on the portfolio right now. It’d be skewed by those really long-time holdings, however.
Best regards.
Thanks for the great analysis, as always!
I have greatly enjoyed this new site and your very compelling stories about your life struggles and accomplishments.
I have sold 1/2 my DE holdings. I believe earning are tomorrow am.
Re WMT – still think if economy gets a boost WMT could see some improvement.
I bouught BUD and NKE recently, picked up some CL at 64.40 when it dropped after earnings.
I agree with others that CVS is a steal here.
So what’s on your buy list now and at what price?
Cheers,
Howard
Howard,
Hey, I appreciate that. Glad you’re enjoying the site! 🙂
I’m with you on DE. I sold about 1/2 late last year. And I sold the rest yesterday. Just doesn’t make sense here. I’d be glad to buy back in if the stock were to drop back down into the $70s or so (which is where I last bought).
CVS definitely looks cheap. I averaged down not too long ago. With the capital from the DE sale, I added to my VFC stake and initiated a position in WEC. Gives me much more dividend income and a much higher dividend growth rate. And the combined valuation on the two stocks sure looks a lot better than DE here.
Cheers!
Thanks, Jason.
Have you considered writing covered calls for some stocks when they get relatively overpriced?
I have been thinking about it as a way to enhance returns.
Regards,
Howard
Howard,
No. I don’t think it’s necessary or even particularly useful. It’s so simple to sit on stocks and collect growing income. I’ve had to sell a bit more often than I’d like to recently only because certain businesses haven’t been performing as expected. That comes with the territory.
But to each their own. What someone else does with their stocks/money/portfolio matters not to me.
Cheers!
Hi Jason,
Do you personally have any interest in a company like Monsanto. It does have quite a long history of dividend payments and is trading at roughly 15x earnings. Since it’s also an arbitrage play – what do you think about Monsanto as an investment?
Thanks for another great article,
Joe
Joe,
I don’t personally own the stock, but I don’t think it’s a crazy investment here. Not sure the valuation is super impressive on a standalone basis, but the arbitrage opportunity is pretty interesting. That’s not really an angle I pursue, which means the low yield is a bit of a turnoff. Otherwise, there’s a lot to like over the long run (assuming it stays an independent company).
Cheers!
Jason, one question. Don’t you think that WB’s investments work better for those who have tons of capital to put to work – and not so well for say <$1m portfolios?
Benjamin,
No. I don’t think so at all. These stocks aren’t somehow reserved for those with more money. That’s the great thing about stocks – and capitalism in general: anyone can participate.
Portfolios scale up and down nicely, depending on one’s individual lifestyle. I don’t need/want much, so my portfolio works for me. If your lifestyle costs 3x mine, you need a portfolio that’s roughly 3x larger (or produces 3x more income).
Best regards.
I was also surprised he sold his WMT stake. I know Walmart went down heavy with Amazon’s rise, but I thought the efforts they were pushing forward with the acquisition of Jet.com would going to establish a new web presence.
I get it though, Walmart is a risky bet I wouldn’t put money on. They’re a decent brick and mortar store, but when I was looking for a new grill utensil set this afternoon, my first thought was Amazon.
Nice write up, I always enjoy following Buffet’s trades!
Wallet Squirrel,
I’m afraid you’re part of the majority there. If you’re looking to buy something online, the first thought is usually Amazon. I actually recently bought something from Walmart’s site. The process was pretty terrible. The site was clunky, the order took forever to arrive, and the whole thing just sucked. It’s not even close to what Amazon is doing. And they’ve had years now to correct this. So it’s just a shame.
It’ll be interesting to see what the next dividend increase looks like. Should know within the next day or so. If it’s another penny per quarter, I’ll probably have to move on like Buffett.
Thanks for dropping by!
Best regards.
Thanks Jason!
Hi Jason,
I would have been surprised about about the WMT sale if I wasn’t watching first hand the decline of Walmart in China. I’m a Canadian expat in Yiwu, China and Walmart has the best location but is almost completely empty. Massive store with no customers… they’ve all gone to Century Mart nearby. There are some Internationals doing well though.. lays chips move off the shelves faster then reps can but them on.
Cheers
Chuck
Chuck,
Sad to hear about the state of Wal-Mart’s store there in Yiwu, but certainly happy to hear about the Lay’s chips. 🙂
Cheers!