Warren Buffett Makes 13 Serious Changes in His 2017 Stock Picks

February 15, 2017 by Jon C. Ogg

Berkshire Hathaway Inc. (NYSE: BRK-A) has released its public equity holdings as of December 31, 2016. While the stock picks and holdings of Warren Buffett and his portfolio managers are always followed closely, the number of changes for the 2017 portfolio was massive. 24/7 Wall St. has tracked Warren Buffett and Berkshire Hathaway’s investments for years now, and the top issue here is that the changes actually look larger than they have ever been in any quarterly report.

Buffett and his team of portfolio managers had public equity holdings of $147.9 billion at the end of 2016. This was up almost $20 billion from the $128.8 billion counted at the end of the third quarter of 2016, and it is even higher than the $115.46 billion counted as of December 31, 2015.

Buffett is considered to be the ultimate “whale watch” by investors who like seeing what hedge funds and activist investors are buying and selling. After all, he is considered to be the best investor of modern times. One key issue to consider here is that Ted Weschler and Todd Combs obviously have been given an expanded role in running the Berkshire Hathaway stocks.

24/7 Wall St. has shown the full Buffett holdings, and the reality is that there are 13 major changes that need to be considered by investors. Again, the total volume of changes looks larger than anything ever seen from Buffett and his team on a quarterly basis. While Buffett doesn’t care about analyst reports and price targets, the consensus analyst price targets from Thomson Reuters have been included so investors can see how these match up against the current share prices.

Apple Inc. (NASDAQ: AAPL) has become a much larger holding for Team Buffett, and it was selected by one of the Buffett portfolio managers in 2016. The new Apple stake at the end of 2016 was 57,359,652 shares, up from just 15.227 million in the prior quarter. It seems quite fortunate for Berkshire Hathaway that Apple shares just hit a new all-time high on the same day that this higher stake was revealed. Does it seem odd for Buffett’s team to be buying up Apple shares when Buffett is good friends with Bill Gates, and considering that Buffett has pledged his estate to the Bill and Melinda Gates Foundation? If Berkshire Hathaway’s stake remained static, it was worth $7.7 billion in mid-February.

Didn’t Buffett hate airlines for many years? His portfolio managers feel the opposite way now as they have grown their stakes to a sector bet worth over $9 billion. Maybe they now have a good model for the likes of Buffett. They have a wider moat to defend their business with fewer legacy carriers to compete against. Airlines also get to gouge their customers with any fees they can think of, and airline prices now have pricing power. Some airlines are even paying dividends.

American Airlines Group Inc. (NASDAQ: AAL) was a new stake at the end of September, and the portfolio managers more than doubled the stake. Berkshire Hathaway’s end-of-year stake in American Airlines was 45.54 million shares, up from 21.77 million shares just a quarter earlier. That stake would be worth some $2.1 billion in current terms, and with shares above $47, the consensus analyst price target of $54.33 would still indicate upside ahead.

United Continental Holdings Inc. (NYSE: UAL) was a much larger stake of 28.95 million shares at the end of 2016. This had been listed as a new stake of 4.533 million shares at the end of September. If this stake has remained the same, it was worth more than $2.1 billion as of mid-February. At $75.50, United Continental shares have a 52-week range of $37.41 to $76.80, and they also have a consensus analyst price target of $85.44.

Delta Air Lines Inc. (NYSE: DAL) was listed as a new stake of 60.02 million shares, up sharply from the prior stake of 6.333 million shares. With Delta’s stock at almost $51 after the filing was disclosed, this stake would be worth some $3.06 billion at current share prices. Delta’s 52-week range is $32.60 to $52.76.

Southwest Airlines Co. (NYSE: LUV) was also an airline stake that was taken at the end of the third quarter, but Buffett told CNBC that he bought this one after his portfolio managers bought the other big three airlines. The actual stake was not known when Buffett made that announcement a quarter earlier, but the new size of the stake was just over 43.2 million shares. Southwest’s post-filing share price was last seen at $56.50, in a 52-week range of $35.42 to $56.91, and with a consensus price target of $62.07. This Southwest Airlines stake would be worth more than $2.4 billion at current prices.

Sirius XM Holdings Inc. (NASDAQ: SIRI) may be an unexpected winner here but investors need to realize that this Buffett stake was under the Liberty parent/tracking shares of The Liberty SiriusXM Group (NASDAQ: LSXMA) rather than in the direct Sirius XM shares. The Berkshire Hathaway stake was listed as 32.2 million shares of the Sirius-Liberty trade, worth $1.01 billion at the end of 2016. Sirius XM Holdings shares were indicated up 2% at $4.83 at a new 52-week high early on Wednesday, versus a 52-week low of $3.50. Sirius XM’s consensus analyst price target was last seen at $5.17. The Liberty SiriusXM Group was up 1.5% at $36.46 on Wednesday, in a 52-week range of $28.00 to $37.02 and with a consensus price target of $42.68.

Bank of New York Mellon Corp. (NYSE: BK) was a larger stake yet again at 21.671 million shares at the start of the year. This stake has grown over time, and it was 21.136 million shares as of September 30. The Bank of New York Mellon stake would be worth just over $1 billion in current dollars. At $47.00 after the filing, Bank of New York has a 52-week range of $33.82 to $49.54, and it has a consensus analyst target of $51.68.

Monsanto Co. (NYSE: MON) was listed as a new stake of about 8.04 million shares at the end of 2016. This was worth $845 million at the end of 2016, and it was worth $876 million after the filing had been seen. What is odd here is that Monsanto is already in a mega-merger with Bayer for its seed dominance. Could there be more at work than just a merger-arbitrage bet?

Deere & Co. (NYSE: DE) may feel like a mistake after the post-election rally took its shares up 22% since November 8. Berkshire Hathaway has eliminated its stake in Deere from its portfolio of stocks. This stake in Deere was previously listed as 21.085 million shares as of September 30, but note that the size of the stake had already come down in 2016 from its peak.

Kinder Morgan Inc. (NYSE: KMI) was eliminated entirely from Berkshire Hathaway’s public stocks, and it appears that the portfolio managers probably made a handy profit after buying these shares cheaply before oil stocks had fully recovered from their lows. This had been a lower stake and was last seen down at 20 million shares in September, versus 26.533 million shares as of June 30. Kinder Morgan was selected by one of Buffett’s portfolio managers.

Lee Enterprises Inc. (NYSE: LEE) was eliminated entirely, after having been the same tiny stake of only 88,863 shares.

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Verizon Communications Inc. (NYSE: VZ) was practically eliminated, down to just 928 shares worth a mere $50,000 at the end of 2016. This was likely overlooked, as the Verizon stake was 15 million shares during most of 2016.

Wal-Mart Stores Inc. (NYSE: WMT) was a significantly lower stake, down to 1.393 million shares at the end of 2016. That stake had been cut to about 12.9 million shares at the end of September, and it had been as high as 60.385 million shares during 2015. The world’s largest retailer was worth just about $96 million at the end of 2016, making it largely immaterial to the likes of Buffett’s billions.