Buffett Moves Berkshire Out of Health Care (UNH, WLP, JNJ, GSK, SNY)

by Jeff Reeves | May 18, 2010 11:02 am

Berkshire Hathaway Inc. (NYSE: BRK-B[1], BRK-A[2]) just released its investment portfolio — albeit belatedly. Warren Buffett’s company has shown its investment holdings as of the end of the first quarter. The one thing that stands out in Berkshire Hathaway’s holdings list for the quarter is a clear movement away from health care — including outright sells of positions in health care stocks United Health Group (NYSE: UNH[3]) and Wellpoint Inc. (NYSE: WLP[4]).

Buffett also reduced Berkshire’s position in health care stock Johnson & Johnson (NYSE: JNJ[5]). Pharmaceutical stocks GlaxoSmithKline (NYSE: GSK[6]) and Sanofi Aventis SA (NYSE: SNY[7]) both remained steady.

Here are the specifics for Warren Buffett’s biggest health care stocks that are part of Berkshire Hathaway’s current investment portfolio:

• Berkshire owned 1.51 million shares of GlaxoSmithKline (GSK[6]) in the latest BRK stock report, the same as the previous quarter.
• Warren Buffett decreased Berkshire Hathaway’s position in Johnson & Johnson (JNJ[5]), down to 23.9 million shares from just over 27 million shares in the previous quarter. That’s a dramatic drop from the 62 million shares of JNJ stock Buffett endorsed at one point in 2008.
• French pharma stock Sanofi Aventis (SNY[7]) remained the same part of Berkshire’s investment portfolio, at about 3.9 million shares and with no change to the position.
• Health insurance stock United Health Group (UNH[3]) disappeared from the BRK stock portfolio as shares went from nearly 1.2 million shares to zero after three or four quarters of steady trimming at the hands of Warren Buffett.
• Insurer Wellpoint (WLP[4]) also was erased from BRK stock holdings, from over 1.3 million shares at the end of 2009.

The move isn’t much of a surprise, since the sweeping health care reform bill that was passed by Congress recently has changed the landscape of the health insurance business already. Health care stocks had been adjusting in anticipation for the bill’s passage, and now that the reforms are law it’s likely that stocks such as UNH and WLP will see their margins and sales slowly eroded by federal health care regulations.

Barring an overturning of the health care reforms, Buffett appears to be bearish on providers and the health care industry in general. While Berkshire Hathaway continues to hold considerable positions in pharma stocks GSK and SNY, the fact that both positions have stayed flat in the first quarter isn’t exactly a ringing endorsement.

Of course, this is all speculation based on a report from several weeks ago. If it was easy to figure out what Warren Buffett was thinking and how Berkshire Hathaway will tailor its investment portfolio, any investor could make a fortune on Wall Street.

As of this writing, Jeff Reeves did not own positions in any of the stocks named here.

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