3 Reasons Warren Buffett Is Dumping Walmart Stock
Berkshire Hathaway has all but abandoned its stake in the world’s largest retailer.
Warren Buffett's Berkshire Hathaway (symbol BRK.B) is falling out of love with Walmart Stores (WMT, $68.87). It sold the majority of its holdings in the world's largest retailer last year. In the final three months of 2016 alone, according to Berkshire’s latest 13-F filing with the Securities and Exchange Commission, Buffett trimmed his Walmart holdings to 1.4 million shares from 13 million at the end of September. With an ownership stake of just 0.05%, Berkshire is no longer a major shareholder in Walmart.
More often than not, Buffett doesn't comment on his investment moves, so his reasons for selling so much of his Walmart position remain opaque. But for buy-and-hold investors, Berkshire’s disaffection with the blue-chip company can be instructive nonetheless. Here are three reasons we think Warren Buffett is dumping Walmart stock. (Prices as of February 16.)
Stiff Competition
The main reason Buffett is abandoning Walmart is that it’s losing out to Amazon.com, says David Kass, a professor at the University of Maryland's Robert H. Smith School of Business who studies Buffett and is a Berkshire shareholder. Buffett has made no secret of his admiration for Amazon's CEO, Jeff Bezos. "We haven't seen many businessmen like him,” Buffett says of Bezos. “Overwhelmingly, he's taken things you and I've been buying, and he's figured out a way to make us happier buying those products, either by fast delivery or prices or whatever it may be, and that's remarkable."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Trend Is Not a Friend
E-commerce sales are growing faster than sales at traditional brick-and-mortar retailers and should continue to do so. In January, non-store retailers enjoyed year-over-year sales gains of 14.5%, according to the Census Bureau. Furniture stores, electronics stores, sporting goods stores and department stores all suffered declines. Walmart is investing in e-commerce in order to ride the wave, including its high-profile purchase of Jet.com, but Amazon remains the market leader. Buffett tends to prefer companies that are at the forefront of their industries.
Cutting His Losses
Berkshire, which first ventured into Walmart stock in 2005, had amassed more than 60 million shares by the end of 2015. That amounted to a sizable 2% ownership stake. But the investment has proved to be largely disappointing. Walmart shares have gained 32% on a price basis since mid 2005, while Standard & Poor’s 500-stock index is up 80% over the same time frame. Analysts at Stifel have a “hold” recommendation on Walmart shares today. At best, Stifel analysts forecast “modest share gains” assuming Walmart can improve online and mobile ordering and increase organic grocery offerings.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.
A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.
Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.
In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.
Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.
Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.
-
Don't Leave Your Heirs an IRA Tax Bomb
Your traditional IRA has served you well, but when your heirs inherit it, watch out. Consider some of these strategies to minimize their tax burdens.
By Kelsey M. Simasko, Esq. Published
-
Five Ways to Maximize Your End-of-Year Philanthropy
To do the most good, pick the right charity, be smart about how you donate and consider giving something just as valuable as money: your time.
By Emily Glassman Published
-
Stock Market Today: Dow, S&P 500 Hit New Highs on Black Friday
Sentiment was bullish on the final trading session of November, with chip stocks leading the charge.
By Karee Venema Published
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical Tension
The main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
By David Dittman Published
-
Why Walmart Stock's a Buy After Its Beat-And-Raise Quarter
Walmart is the best Dow Jones stock Tuesday after the retail giant's solid earnings report and outlook and Wall Street thinks it's just getting started. Here's what they're saying.
By Joey Solitro Published
-
Why Is Warren Buffett Selling So Much Stock?
Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
By Dan Burrows Published
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have Today
Google parent Alphabet has been a market-beating machine for ages.
By Dan Burrows Published
-
Stock Market Today: Stocks Retreat Ahead of Nvidia Earnings
Markets lost ground on light volume Wednesday as traders keyed on AI bellwether Nvidia earnings after the close.
By Dan Burrows Published
-
Stock Market Today: Stocks Edge Higher With Nvidia Earnings in Focus
Nvidia stock gained ground ahead of tomorrow's after-the-close earnings event, while Super Micro Computer got hit by a short seller report.
By Karee Venema Published
-
Stock Market Today: Dow Hits New Record Closing High
The Nasdaq Composite and S&P 500 finished in the red as semiconductor stocks struggled.
By Karee Venema Published