Wednesday, May 31, 2006

Tracking Buffett 2

It's that time again. It's been more than six months since we reviwed Buffett's stock holdings. A lot has been going as Mr. Buffett has been busy putting his cash to work. He has reduced or eliminatd some positions while taking significant new positions along the way.

Berkshire significantly reduced its stake in Pier 1 (NYSE: PIR) as the furniture retailer has continued to struggle. He continues to hold a small position. Apart from a few full divestments, Buffett has pared back his positions in H&R Block (NYSE: HRB) by around 40%, Gap (NYSE: GPS) by 35%, Sealed Air (NYSE: SEE) by almost 38%, and Iron Mountain (NYSE: IRM) by 30%. I was a bit surprised by the 16% reduction in Home Depot (NYSE: HD), but this does not seem to be a significant sale at this stage since he had increased his position by 429% in Q3 of 2005. In fact I would use a bit more weakness in the shares to add to my position.

Meanwhile, the additions to the portfolio are worth paying attention to. Lots of attention. I have already talked about Anheuser-Busch and Wal-Mart in a previous post and continue to hold both stocks. Buffett increased his Wells Fargo (NYSE: WFC) holding by 50% and Lexmark (NYSE: LXK) by 200%. Lexmark had plunged more than 30% in Q4, when Buffett added to his position, and has almost fully recovered. Also since last September, Berkshire has doubled its Tyco (NYSE: TYC) stake. We have also used recent weakness in the shares to add to our position.

During the latest quarter, Berkshire took new positions in General Electric (NYSE: GE), United Parcel Service (NYSE: UPS), and ConocoPhillips (NYSE: COP). Foreign stock additions to the portfolio include Diageo PLC and Tesco PLC. What all these companies have in common is international revenue exposure. As I noted in a recent post, Mr. Buffett is using this strategy to hedge against further deterioration in the US Dollar. He is probably just getting started. I have been a GE shareholder for almost a decade and would use any weakness in the shares to add to my position in the low $30s. As for ConocoPhillips, it trades at a discount to peers primarily because of the company's aggressive exploration expenditures. Regardless, the new position is an endorsement by Mr. Buffett that high energy prices are here to stay. In energy, I have been a shareholder of Canadian income trusts with exposure to the Oil Sands as well as Encana (NYSE: ECA) and Petro Canada (NYSE: PCZ).

Stay tuned as Mr. Buffett continues to deploy his cash.

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