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Warren Buffett's Company Nixes Deere, Cuts 2 Oil Companies


Warren Buffett (Trades, Portfolio) when buying stocks typically likes to play for keeps. Though he is loath to be too active in his trading, sometimes he sells out of a position. He has given a bit of insight into his selling philosophy in the past. In his 1988 shareholder letter, he said:

"When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds."

As his new portfolio managers, Ted Weschler and Todd Combs, continue to gain more responsibility for investing at Berkshire Hathaway (BRK.A)(BRK.B), the company's reported third quarter sells could have been their doing rather than Buffett's.

In the third quarter, Berkshire reported closing out a position in Deere & Co. (DE) and making outstanding reductions to two oil holdings: ConocoPhillips (COP) and National Oilwell Varco Inc. (NOV).

Deere & Co. (DE)

Berkshire bought a sizable position consisting of 3,978,767 shares of Deere & Co. in third quarter 2012. The stock had a volatile quarter, trading as low as $72.85, and ending the quarter at $82.47, which may have given Berkshire an opportunity to get in at a discounted price.

Deere shares closed Wednesday at $87.99 per share, after declining 3.7% year to date.

At the time Berkshire bought the stock, it noted that Buffett's new aides were overseeing about $4 billion each, up from $2.75 billion at the start of the year.

For the company's fiscal fourth quarter ended Oct. 31, it reported net income to $649.2 million, or $1.83 per share, compared to $806.8 million, or $2.11 per share, for the same period of 2013. The company attributed the decline in profits to a slowdown in the farm economy affecting its agricultural equipment segment.

Deere also reported worldwide net sales and revenues for the fourth quarter of $8.965 billion, down 5%. For the full fiscal year, it reported earnings of $3.162, the second-highest in its history, compared to $3.537 billion for fiscal 2013.

ConocoPhillips (COP)

Berkshire also reported cutting its position in ConocoPhillips 65.17%, selling 883,234 shares. At the end of the third quarter, it held 471,994 shares. Berkshire has been reducing its holdings in the company periodically over the past five years.

Buffett has noted he made an error doubling his position in 2008 just as oil prices hit record highs and right before they collapsed, leading to a $1 billion loss for him. ConocoPhillips' shares soared as high as as around $94 in 2008, and plunged to as low as the mid $30's in 2009.

The company's shares closed at $63.61 on Wednesday, after an almost 10% decline year to date.

For the third quarter, the Houston-based oil company reported earnings of $2.7 billion, or $2.17 per share, compared to $2.5 billion, or $2.00 per share, in the same period a year ago. Total third quarter revenue was $12.34 billion, compared to $14.7 billion a year ago.

The company said it would cut expenditures for 2015 by 20% to $13.5 billion after prices for crude oil dropped 42% since June.

Though Berkshire pared ConocoPhillips, it retains a sizable position in Exxon Mobil Corporation (XOM) consisting of 41,129,643 shares and worth 3.6% of the portfolio. Buffett started the position in second quarter 2013 and added to it over the next two quarters, but has not bought or sold shares since.

National Oilwell Varco (NOV)

Berkshire also cut back on National Oilwell Varco by 12.6%, selling 919,918 shares and leaving the company with 6,382,360 shares at the end of the third quarter. The position is worth 0.45% of the portfolio after the reduction.

National Oilwell Varco shares tumbled almost 21% year to date to close on Wednesday at $63.01. Berkshire's average buy price since starting the position in second quarter 2012 was $77.48, equating to a 19% decline.

The company manufacturers, designs and sells equipment and components used in oil and gas drilling globally. It reported third quarter earnings of $699 million, or a record $1.62 per diluted share, compared to $619 million, or $1.44 per diluted share in the same quarter a year ago. Third quarter revenues were $5.59 billion, up 17% from the third quarter of 2013.

For more stock investments of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway, visit the portfolio here. Not a Premium Member of GuruFocus? Try it free for 7 days here.

This article first appeared on GuruFocus.