Warren Buffett’s Stock Sales: Our Favorite Holding Period is Forever?

Warren Buffett says “our favorite holding period is forever” and yet he sold eight stocks during the fourth quarter of 2010. It was surprising that Berkshire hadn’t made any new purchases during the fourth quarter. Todd Combs must still be going through orientation. Why didn’t he buy at least some of the companies he held in his hedge fund? Anyway, the star of this 13F filing isn’t Todd Combs. It’s Lou Simpson, who retired at the end of last year. It’s crsytal clear that Warren Buffett made Lou Simpson sell all his stock picks. Buffett was probably never comfortable with Simpson’s stock picks, so he got rid of those stocks even if it meant changing his “Rule Number 4: Our favorite holding period is forever”. Here is how those 8 stocks performed:

Warren Buffett

Company Ticker 2011 Return Value (Millions)
Bank of America BAC 10.7% 66
Becton Dickinson & Co. BDX -3.8% 140
Comcast Corp CMCSK 9.1% 3
Fiserv Inc FISV 6.5% 210
Lowes Companies Inc. LOW 0.5% 145
Nike Inc NKE 0.9% 292
Nalco Holding Co. NLC -14.4% 155
Nestle NSRGY -9.1% 182

The weighted average return for Lou Simpson’s 8 stock picks were -1.7% since the end of 2010, vs. SPY’s 5.9%. So, Berkshire Hathaway investors avoided an underperformance of 7.6 percentage points for a total portfolio value of $1.2 Billion. Of course one shouldn’t judge the performance of a portfolio based on a few weeks’ performance. Insider Monkey, your source for free insider trading data, calculated Lou Simpson’s 2010 performance as well. These eight stocks had a weighted average return of 20.2% beating the S&P 500 index by 5 percentage points. The same portfolio had a 37.5% return in 2009, beating the S&P 500 index by more than 10 percentage points. These stocks lost 25.1% in 2008 and managed to beat the S&P 500 index again by more than 10 percentage points.

It’s clear that these were nicely picked stocks that managed to beat the market by a huge margin over the past 3 years. But why did Warren Buffett sell these stocks now? It seems Lou Simpson’s alpha is actually higher than the rest of Berkshire Hathaway’s stock pickers.

There were a few changes in Warren Buffett’s other holdings. He added 6.2 million shares of Wells Fargo (WFC). He also sold around 200,000 shares of Bank of New York Mellon (BK) and more than 450,000 shares of Moody’s (MCO).

Company Ticker Value (Million) Return
Coca Cola KO 13154 -3.3%
Wells Fargo WFC 10618 9.1%
American Express AXP 6507 9.4%
Procter & Gamble PG 4938 1.4%
Kraft Foods Inc. KFT 3315 -2.7%
Johnson & Johnson JNJ 2636 -1.9%
Wal-Mart Stores Inc WMT 2105 3.3%
Wesco Finl Corp. WSC 2101 5.4%
ConocoPhillips COP 1982 5.1%
US Bancorp USB 1862 1.8%
Washington Post WPO 759 -1.8%
Moody’s MCO 754 14.8%
M & T Bank MTB 467 3.2%
Costco Wholesale Corp COST 313 4.2%
USG Corporation USG 287 13.5%
Torchmark Corp. TMK 169 6.5%
General Electric GE 142 16.6%
Sanofi Aventis SNY 131 5.0%
UPS UPS 104 4.5%
GlaxoSmithKline GSK 59 -2.2%
Bank of NY Mellon BK 54 6.8%
Exxon Mobil XOM 31 13.9%
Ingersoll-Rand Company IR 30 0.8%
Gannett Inc. GCI 26 13.1%
Comdisco Holding CDCO 14 -2.8%

The weighted average return for Warren Buffett‘s stock portfolio is 3.1% since the end of December, underperforming the SPY’s 5.9%. These stocks slightly underperformed the SPY both in 2009 and 2010. Previously we showed that Warren Buffett’s alpha was zero between 2000 and 2009. Over the past two years, Warren Buffett’s portfolio didn’t even manage to beat the SPY.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!