Warren Buffett has carved out a core stock-picking strategy of investing in companies with strong economic "moats," businesses that have built, fortified and generated success from well-known brands that make it difficult for them to succumb to competitive forces.
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But for a number of holdings in his stock portfolio, the moats may be drying up and the walls could be breached.
Stalwarts like International Business Machines
When Berkshire Hathaway Inc
On average, the 15 biggest positions he owned at the end of 2014 have gained 7.8 percent in the last 12 months, compared with a 13.1 percent rise for the S&P.
Buffett supporters - and there are many - would say that the 84-year-old investor is hardly looking at the short term, but what stands out about some of the larger holdings are weakening revenue trends that augur for concern about the long-term, not just the short term.
"The moats are not as deep and unimpenetrable as in the past," said Doug Kass, who runs Seabreeze Investment Partners in Palm Beach, Florida, and has questioned Buffett's investments in the past. He currently has no position in the stock.
That is not to say Buffett is any kind of a slouch. Those 15 holdings, over the last five years, on average, are ahead of the S&P, with an average gain of 85 percent, compared with the S&P's 78 percent rise.
And he can still be opportunistic, as in the aftermath of the financial crisis when he acquired a $750 million position in Goldman Sachs Group Inc that's now worth $2.5 billion, and an option to buy 700 million shares in Bank of America Corp
What's less clear, however, is whether these previously unassailable franchises are facing competitive pressures that will continue to hurt sales growth. Buffett owns 76.9 million shares of IBM that as of last year had cost him $13.2 billion, and that position is underwater; IBM is trying to reverse 12 straight quarters of year-over-year revenue declines as it plays catch-up in the cloud computing space.
Two other large positions, Coca-Cola and Wells Fargo & Co
But of course, Buffett's total cost for his 400 million shares of Coke was $1.3 billion. As of Wednesday, it was worth $16.2 billion.
“Since he bought it in the 1980s, his return from stock price appreciation and dividends received has been terrific, and will likely continue compounding for years to come," said Ken Stein, founder and portfolio manager at Spencer Capital Management.
Berkshire did not respond to requests from Reuters for comment.
It remains to be seen whether Buffett's portfolio sees a greater shift with the increased influence of Ted Weschler and Todd Combs, the two men handling portfolio management for the last few years.
Berkshire's annual letter lists only the 15 largest positions in the portfolio - many of which predate the two executives - so it is possible that there are other, smaller positions that are big winners. Weschler and Combs are credited with buying DirecTV for Berkshire, which has a 54 percent gain for them. On the other hand, last year Berkshire sold U.K. food retailer Tesco, which Berkshire took a $444 million loss.
Kass even acknowledges that Buffett's ability to hunt for unknowns now would not be easy given the firm's size and stature, in the way he did early in his investing career.
Other investors believe that for Buffett to change his approach would be foolish at this stage of the game.
"His shareholders, I think, would get unnerved if he woke up one day and said, 'Yeah, you know, I’m wrong, let’s buy Apple,'" said Jeff Matthews, who runs Ram Partners, a Naples, Florida-based hedge fund, owns Berkshire shares in his personal account, and has written several books about Buffett.
"When you compound at 20 percent a year for 50 years and that’s better than anybody, how do you start picking that apart just because he didn’t own Apple?"
(Reporting By David Gaffen and Jennifer Ablan; Editing by Bernard Orr)