market folly

Warren Buffett, the legendary investor and oracle from Omaha, has filed Berkshire Hathaway's 13F and we get a glimpse as to what he's been up to in these tumultuous markets. The man needs no introduction, but if you want to learn more about him: read his biography, its very insightful. The man is known for his buy and hold strategy and he has amassed some large stakes in great brands and great companies. This crisis has presented numerous opportunities in his eyes, as he has started buying American. He most recently bought bonds in Tiffany's and Harley Davidson. Earlier on, he got involved with Goldman Sachs and General Electric with large multi-billion dollar preferred purchases. Do you notice a theme yet? He sees opportunity in America. He sees opportunity in American brands and American companies. Heck, he had even mentioned possibly buying back Berkshire stock, which is the Warren Buffett brand in and of itself. But, enough about all his recent purchases that everyone already knows about. Let's get to the info revealed in the 13F.

To be honest, the changes to his portfolio were kind of lackluster. After all the Buffett activity we've seen lately, there's nothing massive to report. But, there have been some changes indeed. A while ago, we had mentioned that Buffett was selling puts on Burlington Northern. He was clearly drawing a line in the sand as to where he wanted to add to his already large position in BNI. And, that strategy worked out as he was assigned more BNI shares to add to his large pile.

The second (and arguably biggest) change to his portfolio would be the large position he picked up in Nalco (NLC). This is a brand new position for him and he has over 8.7 million shares. Nalco does a lot of water treatment among other things, so its interesting to see him step into this arena. We've been reading a lot recently about the impending clean water problems worldwide, and its safe to say that Buffett has as well.

The third most noticeable change would be in regards to his Johnson & Johnson (JNJ) position. He sold over half his position in this name from over 60 million shares down to around 28 million shares. If we were to wager a guess, we'd say that Buffett did so in a "selling when its the hardest to" kind of move. The right plays are usually the hardest to make. And, if you think about it, selling a consumer staples name in the heart of the recession is probably a tough play. But, it could very well be the right play, as more names could be attractive once we emerge from these difficult times. Who knows though, as that's just pure speculation on our part. For all we know, Buffett could simply be trading his 'safe' portfolio plays for a solid income stream of 10-15% interest, which he has garnered in some of his most recent deals. And, who wouldn't take that? Those were some sweet terms, so that would also make perfect sense. Additionally, he sold some of his Procter & Gamble (PG), another well known consumer staples name.

Buffett is the third name we've covered in our fourth quarter 2008 hedge fund portfolio tracking series. We're tracking a ton of prominent names and we invite you to check out what John Paulson and Carl Icahn were up to recently, as we've already covered their movements. Look for 35+ more hedge funds in our daily coverage.

Bottom line in all things Buffett: He started a new position in Nalco (NLC), and he picked up some more Burlington Northern (BNI), & NRG Energy (NRG) among others. He sold some Johnson & Johnson (JNJ), Procter & Gamble (PG), US Bancorp (USB), & Wells Fargo (WFC), among others.