If you follow Mr. Buffett (BRK.A) then you already know that he made some significant portfolio changes in his recent SEC filings. Now, I do not recommend following him since he has billions and ‘he’ can afford to hold stocks forever because it is in his corporate account, which means he really isn’t risking his own money. However, his recent moves are very telling, in my opinion.
He sold Carmax (KMX), Home Depot (HD), ConocoPhillips (COP), Eaton (ETN) and also health care stocks. First and foremost it tells me that he expects health care reform (which is not really reform so much as a public option) to pass; otherwise he would not have sold those health insurers. He sees through the whole cash for clunkers nonsense as it is not a long-term solution for auto sales and it also makes a statement that he feels the consumer is not coming back anytime soon.
His reduction of Home Depot is another vote for the consumer to not return in the near-term and that housing will more than likely stay stagnant for a while. By selling COP he was simply undoing a bad decision for which he took a lot of criticism to begin with. However, if you want to read into it further, I think this means he thinks the energy trade is dead at the moment and prices are going to be flat for sometime into the future which is good news for consumers as fuel costs should remain ‘low’ in the near-term.
His addition of Becton Dickerson (BDX) and Johnson & Johnson (JNJ) indicates two things to me. First, it means that he thinks BDX will benefit from the public option or, in the event it does not pass, that while health insurers are dangerous to own, health care stocks are not, which he is right on about. Second, JNJ is a good company that is well diversified and a defensive play, which, again, is right on for this market.
In short, I see this report as bearish, as he did far more selling than buying and his buys were defensive stocks. He is buying classic defensive stocks and stocks that would clearly benefit if the healthcare reform actually passes. While I do not mimic his moves, and have no positions in any of those holdings, I think he made some pretty good calls.
Of course my opinion really doesn’t matter, however I did find the moves of interest to how he may view the markets at this time. It looks like he is getting much more conservative even if the media is telling you to jump in with both feet in this ‘new bull market’ which really does not exist.
Based on these moves, whether you think I am too bearish or not, I would suggest you invest defensively, as it is not just me who believes this market is more dangerous than rewarding.
