Top Stocks Warren Buffett Just Sold

Warren Buffett is best known for being a patient investor. When he buys stocks for Berkshire Hathaway's (NYSE: BRK-A)(NYSE: BRK-B) portfolio, he'll often hold them for years, a refreshing fact given the time horizon for many investors is measured in days, weeks, or months now. His long-haul approach has turned him into the world's third-richest person, but that doesn't mean he won't sell shares if he loses confidence in a company. In fact, his quarterly updates often reveal stocks that are losing his favor, and Berkshire Hathaway's latest 13F filing with the Securities and Exchange Commission is no exception.

Fine-tuning his airline exposure

Warren Buffett once called airlines a terrible investment, but he's warmed considerably to them since then. In 2017, he began establishing positions in the largest U.S. operators, and he's been fine-tuning his holdings ever since. For example, he sold 1.2 million of his Southwest (NYSE: LUV) shares in the fourth quarter of 2018, and in the first quarter of 2019 he sold an additional 1.1 million shares.

Southwest operates the largest fleet of Boeing's (NYSE: BA) 737 Max planes in the U.S., and the grounding of those planes earlier this year following a second deadly crash creates a headwind to sales, profitability, and perhaps pricing to maintain its market share. Nevertheless, Southwest's revenue still grew 4.3% year over year to $5.2 billion in the first quarter, and earnings per share of $0.70 exceeded industry watchers' consensus estimate by $0.08.

Southwest's resilient results suggest Buffett's decision to trim Berkshire Hathaway's stake may be more about keeping him below 10% ownership, something he tries to do with all his holdings to avoid greater regulatory requirements. Despite his selling, he still owns 53.6 million shares, or 9.7% of the company.

The airline recently announced it's boosting its share repurchase plan to take advantage of weakness in its share price, so it wouldn't surprise me if Buffett continues selling some shares to offset the impact of buybacks so that he stays under 10%. Therefore, until he says otherwise or sales ratchet higher, I think investors can consider this noise worth ignoring.

Going, going, almost gone

Buffett's been selling shares in Phillips 66 (NYSE: PSX) for over a year, and his selling continued in the first quarter. Last summer, he halved his stake to 15.4 million shares. He sold another 3.5 million shares in the fourth quarter, leaving him with 11.9 million shares entering January. Then, he unloaded over 6.3 million more shares in the first quarter, further reducing his stake to about 5.5 million shares.

His selling started when Phillips 66 was riding high on the back of maximum refinery capacity utilization, but the selling has continued even as Phillips 66 shares have lost a quarter of their value. Based on the company's first-quarter financials, Buffett's decision to reduce his exposure has been wise.

In Q1, Phillips 66 revenue fell 1.6% year over year to $23.7 billion, which missed analyst estimates by $1 billion. Earnings per share were better than people were expecting, but they still tumbled to $0.44 in the quarter from $1.07 the year prior. The company's refining capacity utilization was just 84% in the quarter as it struggled to overcome headwinds tied to narrowing refining margins. Midstream results were hurt by declining refinery utilization, further crimping profit.

Given its recent struggles, it's little wonder that Phillips 66 has fallen out of favor with Buffett. And since Buffett's been selling shares for a while, I think Phillips 66 could disappear entirely from Berkshire Hathaway's portfolio soon.

10 stocks we like better than Phillips 66When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Phillips 66 wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Southwest Airlines. The Motley Fool has a disclosure policy.