by Charles Sizemore | November 15, 2012 12:23 pm
It’s filing season again — that time of year when we get to peek at what big, high-profile investors are buying. And perhaps no portfolio is waited for in more anticipation that Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, BRK.B).
Buffett still is bullish these days, even with all the talk of the “fiscal cliff.” If we fell over the cliff and the economy got whacked with higher taxes and massive spending cuts, Congress and the White House would hash out a deal before the economy slipped into recession.
“We’re not going to permanently cripple ourselves,” Buffett said recently in a CNN interview.
That might be true, but I’m a little more worried than Mr. Buffett. I agree that a deal will get made eventually, but the psychological damage still could be huge. And we easily could get a deep stock correction or a recession in the meantime. Policy paralysis has consequences.
With that said, what is Buffett and his team buying and selling these days?
To start, he’s buying broadcast TV. Berkshire Hathaway bought nearly 20% of Media General (NYSE:MEG). This is a small holding for a portfolio of Berkshire’s size, but it does show bullishness on the part of Buffett for traditional media.
I like to think I am a contrarian investor. But then I look at Warren Buffett and I realize that I’m not nearly as big of a contrarian as I thought. I wouldn’t touch traditional media right now because I can’t see where the profits will come from. Advertising is an industry in flux, and TV competes with the Internet for eyeballs.
But then, there is a proper price for everything, and Buffett seems to believe that, at 0.16 times sales, Media General is simply too cheap to ignore.
Buffett additionally made three additions in the gritty industrial sphere, buying nearly 4 million shares of Deere & Co (NYSE:DE), the producer of tractors and others heavy-duty equipment; 1.2 million shares of Precision Castparts (NYSE:PCP), which essentially is a metal shop with a worldwide presence; and 1.5 million shares of Wabco Holdings (NYSE:WBC), a world leader in brake and control systems for large commercial vehicles.
Truck parts and tractors. Buffett clearly believes that industrial activity will be picking up in the years ahead, both in the United States and overseas.
Now, what’s Buffett and his team selling?
He sold out of Dollar General (NYSE:DG), Mondelez (NASDAQ:MDLZ), Ingersoll-Rand (NYSE:IR) and CVS (NYSE:CVS).
The sales have little obvious in common, other than all but Ingersoll-Rand have a strong consumer focus. Dollar General is a discount retailer of assorted sundries, CVS is national chain of pharmacies, and Mondelez is a producer of packaged foods. Yet Berkshire still maintains enormous positions in Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG) and Walmart (NYSE:WMT), so you can’t reach the conclusion that Buffett is bearish on the consumer.
Still, Berkshire’s portfolio has been consistently drifting away from consumer-oriented stocks for months and toward grittier industrial stocks and business services stocks, such as IBM (NYSE:IBM).
Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter, and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, Sizemore Capital was long PG and WMT. Sign up for a FREE copy of his new special report: “Top 3 ETFs for Dividend-Hungry Investors.”
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