My friend Doug Kass has a similar take to my own on the questions raised by Warren Buffett’s decision to sell parts of some core stock positions:
Specifically, Buffett has surprisingly sold off portions of some meaningful core positions, including Johnson & Johnson (JNJ), ConocoPhillips (COP) and Procter & Gamble (PG). Placing a terminal value on some meaningful investments and then selling them goes to the root of Buffett’s long-held investment strategy and questions Warren Buffett’s basic notion that his favorite holding period is forever.
Here are some additional questions that should be asked of Warren Buffett (some of which I hope to relay at this year’s Berkshire Annual Meeting), especially after the release of Berkshire Hathaway’s portfolio changes:
- Have sales been made because Warren Buffett now feels that the moats protecting the Johnson & Johnson, ConocoPhillips and Procter & Gamble franchises have been flooded?
- If those moats were flooded, how does Buffett rationalize still holding 300 million shares of Wells Fargo and 151 million shares of American Express, two financial companies that have seemingly lost their proprietary character and market-leading positions several years ago?
- Why has Berkshire substantially depleted its $40 billion cash hoard with a pell-mell plunge into purchases of General Electric (GE), Goldman Sachs (GS) and other recent investments? What was the rush, and why was the cash "burning a hole in his pocket?"
- Is Warren Buffett seeking a margin of safety in building up cash in light of the precipitous drop in his portfolio’s value?
- Has Warren Buffett reassessed his view of the economic outlook over the intermediate term?
- While the losses from his massive short index put position have resulted in ever larger non-cash charges/losses, has Buffett had second thoughts regarding these derivative bets, and has he decided to use the cash raised to hedge the short position?