Saturday, December 16, 2023 10:58:35 AM
Once these companies fell out of favor with the Oracle of Omaha, he sold them
By Joel Baglole
InvestorPlace
Oct 9, 2023
https://investorplace.com/2023/10/3-stocks-i-bet-warren-buffett-wishes-he-held-onto/#:~:text=While%20Buffett%20has%20never%20discussed,over%20the%20last%20five%20years.
In retrospect, some of Buffet’s stock sales may have been premature.
Costco (COST): Buffett sold this grocery retailer in 2020 at the height of its profits and sales.
Taiwan Semiconductor Manufacturing (TSM): He bought and sold his stake within just a few months.
Home Depot (HD): Buffett sold this stock during the financial crisis, taking a loss on his position.
Warren Buffett is widely considered the greatest investor of all-time.
His holding company, Berkshire Hathaway has a vast investment portfolio currently worth $340 billion. While Buffett is known as a long-term, buy-and-hold investor, at times he’s been known to change the holdings in his portfolio. Buffett hasn’t hesitated to expunge entire positions if he feels his investment thesis has changed.
For example, Buffett owned stock in most of the major U.S. airlines until the Covid-19 pandemic struck in 2020. He quickly sold them all. While many of his decisions appear wise in hindsight, including the airline stocks, Buffett may have sold some stocks too early. He may even regret dumping them. In fact, certain stocks Buffett sold have gone on to rise considerably.
Let’s dissect the three stocks that I bet Warren Buffett wishes he’d held firmly.
Costco (COST)
Buffett owned shares of Costco Wholesale (NASDAQ:COST) for 20 years before selling his entire stake in the grocery retailer in 2020. The optics of his timing may appear a bit strange.
In the summer of 2020, Costco’s profits were booming as people stocked up on groceries and supplies while sheltering-in-place during the pandemic. Costco’s sales were so robust in 2020 that the company declared a special, one-time dividend payment to stockholders of $10 per share in November of that year. Buffett missed it.
Over 20 years, Buffett built his COST stock position to $1.3 billion from an initial investment of $32 million in 1999. Additionally, Buffett’s business partner and Berkshire Hathaway Vice-Chairman Charlie Munger sits on Costco’s board of directors. He personally owns more than $60 million of Costco stock. Yet Buffett dumped his entire stake in Costco at its peak in 2020. While Buffett has never discussed his reasoning of selling his Costco shares, speculation reveals he felt the stock had become overvalued.
Since Buffett sold out of Costco, its share price has gained 60%. COST stock is up 145% over the last five years. By comparison, rival grocer Kroger (NYSE:KR), which Buffett currently has a $2.17 billion stake in, has seen its share price rise 60% in the past five years, which is less than half the gain of Costco’s stock.
Taiwan Semiconductor Manufacturing Co. (TSM)
Buffett’s relationship with Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) has been puzzling. He quickly bought and then sold the stock.
The Oracle of Omaha had initially taken a $4.1 billion stake in TSM stock during the Q3 of 2022. However, by February of this year, he had reduced his holdings in the stock by 86%. Come May, he’d exited the position altogether.
Analysts initially praised the purchase of TSM stock as prescient given the explosion of demand for microchips and semiconductors. Additionally, Taiwan Semiconductor fit with the type of stocks Buffett prefers. The company manufactures more than 60% of all the microchips and semiconductors worldwide, providing a near monopoly position. Although TSM stock is almost flat since Buffett sold his position in May, the share price is up 125% over the last five years.
Many analysts expect Taiwan Semiconductor to be a big beneficiary of the boom in artificial intelligence (AI) chips. In an uncharacteristic move, Buffett publicly explained his decision to quickly sell the stock after buying it, noting he was concerned about the China-Taiwan political situation.
“Taiwan Semiconductor is one of the best managed and most important companies in the world,” said Buffett, before adding, “I don’t like its location.”
Home Depot (HD)
Buffett was once a big fan of do-it-yourself home improvement retailer Home Depot (NYSE:HD). Berkshire Hathaway initially bought HD stock in mid-2005 during the housing boom.
At its peak, Berkshire’s position in Home Depot stock totaled 3.7 million shares worth nearly $150 million. Then, the 2008 financial crisis hit, plunging the U.S. housing market into collapse. Buffett wasted little time getting rid of his entire Home Depot stake.
Shedding a quarter of its position during Q2 of 2009, it was near the market’s low point. He sold the remainder of his position in 2010. At that time, the stock was trading between $20 and $25 a share, half the price Buffett paid a few years earlier. However, since the summer of 2010, HD stock has gained 875%. The stock peaked at an all-time high of $415 a share in December 2021 during the pandemic market boom.
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