It’s well-known that Buffett’s preferred holding time for an equity position is “forever,” though sometimes even he elects to cut a stock loose. In the fourth quarter, his company, Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial), sold out of two holdings, according to its recently released portfolio update. However, Buffett likely bought neither of the holdings. The two stocks were: Dish Network (DISH, Financial) and GlaxoSmithKline (GSK, Financial).
Dish Network (DISH, Financial)
Berkshire Hathaway held only a small parcel of Dish Network shares and only briefly. Since Buffett has said that smaller positions within the Berkshire portfolio are not his, this short-duration buy was probably not made by him but one of his new portfolio managers, Ted Weschler or Todd Combs.
One of them purchased 547,312 shares of the company in the second quarter 2013, when the price averaged $39 a share. Just two quarters later, they eliminated the position at a substantial gain, as the price averaged $51 per share.
Dish was probably sold out of the portfolio due to its lightning price appreciation. The price climbed 64% in the trailing 12 months and 409% in five years. Thursday’s price of around $57.42 reflects a 47% increase from the manager’s average price paid – already 12% above the fourth quarter’s average price.
The stock was also purchased at a relatively high P/E ratio of around 36 in the second quarter – its highest since 2005.
Dish’s P/E ratio currently stands in the same vicinity at 35.6, which is higher than 51% of the 555 companies in the Global Pay TV industry, where the median is 16.6.
As of Thursday, the stock is also trading near a 10-year high price, and close to its five-year high P/S ratio at 1.85. In the third quarter Dish’ number of pay-TV customers increased by 35,000, after falling by 78,000 in the second quarter. Also in the second quarter, it made and withdrew a tender offer to purchase all of Clearwire Corporation (CLWR). In the third quarter, it announced it would close its remaining 300 Blockbuster DVD-rental retail stores and distribution centers.
"This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment," said Joseph P. Clayton, DISH president and chief executive officer, said at the time. "Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings."
Dish appears in neither Todd Combs’ nor Ted Weschler’s portfolios prior to joining Berkshire, so it is not possible to tell which manager dipped their toe in the stock. Ray Dalio (Trades, Portfolio) and Julian Robertson (Trades, Portfolio) also sold out their Dish positions in the fourth quarter, while Jim Simons (Trades, Portfolio) and Stanley Druckenmiller (Trades, Portfolio) introduced it to their portfolios.
GlaxoSmithKline (GSK, Financial)
Berkshire also sold out its position in GlaxoSmithKline PLC in the fourth quarter. This was a long-term, medium-sized holding that predated the entrance of the two new Berkshire managers.
More than 1.5 million shares of the company were purchased in the fourth quarter of 2007. The size and date that the position was established strongly indicate it was a purchase by Buffett’s outstanding former GEICO investor, Lou Simpson (Trades, Portfolio).
| Symbol | Quarter ended on | Value ($1000) | Shares (Split adjusted) | Change | Share Price (Split adjusted) |
| GSK | 20130930 | 17,350 | 345,819 | Â | $ 50.17 |
| GSK | 20130630 | 73,757 | 1,476,021 | Â | $ 49.97 |
| GSK | 20130331 | 70,858 | 1,510,500 | Â | $ 46.91 |
| GSK | 20121231 | 65,661 | 1,510,500 | Â | $ 43.47 |
| GSK | 20120930 | 69,846 | 1,510,500 | Â | $ 46.24 |
| GSK | 20120630 | 68,833 | 1,510,500 | Â | $ 45.57 |
| GSK | 20120331 | 67,837 | 1,510,500 | Â | $ 44.91 |
| GSK | 20111231 | 68,924 | 1,510,500 | Â | $ 45.63 |
| GSK | 20110930 | 62,369 | 1,510,500 | Â | $ 41.29 |
| GSK | 20110630 | 64,800 | 1,510,500 | Â | $ 42.9 |
| GSK | 20110331 | 58,018 | 1,510,500 | Â | $ 38.41 |
| GSK | 20101231 | 59,242 | 1,510,500 | Â | $ 39.22 |
| GSK | 20100930 | 59,695 | 1,510,500 | Â | $ 39.52 |
| GSK | 20100630 | 51,372 | 1,510,500 | Â | $ 34.01 |
| GSK | 20100331 | 58,184 | 1,510,500 | Â | $ 38.52 |
| GSK | 20091231 | 63,819 | 1,510,500 | Â | $ 42.25 |
| GSK | 20090930 | 59,680 | 1,510,500 | Â | $ 39.51 |
| GSK | 20090630 | 53,381 | 1,510,500 | Â | $ 35.34 |
| GSK | 20090331 | 46,931 | 1,510,500 | Â | $ 31.07 |
| GSK | 20081231 | 56,296 | 1,510,500 | Â | $ 37.27 |
| GSK | 20080930 | 65,646 | 1,510,500 | Â | $ 43.46 |
| GSK | 20080630 | 66,794 | 1,510,500 | Â | $ 44.22 |
| GSK | 20080331 | 64,091 | 1,510,500 | Â | $ 42.43 |
| GSK | 20071231 | 76,114 | 1,510,500 | Â | $ 50.39 |
The position was largely untouched until mid-2013, when Berkshire began to reduce it, likely because the price budged little after about six years of holding and he did not foresee it being highly profitable in the future. Berkshire roughly broke even on the investment. It sold out at average prices around $51 and $52, almost where it had been purchased, around $50 on average.
GlaxoSmithKline has also has never appeared in Lou Simpson (Trades, Portfolio)’s SQ Advisors LLC portfolio as long as GuruFocus has tracked it – second quarter 2012.
In the fourth quarter 2013, the UK pharmaceuticals company reported 4% EPS growth and 1% sales growth. It has five-year growth rates of 2.2% for revenue and 1.2% for EBITDA, with 77.7% return on equity and 12.9% return on assets.
The company’s price is near a 10-year high, its P/E at 21.3 near a two-year high, its P/B at 13.78 near a 10-year high and P/S at 3.14 near a five-year high. In addition, its per-share revenue has been in three-year decline, its gross margin has been in long-term decline at a rate of 1.6% per year, and its operating margin has been in five-year decline at an average rate of 5.5% per year.
To see more investing by Warren Buffett (Trades, Portfolio), Ted Weschler and Todd Combs, visit Berkshire Hathaway’s portfolio here. Not a Premium Member of GuruFocus? Try it free for 7 days here!
