Tracking Buffett: America's Most Successful Investor Reveals His Latest Moves

Berkshire Hathaway (BRKA) (BRKB) filed an update to its stock holdings yesterday. I’m always curious to see what superinvestor Warren Buffett has been up to this past quarter.

Lo and behold, it looks like Mr. Buffett has accumulated more shares of USG Corporation (USG). Over the past quarter, Berkshire Hathaway’s holdings of USG Corp. increased from 16,700,992 shares on September 30, 2006 to 17,072,192 shares on December 31, 2006.

As you might remember, I added USG Corp. to the Fat Pitch Financials Port last August. It’s nice to see that Warren Buffett continues to find this stock worthy of buying. I’m already up almost 17% since my purchase of USG. As I’ve witnessed before, it is often very profitable to invest along side Warren Buffett.

So what else has Buffett done with the Berkshire Hathaway’s stock holdings this past quarter? Buffett upped his stake in Wells Fargo (WFC). He also added a significant $843 million position in US Bancorp (USB). It appears that Mr. Buffett is finding opportunities in banks. With everyone concerned about the potential bursting of a housing bubble and the inverting of the yield curve, it is interesting to see that Warren Buffett maintains his long-term perspective and finds value in today’s banking and financial sector.

Buffett also started a new position in UnitedHealth Group (UHG). My guess is that he took advantage of the depressed stock price of this health insurance company during its stock options scandal last year, which resulted in the ousting of its founder and former CEO Dr. William McGuire. Buffett invested a more modest $47.6 million in UnitedHealth. I’ve had some negative personal experiences with this company that will probably keep me from being interested in this stock however.

Warren Buffett bought an even smaller position in Ingersoll-Rand (IR). He started a new holding of just under $25 million in this stock. Ingersoll-Rand is a manufacturer of various industrial goods including various refrigeration equipment, construction equipment (think Bobcat), security products, and other products. This stock price may also be affected by concerns about a decrease in housing construction. However, the company has been buying back stock and apparently Warren Buffett has also been buying. The company has had strong returns on invested capital over the past five years according to my quick look at Ingersoll-Rand’s financials. This opportunity looks worth investigating a bit further.

It is also revealing what Mr. Buffett sold this past quarter. He completely sold his stakes in Target (TGT), Sealed Air Corp. (SEE), and the parent company of Outback Steakhouse, OSI Restaurant Partners (OSI). Berkshire Hathaway also trimmed back its holdings in Ameriprise Financial (AMP), Comcast (CMCSK), Pier 1 Imports (PIR), and H&R Block (HRB).

I believe the sale of Target and continued holding of Wal-Mart Stores (WMT) indicates that Mr. Buffett does not believe Target has a durable competitive advantage over Wal-Mart. Target seemed to be gaining a lot of ground on Wal-Mart last year, but lately it also appears that Wal-Mart is finally starting to try to address its issues.

The continued liquidating of Berkshire Hathaway’s H&R Block position is probably associated with the continuing deterioration of H&R Block’s competitive position. H&R Block seems hell bent on tarnishing their remaining brand image by pushing their Rapid Refund and other financial services that often leave their customers worse off than many other alternatives. Trust is an important element when selecting a tax professional, and H&R Block’s tactics do not promote trust in its brand. This bottom feeding behavior will likely be unsustainable and continue to allow other competitors to gain ground in the tax preparation sector.

I’m a little surprised to see the reductions in Buffett’s Comcast and Ameriprise Financial holdings. These reductions may primarily be due to the significant appreciation of both of these stocks over the past year. Maybe the prices of these stocks are starting to look richly valued in Mr. Buffett’s eyes.

There are always lessons to be learned by watching the stock trades of this great investor. I look forward to hearing more details about Warren Buffett’s latest moves when he publishes his letter to shareholders in the spring.

Comments

[Nova Law]

Interesting and useful analysis. Thanks.