Numerous gurus have commented on the rising frothiness of the U.S. equity market. The list includes John Hussman (Trades, Portfolio), Ray Dalio (Trades, Portfolio), George Soros (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and others. Last month, Carl Icahn (Trades, Portfolio) warned that there was “danger ahead” in the financial markets.
Today, one publication added one more name to that list: Warren Buffett (Trades, Portfolio).
A recent article by Profit Confidential highlighted how Warren Buffett (Trades, Portfolio)’s holding company, Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial), has been ditching stocks that are heavily dependent on consumer spending, an area of the economy that will likely be hit if economic conditions slow or even reverse.
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"For example," the article begins, "at the end of the second quarter of 2012, Berkshire Hathaway held 10.33 million shares of Johnson & Johnson (JNJ, Financial). At the end of the second quarter of 2014, it held only 327,100 shares." Since then, Buffett hasn't increased his position at all.
Berkshire Hathaway also currently owns just 315,400 shares of Procter & Gamble (PG, Financial), or 0.02% of the company. Four years ago it held 59.6 million shares.
The article also highlights Berkshire's Kraft (KRFT, Financial) position as a reason to believe Buffett has turned bear. That's a difficult argument to make considering it still represents his largest position, comprising nearly 25% of his entire portfolio.
Despite weak anecdotal evidence, Buffett appears to still have an affinity for consumer-goods stocks, especially in businesses that have strong brands. This creates a strong and durable competitive advantage.
According to GuruFocus' latest data, Buffett's portfolio is still 39% invested in Consumer Defensive companies. His next largest exposure, Financials, is hardly a place for a supposed stock market bear.
Warren Buffett (Trades, Portfolio) still appears bullish on the long-term U.S. stock market. Recently, he told CNBC that he feels like a “10 on the long-term optimism” scale.
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Disclosure: I have no positions in any of the stocks mentioned above and no intention to initiate a position in the next 72 hours.
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