Warren Buffett, the CEO of Berkshire Hathaway (BRK.B) who's regarded as the most intelligent investor, had a portfolio worth $53.6 billion at the end of quarter one, 2011. Buffett reduced his holdings in some stocks before the end of quarter one, 2011. Let’s try to learn which stocks the legendary investor is selling and maybe it can help us shave our own portfolios in the right manner. Hence, we will be talking about six stocks that he has sold or in which he has reduced holdings.
Buffett’s holdings in Lowe's (LOW) was 6.5 millions shares at the end of quarter three, 2010. In quarter four, 2010, Buffett sold out of all of the stock. The total impact to portfolio was about -0.3% as a percentage of holdings. The average price of the stock over the sale period was $23.08. Buffett sold the shares with a loss of about 6.5%. At start of quarter two, the price was above $26 but later started to fall and reached the current level of $21.58. Its P/E ratio is 15.18 with EPS of $1.42. Home Depot (HD) is the biggest direct competitor of the company.
LOW has a market capitalization of about $28.1 billion with a dividend yield of about 2.59%, which is lower than its competitors, Home Depot's 3.46%. The company had a consistent dividend growth over the past five years at an annual rate of about 25.7%.
The company’s return ratios have not been satisfactory in comparison to HD. Lowe's ROA, ROE and ROI of 6.03%, 10.27% and 7.70% is lower than that of HD's 8.24%, 17.44% and 11.03%, respectively. Overall HD, with a beta of 0.78, is a low risk and high return investment in contrast to LOW, with a relatively higher beta of 1.02 and a lower yield. We agree with Buffett on a relative basis.
Buffett had 3.91 million shares of Fiserv (FISV) at the end of quarter three, 2010. Buffett sold all the shares with a gain of about 7%. This sale was about 0.43% of the portfolio. The average price of the stock was $56.4 at the end of quarter four, 2010. The price after quarter four started to climb up and reached a level of $65 in July. But as uncertainty in the world continued to rise, it started to fall to the current price around $60 per share.
FISV has a market capitalization of about $8.67 billion. Its P/E ratio of 19.30 is very close to an industry average of 19, while its EPS is $3.13. The company's ROA, ROE and ROI of 5.91%, 16.18% and 6.74% are lower than that of competitor Accenture’s (ACN), which has returns of 6.42%, 62.80% and 36.49%, respectively. Even the operating margins of the company are lower than ACN's, making the company a bad investment in the current economic condition.
Comcast (CMCSK) has a high market capitalization of about $67.31 billion. Current price level of the stock is $23.34 with P/E ratio of 17.66. Its yearly earnings per share is $1.32. The portfolio of Buffett had about 373,794 shares of CMCSK at the end of quarter three, 2010. In quarter four, 2010, Buffett went on to sell all the stake in CMCSK with gains of about 21.9%. The average price at the end of quarter four was $19.15. CMCSK steadily moved up after having low levels in quarter three, 2010, and touched record levels of $24.98.
The company has a dividend yield of 2.24%, which is low compared to its competitor Time Warner Cable (TWC), which yields 3.11%. TWC also has a lower beta, making it a good low risk and high return stock during these turbulent times.
Becton, Dickinson and Company (BDX) is a leading provider of medical devices and instrument systems. The company is expected to grow at a rate of about 10.80% over the next five years, but this rate is less than a growth rate of industry, which is 18.20%.
The company has a market capitalization of about $18.49 billion and price to earnings ratio of about 16. After having continuous long positions in this company, Buffett reduced his portfolio holdings of the stock by about 29% by selling about 1.89 million shares in quarter four, 2010, with a gain of about 6.1%. The average price of the stock was $78.81 at the end of quarter four, 2010. If we look at the performance of a stock, we come to know that a stock was on an upward move since the end of quarter one, 2011, and touched levels of $90. In July, however, it started falling to reach a current price of $84, as global uncertainty continues to increase.
The company is in competition with Abbott Laboratories (ABT) and Johnson & Johnson (JNJ). BDX has a yield of 2.12%, which is low against ABT's and JNJ's yield of 3.99% and 4.12%, respectively. Also, a company has a higher beta of 0.81 compared to its competitors, making the organization a high risk and low return investment.
Buffett’s holdings in Moody's (MCO) at the end of quarter two, 2009 were 48 million shares. After that quarter, Buffett went on to reduce his holdings in the stock. A total of about 19.585 million shares were sold after quarter two, 2009, with the gain of about 44%. The average price per share for these sales was $24.81. Total holdings of Buffett at the end of quarter one, 2011 were 28.415 million shares. The average price at the end of quarter four, 2010 was $26.89. The stock, since an end of quarter two, 2010, was having a slow upward trajectory and in June 2011 went on to a price level of $41.8. It started to have declines after this point and now the current price is $35.61.
Over the next five years, the company is expected to grow at a rate of about 11.30%, less than a 16.50% growth rate of an industry. The company is competing with Equifax (EFX), Fitch and Standard and Poors (MHP), as well as Morningstar (MORN) and growing competition can hit margins in coming quarters.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.