Warren Buffett is the chairman and CEO of Berkshire Hathaway (BRK.B), and a man revered amongst investors. His investment mantra is to buy and hold; indeed, his famous “rule number 4” states, “Our favorite holding period is forever.” It is not surprising, therefore, that when Buffett sells stock, the market sits up and listens. The following are six stocks that Buffett sold out during the fourth quarter of last year. All were stocks bought and held by retiring fund manager Lou Simpson.
Bank of America Corp (BAC): The North Carolina-based financial holding company was formed in 1874 and has a market capitalization of $102.65 billion. It provides banking and other financial services to business of all sizes, individuals and governments around the world. At the time of writing, its shares trade at $10.13, down 0.10% on the day and near its 52-week low of $9.40. Like most financial stocks, it has been hit hard by the financial crisis, and is forecast to make a loss this fiscal year of $0.22 per share on revenues of $90.19 billion. However, it is well-placed to revert to profit the following year, with analysts forecasting a leap to an EPS figure of $1.55 on healthy revenues of $107.48 billion in 2012. Buffett sold his 5 million share holding during the fourth quarter of 2010. BAC remains a better bet than Citigroup (C) due to its competitive position in retail banking and modestly better reputation.
Nalco Holding Co (NLC) conducts business across the manufacture and sale of specialized service chemical programs globally. Operating in three segments (water, paper, and energy), its operations include the production and services related to the sale and application of chemicals and technology to businesses involved in these segments. Nalco was founded in 1928 and is headquartered in Illinois. At today’s share price of $36.69, Nalco is capitalized at $5.09 billion. It is trading within 2% of its 52-week high ($37.34) and well above its 52-week low of $21.98. Its PE ratio is 17.72 on an EPS of 2.07. With a dividend of just $0.14 and dividend coverage of 14.79 times, it does have plenty of room for maneuver in this direction, although analysts expect lower earnings this year before recovery next year. Buffett sold out of his holdings, a 6,142,300 share stake valued at $155 million at the time of sale.
Nike Inc. (NKE): The sportswear manufacturer and seller has a market capitalization of $43.05 billion at the time of writing, with a 52-week share price range of $68.32 to $94.23. Currently, shares are changing hands at $91.71. Best known for its footwear, it also manufactures and sells sports apparel and accessories, bags, sports equipment, golf clubs and sports balls under the Nike brand name. It operates around 350 stores in the United States, and approximately the same number internationally. It is headquartered in Beaverton, Oregon, and was founded in 1964. Its shares trade on an undemanding PE multiple of 20.89, and its EPS of $4.39 means that its $1.24 per share dividend is covered over 3.5 times. EPS over the next two years is expected to reach $5.62 on revenues increasing to $25.15bn. Buffett’s Berkshire Hathaway sold its entire holding, 3,642,929 shares, valued at $292 million in the fourth quarter of 2010.
Lowe’s Companies Inc. (LOW): A major home improvement retailer in the U.S., Canada, and Mexico, Lowe’s offers a wide range of products for maintenance, repair and remodeling, home decoration, and property maintenance through its own stores and those of its subsidiaries. Founded in 1942, Lowe’s now operates a total of over 1,700 stores, administered from its base in Mooresville, North Carolina. Its shares suffered on the day of writing, down 1.39% at $22.62 against a 52-week high of $27.45 and low of $19.35. EPS are seen rising from last year’s $1.42, to $1.64 this year and $1.90 next year. Revenues are set to hit $51.95 billion during this period. On a current PE ratio of 15.92, analysts expect the shares to rise to around $27.35 within 12 months, though the highest target price is $32. Lowe's has found solid footing in its near-duopoly with Home Depot (HD). Another of Simpson’s stocks sold out by Buffett upon Simpson’s resignation, the fourth quarter of 2010 saw Buffett sell the holding of 6,500,000.
Fiserv Inc. (FISV): Buffett sold Berkshire's 3,910,800 shares in the last quarter of 2010. With its subsidiaries, Fiserv, Inc. provides financial services technology solutions. These include commerce systems, transaction processing, electronic bill processing and payment, and software and systems solutions. Operating in two segments – payments and industry products, and financial institutions -- it provides customer solutions for card-based products and services as well as internet banking technology. Its customers are businesses including banks, thrifts, credit unions, and investment firms. It has operations around the world and was founded in 1984 in Wisconsin. Its expected revenue of $4.29 billion this year fully supports its market capitalization of $8.39 billion, though tough economic conditions for the financial services industry have had an effect on the share price over the last couple of years. Analysts believe the company could take advantage of a continued upswing in the sector, and predict the share price could hit $80 in the next 12 months compared to the current price around $62. The 52-week range is $46.19 to $65.42 and the last year’s EPS of $3.25 is expected to rise to over $5 in 2012.
Comcast (CMCSA) provides consumer entertainment, information and communication products and services to residential and commercial customers across the United States. It operates in the areas of cable and programming. The cable segment includes video, high speed internet, and phone services, as well as regional news and sports networks. Comcast.net provides multiple email addresses, online storage and various proprietary content. It was founded in 1969 and is headquartered in Philadelphia. With a market capitalization of $66.58 billion, the shares moved higher by 0.84% on the day of writing to $24.07, a little more than a dollar below the 52-week high of $25.40 and well above the 52-week low of $15.71. The dividend coverage of 2.93 times and EPS of $1.32 support the dividend of $0.45. This was the smallest of these six positions sold by Buffett. Berkshire reduced its holdings by 98.44% during the third quarter of 2010, and sold out of the remaining 186,897 shares the last quarter of 2010.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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