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Warren Buffett’s Short-Term Hit and Run Transactions

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Warren Buffett is known for his highly successful value investing approach. The “Oracle of Omaha” usually puts his money down, long-term, in stable companies, whose businesses he understands, like The Coca-Cola Co (NYSE:KO) or American Express Company (NYSE:AXP) – both these stakes have been in his portfolio for at least 15 years.

However, over the past few years, his fund, Berkshire Hathaway, has disclosed some short or medium-term stakes, positions it did not maintain for more than a year.

Warren Buffett
Warren Buffett
Berkshire Hathaway

In many occasions, these stocks were picked by one of Buffett’s hedge fund managers, Todd Combs and Ted Weschler, and not by himself. For instance, check out Combs’ participation in the Precision Castparts Corp. (NYSE:PCP) deal, one of the firm’s largest moves of all time.

hedge funds vs. mutual funds

In this article, we will seek to shed light at the criteria behind these selections and the decisions to sell out. It should be noted that we’ll focus only on stakes closed out between 2010 and 2015, inclusive, and not on large reductions, like the 78% cut that the firm’s Chicago Bridge & Iron Company N.V. (NYSE:CBI) position experienced in the third quarter of 2015, or the 93% trim seen at the Graham Holdings Co (NYSE:GHC) bet over the second quarter of 2014.

As readers will notice, it seems like Combs and Weschler’s strategy is all about profit taking, acquiring stocks at low prices and selling when they surge, instead of keeping them for long periods of time.

Express Scripts Holding Company (NASDAQ:ESRX)

Let’s start with one of the most recent positions that Berkshire Hathaway held for less than two years, Express Scripts Holding Company (NASDAQ:ESRX). Buffett’s firm opened a stake in the Fortune 100 company over the third quarter of 2014; it comprised 449,489 shares, valued at more than $31 million as of September 30,2014 – which makes it a rather small investment for Berkshire Hathaway.

As many analysts noted at the time, the stock was most likely picked by either Todd Combs or Ted Weschler, who have been managing some of Berkshire’s investments for several years now.

Express Scripts Holding Company (NASDAQ:ESRX)’s stock was almost flat in the third quarter of 2014, when the position was opened. And, it seems like Berkshire was hoping for a turnaround. However, the firm sold all of its shares of the company over the following quarter, at an estimated average price of $78.34, presumably generating a small return on its investment – especially if the position was started in July of 2014.

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Archer Daniels Midland Company (NYSE:ADM)

Next up is Archer Daniels Midland Company (NYSE:ADM), another stake that Berkshire only held for one quarter. The fund bought more than 5.95 million shares of the company over the fourth quarter of 2012, when the stock was almost flat – although slightly up, after struggling in previous quarters. The stake was valued at more than $163 million by the end of 2012.

After Berkshire acquired the stake, the company reported strong fourth quarter results, which helped its stock recuperate approximately 25 percent of its value over the first quarter of 2013. Once again, the position was closed after one quarter, at a profit. In its 13F for the first quarter of 2013, Berkshire declared holding no shares of Archer Daniels Midland Company (NYSE:ADM).

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