Buffett’s Biggest 3rd Quarter Losers

Berkshire Hathaway’s latest third-quarter update about its stock holdings were just released this past Thursday. There were three companies in particular that lost Warren Buffett and Berkshire Hathaway a total of $1.4 billion in value between the periods of the second quarter and the third quarter.

Coca-Cola

During the second quarter, Berkshire Hathaway’s 400 million Coca-Cola shares were worth a little more than $16 billion. But when the third quarter ended, the amount dwindled to $15.2 billion. The loss in total was worth $892 million, or 5.5% in value.

It’s been pretty tough for Coca-Cola since May, right before the summer holiday. From mid-May to the end of September, the stock dropped roughly 11%. This was specifically due to weakening sales because of the emerging markets, plus lower margins due to a stronger dollar in relation to other currencies. Please take note that the share price of Coca-Cola has actually risen almost 5% since the end of September.

Since Warren Buffett once said in relation to Coca-Cola, “I’m the kind of guy who likes to bet on sure things. No business has ever failed with happy customers… and you’re selling happiness,” and that he never intends to sell even one of his 400 million shares, it’s highly likely that Buffett is not very concerned with the movements that take place from quarter to quarter when it comes to this incredible company.

IBM

There’s no question that IBM’s difficulties have been well documented. The tech giant’s stock price has dropped 3% from the second quarter to the third quarter. This resulted in a $400 million loss for Berkshire Hathaway. Their position was previously worth $13 billion dollars. The problem was actually compounded once IBM reported a lackluster earnings report in October due to weekend China segment revenue. On the day of the earnings report, the stock fell by nearly 6%. It has since recovered a bit from the big drop, but it’s still down 2.5% from the end of September until this day.

Relative to the market, IBM is down 45%. You’d have to compare the 3% IBM loss and add the 42% gain in the S&P 500. This 45% loss takes place when Buffett first disclosed of this position back in November 2011. He originally said one of his main reasons for investing in IBM was the plan that they put in place from then until 2015. So when you think about it, there are still a number of years to go for this plan to reach fruition. So it wouldn’t be surprising if Buffett is content to sit and wait. And knowing that he has actually bought more shares of the company since originally purchasing them in November 2011, there’s no question that he isn’t swayed on his own investment thesis in regards to the company.

Procter & Gamble

Procter & Gamble is Berkshire Hathaway’s fourth-largest position in the portfolio. It recently took a 2% price dip during the third quarter which led to an unrealized loss of $75 million. There’s no question that amount is certainly a lot of money, but when you compare it to the $89 billion Berkshire Hathaway portfolio at the end of the second quarter, it’s really just a drop in the bucket. This is only a minor loss of about 1%. Buffett’s core principle is to buy-and-hold, so this minor movement is no reason to experience any tremendous concern in Buffett’s world.