Every time Berkshire Hathaway (BRK.B, BRK.A) files a 13F form, Warren Buffet disciples flock to see what the Oracle of Omaha has been buying and selling. But in Buffett’s most recent disclosure, the fact that he merely stopped buying Wells Fargo (WFC), Kinder Morgan (KMI) and Axalta Coating Systems (AXTA) in Q1 could be a much more subtle indication of what he is thinking.
Buffett Still Happy With Wells Fargo (WFC)?
Berkshire owns more than $23 billion of WFC stock, so to suggest that Buffett is no longer bullish on the stock is a bit of a stretch. But it is somewhat surprising to see that Buffett didn’t buy any WFC in Q1 when the stock is down roughly 11% from the prices at which he was buying it in Q4.
Way back in 1977, Buffet told his shareholders they shouldn’t stress about falling share prices:
“If their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price,” he wrote.
That has certainly been Buffett’s philosophy when it comes to IBM (IBM), for example, which he first bought back in 2011 at a price of around $172.
Perhaps Buffett is simply content with the $23 billion worth of WFC stock, but investors will be watching closely in coming quarters for any sign that he has had a change of heart.
Buffett Blows It on Kinder Morgan (KMI)
Buffett took a relatively modest (for him at least) $600 million stake in pipeline company KMI in Q4. The timing could not have been worse. At the time, KMI was paying roughly an 8.6% dividend yield.
Throughout the energy downturn, KMI management had always been committed to the dividend. In the company’s Q3 2015 earnings release, CEO Richard Kinder even said, ”We currently expect to increase our dividend for 2016 by 6 to 10 percent over the 2015 declared dividend of $2.00 per share.”
With the prospect of a sustainable 9%-plus dividend and a potential log-term recovery in the oil market ahead in coming years, it’s not surprising that KMI stock would get the attention of Buffett. However, shareholders never got that dividend hike. Instead, less than 50 days after the company had promised to raise its dividend in 2016, it dramatically cut it by 75%.
KMI shares are now trading nearly 30% below the price Buffett paid for them in Q4. While he isn’t dumping just yet, he chose not to add a single share to his stake in Q1. It wouldn’t be surprising if he is simply waiting for the share price to recover a bit before exiting the position.
Buffett Done With Axalta Coating Systems (AXTA)?
AXTA is not one of the big-name stocks that comes to mind when investors think of Warren Buffett, but he has been a big fan of the stock in recent quarters. AXTA makes performance and transportation coatings, and the company has only been public since November 2014. Buffett started buying AXTA last year, snatching up 20 million shares at around $33 in Q2 then adding to his position at lower prices in Q3 and Q4.
In the most recent quarter, Buffett decided not to pull the trigger on AXTA, even though the stock remains well below his initial price. AXTA reported a 3.3 percent year-over-year decline in revenue in Q1. Did Buffett see something that indicates that the stock is no longer a bargain, even at a lower price? Only time will tell.
Disclosure: As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.
