Berkshire Hathaway Inc. (NYSE: BRK-A) and Warren Buffett often are followed in corporate America as the undisputed investment kingmakers of all time. And 2013 has been an incredibly strong year, with gains so far of nearly 30% for this year alone. Imagine if Buffett’s gains included all the opportunity cost of past investments that were sold that should not have been. 24/7 Wall St. has evaluated many of the past Warren Buffett and Berkshire Hathaway stock sales and found multiple instances of positions that the Oracle of Omaha never should have surrendered.
The aim is not simply to act as a Monday morning quarterback, nor merely being a critic after the fact. Buffett is not immune from mistakes, but the reality is that his picks through time have been exponentially more significant than his losses. Our aim is to review what happens along the way that interrupts the “buy and hold forever” mentality that Buffett has done so well with over the past five decades or so — and to learn from it.
The reality is that Buffett and Berkshire Hathaway Inc. (NYSE: BRK-B) have made many purchases and sales through time. Some sales were for huge gains, while others were at a loss. Buffett and his portfolio managers have such a great track record and have made such large gains that they do not have to justify any single loss to anyone. That being said, there are solid investing and strategic lessons to be learned here for investors of all sorts.
Dollar General Corp. (NYSE: DG) was purchased back in 2011 and was initiated almost certainly by Todd Combs. The position started out small at 1.5 million shares, but ultimately it grew to almost 4.5 million shares. This is one that Team Buffett sold out of in 2012 after seeing large gains. The sin in selling out of Dollar General was not the gain, nor was it that the valuation was misread. The sin in selling out here is that the dollar store theme, which is more like an under $5 one now, is a trend of the future for the demographics of America. This was and is a stock to own for the whole decade, and chances are high that this company has much higher share prices ahead, even though it is close to an all-time high now.
General Dynamics Corp. (NYSE: GD) was likely another position that was added on by Combs. It was a new position of more than 3 million shares in the third quarter of 2011 initially. Shares averaged about $60 during that quarter, and they were sold in the second quarter of 2013 when shares averaged about $80. The price was recently around $88, and Wall Street now has a consensus price target of more than $95, plus you get a 2.5% yield even at the all-time highs. Maybe Combs just wanted to lock in the gains here, but the reality is the driving force behind the sale was and remains a mystery.