Holding A Candle To Buffett

Holding A Candle To Buffett

Martin T. Sosnoff

Warren Buffett is not always right, but he's a smart guy to follow through tough times.

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Like everyone else, Warren Buffett's equity portfolio, year-to-date, has sustained serious damage. Not to worry! Unlike headmen at banks, brokerage houses and insurance conglomerates, nobody's throwing Warren out of his house (I assume no mortgage) and dumping his chattels on the sidewalk.

The heart of Berkshire Hathaway's (nyse: BRK - news - people ) portfolio hardly changes decade over decade, because its low cost basis makes harvesting prohibitive. Why should Buffett singlehandedly cure the Treasury's deficit with his capital gains levies?

Berkshire's equity portfolio exceeded $50 billion at September's end. The 12 largest positions totted up to $48 billion. The top three holdings, $22 billion worth, remain Coca-Cola (nyse: KO - news - people ), Wells Fargo (nyse: WFC - news - people ) and Procter & Gamble (nyse: PG - news - people ). Huge winners, but Buffett got into P&G when it acquired his legacy holding, Gillette. I'm not sure how happy Buffett is with P&G, but, again, why pay billions in capital gains taxes?

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Wells Fargo is a survivor among the five largest banks in the country, more than you can say for Wachovia (nyse: WB - news - people ), which Wells swallowed, edging out Citigroup (nyse: C - news - people ). I owned a lot of Bank of America (nyse: BAC - news - people ) but whittled it down over concern about earnings power next year. All banks could be setting aside inadequate reserves for loan losses on mortgages, credit card receivables and commercial and industrial loans, but the Citigroup bailout suggests that the biggest survive but do not necessarily prosper.

When I drill down into Berkshire's top 10 holdings, some are relatively new positions. ConocoPhillips (nyse: COP - news - people ) and Burlington Northern Santa Fe (nyse: BNI - news - people ) together account for $9 billion of the portfolio, and they're problematic today. Railroad car loadings are fading fast as the recession bites into industrial production, inventories and commodity shipments.