Warren Buffett is considered by many people to be the best investor of the modern era. Getting to be one of the world’s richest men on paper may have something to do with that. This makes the inner workings of the Berkshire Hathaway Inc. (NYSE: BRK-A) investment portfolio more than just a little important. One common investor strategy is to peruse the Buffett and Berkshire Hathaway stock portfolio each quarter. Seeing each new position taken by Buffett or his portfolio managers has become a hobby and passion for the investing community. After all, the richest of the rich must know at least something.
What if it turns out that it is just as important, or perhaps even more important, to know when Berkshire Hathaway or a member of Buffett’s team decides to sell a stock? Again, being the richest of the rich means you must know something. Or does it?
24/7 Wall St. has tracked the Berkshire Hathaway portfolio changes every single quarter for 10 years, and one of the cofounders has tracked these quarterly changes since the mid-1990s. It turns out that tracking Buffett’s stock sales in public companies outside of Berkshire Hathaway may be more important than tracking when Team Buffett actually buys a stock. History has shown that Buffett’s stock picks tend to rise through time. That being said, many of the stocks that Buffett or his portfolio managers sell out of end up rallying massively in the years afterward.
It is important to not think that Buffett and his investing managers are losers by any means. Buffett and his team are frequently considered to be value investors, or at least high-quality investors who avoid troubled companies.
There are many reasons that Buffett and his team have sold stocks. Sometimes they just become too expensive to hold for value and quality managers. Sometimes portfolio managers or unit heads retire, and Buffett doesn’t like to inherit opinions. Buffett said back in 2011 that positions created by Lou Simpson, who retired at the end of 2010, were liquidated from the stock picker’s portfolio. As you will see, many sales took place during or after Simpson’s 2010 exit. Also, sometimes Buffett needs to raise cash to fund big acquisitions with an admission that he likes to keep at least $20 billion in cash on hand.
What has seemed uncanny is by how much some of the Buffett stocks, or those from his team, have risen through time after they were sold. Buffett’s newest portfolio managers are Todd Combs and Ted Weschler. They are proving to be much more nimble, with shorter time periods in which they are willing to hold stocks, compared to Buffett. They are also well respected by the investing community — after all, if the richest of the rich will trust you then maybe they know something too.
24/7 Wall St. has tracked many equity sales made by Buffett and by his investing team, and the history books might very well show that Buffett should have never allowed the stock sales to take place. Here are 10 stocks that Buffett should have never sold. Six of them are now Dow Jones Industrial Average (DJIA) stocks, and four were included on the 24/7 Wall St. stocks to own for the decade.
The position in Dollar General Corp. (NYSE: DG) was one that one of the Buffett portfolio managers took on, rather than a position that Buffett himself would have taken. The stake was also after Dollar General came public again, after being owned by private equity, and the team at Berkshire Hathaway got the trend right that dollar stores were “reaching up” into the $5 and $10 spending and growing its base of products to even include real food. This dollar store reaching-up trend is here to stay, and they even rival Wal-Mart and other top retail destinations for millions of Americans.
The Dollar General position started out at 1.5 million shares but grew to almost 4.5 million. Team Buffett sold out of the position in 2012 after seeing large gains — but shares have risen from an average of less than $50 then to over $80 now. Despite making a profit, this is a position that could have grown and grown. Dollar General even started paying a dividend in 2015.
The largest fully-integrated oil and gas company that can be invested in is Exxon Mobil Corp. (NYSE: XOM). Buffett has been in and out of the energy sector over the years, including in Exxon Mobil. His recent Phillips 66 investment and his stake in Suncor, as well as having the exposure to transporting oil in BNSF, prove that Buffett believes oil and gas will be relevant for decades. Buffett sold Exxon Mobil before the energy meltdown went into overdrive in 2015.
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