Last night came the filing from Berkshire Hathaway (NYSE:BRK-A) showing its public company stock holdings as of September 30, 2007. Berkshire’s four largest holdings in the report are American Express (NYSE:AXP), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), and Wells Fargo (NYSE:WFC).
CarMax Inc (NYSE:KMX), the largest used car seller in the U.S., was a new holding and listed as almost 14 million shares. Frankly, this was surprising since auto sales (new and used) are not expected to turn yet. Mr. Buffett must have been impressed with their streamlined approach to underpaying for inventory and overcharging for sales. If you don’t believe they underpay or overcharge, go price shop their trade-in offer and their sales prices. Nonetheless, shares of KMX are up 8% today.
Buffett added to stakes in three large U.S. banks with increased stakes in Wells Fargo & Co (NYSE:WFC), U.S. Bancorp (NYSE:USB) and Bank of America Corp (NYSE:BAC). U.S. Bancorp was actually one we thought Warren Buffett might outright acquire US Bancorp as part of one of his "whale of an acquisitions" he’s never gotten around to. Interestingly enough, the CEO of Wells Fargo was speaking at a Merrill Lynch banking conference today and said Wells Fargo’s exposure to CDO’s and asset-backed commercial paper is minimal. He also noted that the nationwide housing market is now the worst since the Depression (he must have forgotten about Texas in the 1980’s) and is far from over. Mr. Buffett probably wishes he would keep quiet since Wells Fargo shares are down 3% today. Bank stocks are mostly lower today.
Warren Buffett also boosted share holdings in drugmaker Johnson &Johnson (NYSE:JNJ) and health insurers UnitedHealth Group Inc(NYSE:UNH) and WellPoint (NYSE:WLP). Berkshire now holds a 17.2% stakein Burlington Northern Santa Fe Corp (NYSE:BNI), but it reduced itsstakes in both Norfolk Southern (NYSE:NSC) and Union Pacific(NYSE:UNP). Berkshire reported lowered stakes in American Standard(NYSE:ASD), but he did hold shares of Wabco Holdings (NYSE:WBC) withroughly 2.7 million shares, a manufacturer of braking and other vehiclecontrol systems spun off during the summer by American Standard. Bothof these positions may by now be incidental. Berkshire Hathawaylowered its stake in Ameriprise Financial Inc (NYSE:AMP),ConocoPhillips (NYSE:COP) and Nike Inc (NYSE:NKE). It has alsoapparently eliminated its holdings in Tyco International Ltd (NYSE:TYC)and Western Union (NYSE:WU).
But… back to the banking question. If bank stocks are good enoughWarren Buffett, are they good enough for you? Frankly, Mr. Buffett isin his 70’s and has yet to name a replacement to lead the BerkshireHathaway dynasty. So even if you take his holding period foracquisitions of "forever" you’d still guess he wants to see a return orcome-back in his life time. Maybe this isn’t the bottom, maybe it is.Bank stocks haven’t performed well since September 30. We don’t knowwhen over the last quarter those were added so we don’t know if headded positions when prices were lower or higher. But as long as youare talking about banks that won’t implode over leverage and derivativedebt instruments, then maybe the worst has been seen. 24/7 Wall St.still thinks that there will be more shoes that drop and we haven’tseen the last of all the banking and financial woes. But for thosewith very long-term outlooks, some of these large banks that willsurvive may be worth a look.
We constantly review large, mid-sized, and even smaller regional banks for our Special Situation Investing Newsletter.We feel that the banking consolidation is a secular trend, and is just merely on a "interrupted" status based on the market woes of today. Some of these will be likely taken out by larger foreign banks out ofCanada or the U.K., and they are dirt cheap to acquirers if youconsider the currency leverage that a foreign buyer holds.
Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.
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