Published on February 21st, 2015
Warren Buffett has a reputation as a buy and hold investor. One of his most well known quotes is:
“My Favorite Holding Period is Forever”
In practice, Warren Buffett does not always hold forever. This article shows what happened to the top 10 stock positions in Berkshire Hathaway’s portfolio at the end of 2006. Warren Buffett has held fewer stocks than you may think for the long run. Berkshire Hathaway’s top 10 stocks in the 4th quarter of 2006 were:
- Coca-Cola (KO)
- American Express (AXP)
- Wells Fargo (WFC)
- Procter & Gamble (PG)
- Moody’s (MCO)
- Wesco Financial (WSC)
- Anheuser-Busch (BUD)
- Johnson & Johnson (JNJ)
- ConocoPhillips (COP)
- Graham Holdings Company (GHC)
10. Graham Holding Company
Graham Holdings Company is better known by its previous name, The Washington Post. The company changed its name in 2013 when Jeff Bezos purchased The Washington Post paper for $250 million. The Graham Holdings Company owns Slate, education publisher Kaplan, several large market television stations, and internet service provider Cable One.
Warren Buffett has a long history with the Washington Post. He started purchasing shares in 1973. Warren Buffett held the stock over 40 years before finally exiting in 2014, after the paper was purchased by Jeff Bezos of Amazon (AMZN). Warren Buffett did not outright sell his shares, but instead exchanged them for WPLG, Miami’s ABC affiliated television station. In addition, Berkshire Hathaway received shares of itself that were owned by Graham Holdings Company, as well as cash.
Warren Buffett recently sold Berkshire Hathaway’s ConocoPhillips stock completely. By the end of 2006, ConocoPhillips was Berkshire Hathaway’s 9th largest holding. Buffett continued to add shares as oil prices soared in 2007 and 2008. Warren Buffett purchased ConocoPhillips during the idea of ‘peak oil’.
Now, Warren Buffett has completely exited his position in ConocoPhillips (as well as his position in ExxonMobil) just as oil prices have fallen precipitously. Warren Buffett is obviously a fantastic investor; perhaps the greatest of all time. He is still fallible, however. Buying oil stocks during high oil prices, and selling during low oil price is not sound investing. I believe Warren Buffett’s poor timing in his ConocoPhillips and ExxonMobil trades could go down as one of the worst in his investment career. Only time will tell. In total, Warren Buffett held ConocoPhillips under 10 years.
8. Johnson & Johnson
Johnson & Johnson first appeared as one of Berkshire Hathaway’s top holdings in 2006. Warren Buffett has slowly sold off stock in Johnson & Johnson. He sold off shares during the Great Recession in 2008 and 2009 to fund other purchases. He purchased shares in 2010, then has continued selling in 2012, 2013, and 2014. It is interesting to see Warren Buffett add to and reduce his stake in Johnson & Johnson.
Johnson & Johnson stock was relatively flat from 2006 until 2012. From 2012 to now, the stock price has grown from $65 per share to $100 per share. Warren Buffett appears to be reducing his stake in the company as the share price rises.
Warren Buffett was squeezed out of his Anheuser-Busch position in 2008 as the company was acquired by InBev. Interestingly, Warren Buffett sold prematurely. He exited about half of his position on rumors of a takeover. The rumored acquisition price was $65 per share. Warren Buffett sold over half of his holdings between $61 and $62 a share. Shortly after, InBev acquired Anheuser-Bush for $70 a share.
6. Wesco Financial
In 2011, Berkshire Hathaway acquired 100% of Wesco Financial. The company had owned about 80% of Wesco for over 30 years before completing the final purchase of the company. Wesco Financial is an example of a ‘forever’ Warren Buffett stock.
Berkshire Hathaway first acquired Moody’s in 2001. Berkshire Hathaway built up a 20% stake in the company. Moody’s operates in the oligopolistic ratings market, along with Standard & Poor’s rating service and Fitch rating services.
Warren Buffett reduced his holdings from 20% of the company down to 12% in 2010. The timing could not have been worse. From the end of 2010 to now, Moody’s stock has more than tripled. In addition, the company has paid dividends through that time as well. Warren Buffett continued to trim his Moody’s position in 2013.
4. Procter & Gamble
Warren Buffett did not directly buy shares in Procter & Gamble. He purchased shares of Gillette in 1989. In 2005, Gillette was acquired by Procter & Gamble. In the process, Warren Buffett acquired about 100 million shares of Procter & Gamble. He reduced his holdings by about 50% in 2009 in Procter & Gamble to free up cash for other investments.
At the end of 2014, Warren Buffett decided to exchange his shares of Procter & Gamble for the company’s Duracell division. In the move, Procer & Gamble ‘recapitalized’ Duracell with over $1 billion in cash.
The Top 3:
Wells Fargo, American Express, & Coca-Cola
Warren Buffett first purchased American Express in 1964. He has now held the stock for over 50 years. If that is not a long-term investment, I don’t know what is.
Warren Buffett first invested in Coca-Cola in 1988. He has continued to hold and invest in the soda company over the last 26 years.
Wells Fargo shares were first purchased by Warren Buffett in 1989. Since then, he has continued to load up on the bank as it has expanded across the U.S.
These 3 investments currently make up Berkshire Hathaway’s core holdings. Together, American Express, Wells Fargo, and Coca-Cola account for over 50% of his portfolio. His other large holding is IBM (11%+ of total portfolio), which was purchased more recently, during the Great Recession.
Of Warren Buffett’s Top 10 holdings at the end of 2006, he currently still holds 6 (KO, AXP, WFC, MCO, JNJ, & Wesco Financial). He did not reduce his position in just 4 of the Top 10 (KO, AXP, WFC, and Wesco Financial).
Warren Buffett is a long-term investor, but only in a select few businesses. Otherwise, he tends to buy and sell like everyone else. It is interesting to note that many of his transactions are swaps and do not trigger tax payments. Examples include his Gillette for Procter & Gamble swap, the Procter & Gamble for Duracell swap, and the Graham Holdings Company for a major TV station swap.
A few notable mistakes also stand out. Selling a sizeable chunk of Moody’s at the end of 2010 was not a good move. The partial sale of Anheuser-Busch just before a new buyout offer was puzzling as well. I expected Warren Buffett to have more ‘insider knowledge’ – especially in the Anheuser Busch deal – than he has demonstrated over the last decade. Warren Buffett is known to buy excellent stocks. His sell timing does not appear to be nearly as remarkable as his buy timing.