What Did Warren Buffett Trade in the Third Quarter?

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Late Monday, Warren Buffett’s Berkshire Hathaway (NYSE:BRKA) filed its third quarter 13-F form.  The form provides investors with a glimpse at the holdings of Wall Street’s biggest funds.  While investors do not know the trading strategy used by the big boys, the 13-F form can provide insight to how successful investors think.  Investors should keep in mind that this is backward looking information that may have changed since the end of the third quarter.

Here’s what Berkshire Hathaway is doing with its money:

The most talked about new position is Warren Buffett’s stake in International Business Machines (NYSE:IBM).  He now has a significant 5.4% stake in the blue chip giant at an average price of $170.  Warren Buffett explained that IBM fits all of his principles.  One principle that our CHEAT SHEET framework shares with Buffett is the requirement for A-Level Management.  This will be a factor to keep an eye on as IBM recently announced that Virginia M. Rometty will succeed Sam Palmisano as chief executive on January 1.  Buffett revealed Berkshire accumulated the stake – about 64 million shares valued at $10.7 billion – from March to October.  The SEC gave Buffett permission to keep it confidential until yesterday.  According to the 13-F, IBM is now Berkshire Hathaway’s second largest stock position.

Berkshire Hathaway also added smaller new positions in CVS (NYSE:CVS), Intel (NASDAQ:INTC), Visa (NYSE:V), General Dynamics (NYSE:GD), and DirecTV (NASDAQ:DTV).  Investors should keep in mind that since these were relatively small stakes, it is likely that the trades were completed by Todd Combs at Berkshire Hathaway, and not by Mr. Buffett himself.

In the third quarter, Berkshire Hathaway added 9 million shares of Wells Fargo (NYSE:WFC), 3 million shares of Dollar General (NYSE:DG), and 2.1 million shares of Verisk (NASDAQ:VRSK).  Despite the turmoil in the financial sector (NYSEARCA:XLF), Buffett has stayed with Wells Fargo over the years.  As of the end of the third quarter, the bank is Berkshire Hathaway’s third largest portfolio position, with a holding value just over $9 billion.

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Warren Buffett sold very little in the third quarter.  He trimmed positions in Kraft (NYSE:KFT) and Johnson & Johnson (NYSE:JNJ).  Overall, Berkshire Hathaway held $59.1 billion in common stock at the end of the third quarter.  This represents a nearly 13% increase from $52.4 billion in stock holdings at the end of the second quarter.  After the changes in the third quarter, Berkshire’s stock portfolio is composed of 36% consumer goods, 31% financials, 17% technology, 6% consumer services, and 4% healthcare.  The rest is spread across industrials and energy.  Although IBM is considered a tech giant, the company only receives 8% of its earnings from hardware.

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