Buffett reshuffles holdings: BNY is in, Home Depot out; Wells up, Nike down

Warren E. Buffett’s Berkshire Hathaway Inc. in the third quarter sold stakes in CarMax Inc. and Home Depot Inc., and cut its holding of Nike Inc. as the billionaire replaced a retiring investment manager and built the company’s cash holdings.

The company also lowered its stake in Nike, the world’s largest sporting-goods provider, by 52% to 3.6 million shares, Berkshire said Nov. 15 in a regulatory filing that listed U.S. equity holdings as of Sept. 30. It had 7.7 million shares of auto seller CarMax and 2.8 million shares of Home Depot, the largest U.S. home improvement retailer, on June 30.

The company also eliminated stakes in trash hauler Republic Services Inc., NRG Energy Inc. and Iron Mountain Inc., a provider of records management. Berkshire divested or reduced holdings in 12 companies and boosted stakes in Johnson & Johnson and Wells Fargo & Co.

Berkshire disclosed a new investment in Bank of New York Mellon Corp., the world’s largest custody bank.

Mr. Buffett has trimmed Berkshire’s portfolio since the 2008 financial crisis and focused instead on buying whole companies.

The 80-year-old chairman, renowned for multibillion-dollar stock bets, is reshuffling his holdings as he welcomes hedge fund manager Todd Combs, hired by Berkshire in October.

Lou Simpson, 73, once identified by Mr. Buffett as his emergency stand-in, is scheduled to depart at year-end from Berkshire’s Geico unit.

“It looks to me like he’s selling out of the Lou Simpson holdings,” said Gerald Martin, a finance professor at American University’s Kogod School of Business. Mr. Buffett may be amassing funds for Mr. Combs to invest “or he may have something up his sleeves, a potential acquisition somewhere, and he’s building the cash for that,” Mr. Martin said.

‘DRIVER OF VALUE’

Berkshire’s equity sales exceeded purchases by about $1.2 billion in the third quarter, according to a Nov. 5 regulatory filing. It was the sixth period out of eight in which the company was a net seller of equity securities.

Berkshire held $57.6 billion in stocks Sept. 30.

“The equity investments have been a great driver of value for the company, but as the pot gets bigger, it’s harder to put it to work,” said Paul Howard, director of research at Solstice Investment Research. “He’d rather put the money into acquisitions of businesses and make it easier on the new investment managers” by leaving them with a smaller portfolio to oversee, he said.

Mr. Buffett acquired BNSF Railway Co. in February for $26.5 billion to add a railroad to Berkshire’s collection of more than 70 subsidiaries in industries spanning insurance, energy and ice cream. In the past two years, the firm has cut its holding in Moody’s Corp. by more than a third and divested a stake in SunTrust Banks Inc.

Berkshire trimmed its stake in Procter & Gamble Co., the world’s largest consumer products company, by 1.7% to 76.8 million shares in the third quarter.

It cut its holdings of Comcast Corp., the largest U.S. cable television company, by about 98%. Stephen Burke, a Berkshire director, is chief operating officer at Comcast.

Berkshire cut its stakes in Nalco Holding Co., a provider of industrial water treatment services; Ingersoll-Rand PLC; Swords, an Ireland-based maker of air conditioners; and Fiserv Inc., a provider of electronic commerce systems and services.

“Investment decisions are made for any number of reasons, not all of which reflect the underlying strengths of a business,” Dan O’Neill, a spokesman for Iron Mountain, wrote in an e-mail. “We’re not privy to how or why those decisions are made, but our business is strong and performing well.”

Representatives of Comcast and Home Depot declined to comment.

Mr. Buffett didn’t respond to a message left with an assistant.

Representatives of Nike and CarMax didn’t respond to messages seeking comment.

‘VOTE OF CONFIDENCE’

Mr. Buffett’s firm had 1.99 million shares of BNY Mellon at the end of the third quarter. The stake in Wells Fargo rose to 336.4 million shares, from 320.1 million at the end of June.

Berkshire has increased its Wells Fargo stake in four quarters since the beginning of 2009 as reductions in short-term interest rates and financial industry rescue programs helped revive banks’ profits.

“That is very much a vote of confidence — not only in Wells Fargo, but in the commercial banks and the banking sector,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. “Warren Buffett is perhaps more confident now in the economic outlook that our recovery, however slow, will continue.”

Mr. Buffett, who also is Berkshire’s chief executive, has said that the company eventually will divide his roles as head of investments and operations among more than one successor. Mr. Combs, who has specialized in financial services investments, initially may manage $2 billion to $3 billion, Fortune magazine reported.

Berkshire increased its stake by 3.2% in Johnson & Johnson, the world’s largest maker of health care products, according to the filing. The stake was 42.6 million shares as of Sept. 30.

Mr. Buffett has said that he built his equity portfolio by buying and holding stocks of companies that he thinks have durable competitive advantages. Berkshire is the top shareholder in The Coca-Cola Co., the world’s largest soft-drink maker, and American Express Co., the biggest credit card issuer by purchases.

Berkshire increased its stake in Munich Re, the world’s biggest reinsurer, to more than 10% in October. It disclosed a 3% stake in the German company in January.

The Nov. 15 filing by Berkshire includes only U.S. holdings. Equity investments abroad are reported to local regulators.