We already gave a full run-down position by position in the Berkshire Hathaway Inc. (NYSE: BRK-B, BRK-A) holdings as of December 31, 2009.  What is interesting is that this round of 13F holdings had many changes.  Most of these have been reported by the media, but there has not really been a sector by sector breakdown of what Uncle Warren is doing for what reasons.  We wanted to break these out in a separate group rather than just list the holdings with the additions and deletions inside.

ConocoPhillips (NYSE: COP), Exxon Mobil Corp. (NYSE: XOM), Becton, Dickinson and Company (NYSE: BDX), Johnson & Johnson (NYSE: JNJ), Gannett Co. (NYSE: GCI), Moody’s Corp. (NYSE: MCO), Wal-Mart Stores Inc. (NYSE: WMT), Procter & Gamble (NYSE: PG), United Health Group (NYSE: UNH), Wellpoint Inc. (NYSE: WLP), Wells Fargo & Co. (NYSE: WFC), Sun Trust Bank (NYSE: STI), Iron Mountain (NYSE: IRM), Republic Services Inc. (NYSE: RSG), Norfolk Southern (NYSE: NSC), Union Pacific Corp. (NYSE: UNP), and NRG Energy (NYSE: NRG) were most of the changed positions at Berkshire Hathaway.  We have given color on each and predictions of which stocks Buffett will probably add to or cut further.

Media outlets spent much time discussing the drop of ConocoPhillips (NYSE: COP) down to about 37.7 million shares.  Buffett telegraphed last year that he made a mistake and that he was going to use these shares as an offset.  The holding was 57.43 million shares a quarter before and down from 62.485 million at the end of June.  That is a position in steady decline.  But the surprise was in Exxon Mobil Corp. (NYSE: XOM).  When it first appeared a quarter ago it was 1.276 million shares, yet the new position was a mere 421,800 shares most recently.  If Buffett wants a major position in big-oil, he needs to boosting that stake in ExxonMobil rather than cutting it.  Buffett was bottom-fishing in ConocoPhillips and he got the timing wrong.  In short, Buffett found out he was bottom-sniffing rather than bottom-fishing.

The surprise was in medical-related stocks.  He increased slightly the Becton, Dickinson and Company (NYSE: BDX) to 1.5 million shares from 1.2 million shares.  That is barely a $20 million change, but this is a medical devices and instruments company and was a new portfolio addition in 2009.  Over at Johnson & Johnson (NYSE: JNJ), Buffett’s position went down to over 27 million shares from over 36.9 million shares a quarter before.  As far as a bias here, it seems that J&J is creeping lower in the Buffett realm, but we’d look for additional positions in Becton if the stock does not go up too much.

Gannett Co. (NYSE: GCI) was a decreased holding of 2.202 million shares, down from 3.447 million last quarter.  No shock here, particularly since the stock has come roaring back.  Buffett has panned newspapers.  Moody’s Corp. (NYSE: MCO) was slashed  again to 31.8 million shares.  That is down from 39.2 million shares a quarter before and under the 48 million the quarter before that.  Our only surprise here is that Buffett still owns any of this one at all.  We think he is on his way to exiting completely, even if he will hold a small stake.

Wal-Mart Stores Inc. (NYSE: WMT) got a small boost to over 39 million shares versus 37.8 million a quarter earlier, but this was well above the 19.9+ million shares two quarters ago.  If Buffett needs to hide money in a liquid instrument, this is perhaps one of the easiest spots to do it.  Procter & Gamble (NYSE: PG) is a decreased position of about 87.5 million shares, down from 96.3 million.  P&G is considered one of the most stable names out there, but maybe Uncle Warren thinks it is fully valued.  P&G was actually a surprise to see it lower.

The obvious change is that Buffett is still lightening up against his health insurance stocks… These have enjoyed significant recoveries, but many still fear what Obamacare will do to these.  Buffett may have supported Obama in the election, but business is business.  United Health Group (NYSE: UNH) was cut to 1.175 million shares from 3.4 million shares a quarter ago and marks the third consecutive decline in holdings here.  Wellpoint Inc. (NYSE: WLP) was cut to 1.343 million shares from 3.394 million shares a quarter earlier and also marks three 3 consecutive quarters there.

Buffett made some changes in his bank holdings.  Wells Fargo & Co. (NYSE: WFC) was an increased position to about 319.5 million shares versus 313.3 million shares a quarter ago, and that was also above the 302 million and the 290+ in each of the preceding quarters.  Sun Trust Bank (NYSE: STI) was where Buffett cut… almost 2.4 million shares, down from 3.079 million shares and down from 3.2+ million in each consecutive preceding quarter.  Buffett has said Wells Fargo is his favorite bank, so he doesn’t even really need SunTrust.  Buffett can keep adding to Wells Fargo.

Iron Mountain (NYSE: IRM) was a “buy more on sale” bet.  Most of Buffett’s holdings are not down as much from highs like this company is in business services for document storage and back-up.  The holding was effectively doubled to 7 million shares to worth more than $150 million today.  As far as whether Buffett will grow this, that probably depends upon price more than anything else.

Republic Services Inc. (NYSE: RSG) is really no surprise at all that the position has been raised.  Bill Gates’ Cascade Holdings has taken a board seat and a large stake, and we know that Buffett will follow Bill Gates into any great investment.  Besides, garbage and waste removal companies enjoy significant barriers to entry and limited competition.  That is now 8.29 million shares after having been a new position in Q3-2009.  Our bet is that this position is even larger already or will be by the end of this quarter.

Norfolk Southern (NYSE: NSC) and Union Pacific Corp. (NYSE: UNP) were both eliminated.  It is surprising that these were both down late yesterday on the news.  It is also surprising that many major media outlets just said that Buffett dropped his stakes here.  Buffett already said last year after his whale of a deal for BNSF that he would dump his holdings in competing rail companies.  This should have been a more than known event. NRG Energy (NYSE: NRG) was a bit of a surprise to be completely eliminated because it is a wholesale power generation company.  Berkshire held 7.2 million last quarter.  We always thought that Buffett was going to try to do a whale of a deal in the electric utility sector rather than in the rail sector, but maybe Buffett decided that the rail was a good enough utility for exposure there.  Rails are utilities if you gre up playing Monopoly.

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JON C. OGG

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