Warren Buffett's Recent Portfolio Activity

By Meena Krishnamsetty - June 11, 2012 | Tickers: GIS, KRFT, LEE, TGT, WMT | 0 Comments

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These days, discussions surround Warren Buffett are often speculation over his successor at Berkshire Hathaway. In February, Buffett announced that the decision had been made but declined to disclose the identity of the fund’s future leader. His son, Howard, will serve as the non-executive chairman to protect the firm's values. Though Buffett’s net worth has declined by several billion since last year, he remains the second richest person in America with a net worth of $44 billion.

Top 10 Holdings:

On Wednesday, Berkshire Hathaway filed an amended 13F, disclosing a 3.2% stake in the newspaper chain, Lee Enterprises (NYSE: LEE). Reaction in the rather illiquid stock was muted, perhaps due to investor wariness regarding its relatively recent emergence from bankruptcy last December. LEE owns Pulitzer Inc. and publishes four dozen daily newspapers including the St. Louis Post-Dispatch.

True to his long-term, value-oriented strategy, many of Buffett’s core holdings were untouched. He did upsize his position in Wal-Mart (NYSE: WMT) and downsize his position in Kraft (NASDAQ: KRFT). We prefer Target (NYSE: TGT) given what we view as an unwarranted trading discount to WMT (11.8x versus 12.5x). TGT posted a strong SSS increase of 4.4% in May, beating consensus definitively with growth in grocery, health & beauty, and apparel. We think that with a recovery in apparel underway, this will support SSS numbers in the foreseeable future. We also prefer KFT over its lagging competitors Kellogg (K) and General Mills (NYSE: GIS) with its focus on healthy Oscar Mayer products and creative marketing strategies in gum. We make it no secret that Kellogg is a bit of a disaster with its Pringles remaining its only hope. GIS is far better positioned with a strong Latin America footprint and growing US yogurt business. KFT trades at 13.7x forward P/E, GIS trades at 13.8x, and Kellogg trades at 13.4x. Activist investors Bill Ackman and Nelson Peltz are among the hedge fund managers with large bets on Kraft.

Warren Buffett also increased his positions in Wells Fargo and IBM. Both stocks are attractively priced compared to the rest of the market. Investors are staying away from banking stocks at the moment and this is creating an opportunity for long-term investors. Wells Fargo’s 2012 forward PE ratio is in single digits. IBM has been a solid long-term performer. It won’t make you rich but it will help you get much better returns than long-term Treasuries over the next 10 years. Billionaire Ken Fisher had nearly $500 million in IBM at the end of March (see Ken Fisher’s stock picks).

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