Investing

Short Sellers Change Bets Against Top Warren Buffett Stocks

Everyone seems to still be enamored with Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A). Unfortunately, the Oracle of Omaha and his top trading professionals have come under at least some scrutiny of late over their top investment choices. Time has historically been on Buffett’s side.

24/7 Wall St. wanted to review the highest positions in Berkshire Hathaway’s equity holdings to see what has been happening in the minds of short sellers against the key Buffett bets. His total equity portfolio holdings are now over $100 billion, and it turns out that roughly 58% of that balance was tied up in four stocks: American Express, Coca-Cola, IBM and Wells Fargo.

American Express Co. (NYSE: AXP) saw its short interest fall by 5.7% at the end of December. This was down to 8,782,781 shares short, versus 9,314,482 shares short as of mid-December. While the short interest represents three days to cover, investors might want to consider that Buffett’s stake has been static at 151 million shares for as long as one can remember. Our own 2015 bullish and bearish case for American Express highlighted many issues, including how its dividend of barely 1% is just too low.

Coca-Cola Co. (NYSE: KO) saw its short interest rise by 2.4% in the second half of December. This was up to 42,121,993 shares short from 41,122,952 shares in the prior period. While this is three days to cover for the 42 million shares short, Berkshire Hathaway has held the same whopping number of 400 million shares for as long as memory serves. Buffett likely did not even bother wondering about the uptick in the short interest. Our own 2015 bullish and bearish case for Coke highlighted many issues surrounding the future of Coca-Cola.

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International Business Machines Corp. (NYSE: IBM) saw its short interest fall by 1% or so, to 20,041,227 shares at the end of December from 20,250,032 as of mid-month. This represents roughly four days to cover. A change of 1% lower might not seem like much, but much of the negative sentiment has only grown in strength. Our own 2015 bullish and bearish outlook for IBM noted cheap valuations but a story that unfortunately has not changed. Also, IBM’s drop has brought criticism on Buffett for finally betting big on tech — and making the wrong tech bet.

Wells Fargo & Co. (NYSE: WFC) saw its short interest fall almost 10% to 33,339,592 shares at the end of December. This was from 36,947,816 shares short in mid-December. What is interesting is that Buffett and his team have now stopped accumulating Wells Fargo shares. The short interest represents roughly two days to cover, but this puny compared to the 463.458 million shares owned by Berkshire Hathaway.

Buffett also has large non-equity stakes in Bank of America Corp. (NYSE: BAC) and Dow Chemical Co. (NYSE: DOW), initially worth $5 billion and $3 billion, respectively. Those stakes are now worth far more, and it could end up that Buffett or his successor will decide to hold on to these down the road. Bank of America saw its short interest rise more than 10% to 86,537,899 shares at the end of 2014. Dow Chemical saw its short interest rise 15% to 27,807,602 shares short in the period.

So, what are short sellers up to in Buffett’s own stock? Berkshire Hathaway Inc. (NYSE: BRK-B) shares saw their own short interest drop handily by over 11% to 11,280,501 shares as of the end of December. Buffett probably is not worried about that either.

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