3 of Warren Buffett’s Biggest Sells

As one of the world’s most famous investors, every move Warren Buffett makes is scrupulously analyzed. Countless books have been devoted to evaluating what he has bought and why.

A famous Buffett adage is: “Our favorite holding period is forever.” But he doesn’t always take his own advice. Warren Buffett knows when to call it a day, and analyzing what he’s sold is just as important as watching what he is buying.

In some of the most recent cases, Buffett and his holding company, Berkshire Hathaway, are simply cleaning house. The company closed out small holdings in UPS and Proctor and Gamble this year likely because other positions offered better reward to risk ratios.

But sometimes he’s made bigger sells that signal a change in attitude toward industries or companies. For example, Buffett finally sold off the last of his General Motors (NYSE: GM) stake this year. He also disposed of Activision (previously trading as ATVI) following a successful arbitrage post-acquisition. But the largest position he sold was Chevron (NYSE: CVX).

So what are the lessons learned from Buffett’s biggest sells?

Why Did Buffett Sell Chevron?

Buffett bought into the company in 2020 in a big way. He added to his investment as oil prices skyrocketed following concerns about energy disruption as the war in Ukraine persisted. But as oil prices plateaued, Buffett pared back his investment in Chevron. In the 3rd quarter of 2023, he sold 12.9 million shares of the energy company, representing a $2.13 billion stake and 5.9% of his portfolio.

There were several factors behind Buffett’s decision to lighten his position. Perhaps the most important one was the margin of safety had slimmed after the share price run. CVX had virtually doubled from 2020-22, before falling 14% this year.

As expected, falling oil prices hurt Chevron’s bottom line. In the 3rd quarter of 2023, the company reported net earnings that were 42% below the same quarter of last year. Diluted earnings per share of $3.48 were 17% under the level that analysts had predicted for the quarter.

Revenue also decreased for the quarter, falling by over 18% year-over-year. That was attributed to lower oil and higher refining costs. The war in Israel also affected production supply for part of the quarter.

It’s worthwhile to note that Buffett still holds a substantial stake in Chevron. He currently has $18.6 billion invested in the company, amounting to over 110 million shares. In that light, Buffett’s decision to sell CVX looks like he’s simply reducing his exposure versus changing his investment thesis.

What Made Warren Buffett Sell Activision?

The Oracle of Omaha might have done a rare thing when he decided to sell Activision in July 2023. He might have made a mistake. Until then, Berkshire Hathaway had been buying up ATVI, and he doubled down on the stock after the news that Microsoft planned to acquire Activision.

But in July, the deal was on shaky ground. UK legislators were disturbed by the merger of the two tech giants, and it looked like the deal might be off. In response, Buffett sold off 70% of the stake he had acquired since 2021. The selloff reduced his $5 billion investment in Activision to around $50 million.

But just a few months later, the deal did go through. ATVI stock soared on the news and the company merged with Microsoft shortly after.

Even though Buffett may have left some money on the table in the deal, he’s not likely to regret it. If the deal had gone south, he would’ve stood to lose a lot more than he gained by staying invested. Buffett made a hard call, and he lived to invest another day.

Why Did Buffett Sell General Motors?

Unlike CVX or ATVI, Buffett has had a much longer-term investment in General Motors. He started buying the stock in 2012, but by 2022 Buffett had changed his outlook. He began a gradual divestment of his GM holdings that came to a close in the 3rd quarter. He sold off his remaining 22 million shares, closing out a $850 million investment.

As with Chevron, a big reason for moving away from GM was likely competition from Tesla and other rivals. From when Buffett bought low in 2012 to 2021, GM nearly doubled in price but it’s clearly nowhere near as efficient operationally as Musk’s firm, or indeed BYD, which Berkshire owns, and is a competitor to Tesla in China.

Also like Chevron, GM didn’t make as much profit in the 3rd quarter of 2023 as it did the year prior. GM did manage to beat estimates for revenue and earnings in the quarter, and total revenue increased by 5.35%. The company also pays out a dividend at a 1.01% annual yield, amounting to a $0.09 quarterly payout.

But none of that was enough to keep Buffett around. One of the reasons General Motors has struggled is its lack of competitiveness in the burgeoning electric vehicle market. With little doubt that EVs are the future, Buffett perhaps saw the writing on the wall.

What Are The Lessons Learned From Buffett’s Sells?

Buffett is human, as the Activision trade proves, but he’s very good at what he does. His philosophy is sound, and he sticks to it in his buys and his sells. With the Chevron sell, he was scaling back his investment in a company that was going through a rough patch. But Chevron is still the fifth biggest holding in his portfolio.

It’s clear that the old adage Buffett likes to hold a position forever only applies to an exclusive few stocks like Coca Cola and American Express. Even Apple once was sold by Buffett, though he subsequently admitted that was likely a mistake.

For the Chevrons of the world in the Berkshire portfolio, Buffett’s favor only lasts as long as the reporting is up to scratch. Once the fundamentals weaken, Buffett tends to offload his positions, and move to the next best thing he can find.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.