5 Stocks Warren Buffett Sold to Get Ready for 2015: Deere, ConocoPhillips and More

 

NEW YORK (Stockpickr) -- At Stockpickr, we track the top holdings of a variety of high-profile investors, such as George Soros and Carl Icahn.

It should come as no surprise that the most popular of these portfolios is that of renowned investor Warren Buffett, CEO of Berkshire Hathaway (BRK.B) and one of the richest people in the world.

Today we're taking a closer look at five stocks that Buffett sold part or all of his position in in the most recently reported quarter, based on Berkshire Hathaway's most recent quarterly 13F filing with the SEC, which reflects holdings as of Sept. 30, 2014.

Deere

Berkshire Hathaway sold completely out of its position in Deere (DE) in the most recently reported quarter.

TheStreet Ratings team rates Deere as a buy with a ratings score of A-. TheStreet Ratings team has this to say about its recommendation:

"We rate Deere (DE) a buy. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Machinery industry and the overall market, Deere's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $2,843.80 million or 6.64% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -15.86%.
  • DE, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, DE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • Deere's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, Deere reported lower earnings of $8.62 versus $9.08 in the prior year. For the next year, the market is expecting a contraction of 35.8% in earnings ($5.53 versus $8.62).

You can view the full analysis from the report here: DE Ratings Report

ConocoPhillips

ConocoPhillips (COP) comprises 0.03% of the Berkshire Hathaway portfolio as of Sept. 30. In the most recently reported quarter, Buffett trimmed his position in the stock by 65.2%, to 471,994 shares.

TheStreet Ratings team rates ConocoPhillips as a buy with a ratings score of B-. TheStreet Ratings team has this to say about its recommendation:

"We rate ConocoPhillips (COP) a buy. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins, good cash flow from operations, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 40.09% is the gross profit margin for ConocoPhillips which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.38% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $4,180.00 million or 12.82% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -1.81%.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.
  • The net income growth from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 9.0% when compared to the same quarter one year prior, going from $2,480.00 million to $2,704.00 million.

You can view the full analysis from the report here: COP Ratings Report

National Oilwell Varco

National Oilwell Varco (NOV) comprises 0.5% of the Berkshire Hathaway portfolio as of Sept. 30. In the most recently reported quarter, Buffett trimmed his position in the stock by 12.6%, to 6.4 million shares.

TheStreet Ratings team rates National Oilwell Varco as a buy with a ratings score of B. TheStreet Ratings team has this to say about its recommendation:

"We rate National Oilwell Varco (NOV) a buy. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, attractive valuation levels and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • NOV's revenue growth has slightly outpaced the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 17.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NOV's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.19, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Energy Equipment & Services industry average, but is less than that of the S&P 500. The net income increased by 9.9% when compared to the same quarter one year prior, going from $636.00 million to $699.00 million.
  • National Oilwell Varco has improved earnings per share by 15.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, National Oilwell Varco reported lower earnings of $5.16 versus $5.83 in the prior year. This year, the market expects an improvement in earnings ($6.01 versus $5.16).

You can view the full analysis from the report here: NOV Ratings Report

Bank of New York Mellon

Bank of New York Mellon (BK) comprises 0.8% of the Berkshire Hathaway portfolio as of Sept. 30. In the most recently reported quarter, Buffett trimmed his position in the stock by 5.2%, to 23.4 million shares.

TheStreet Ratings team rates Bank of New York Mellon as a buy with a ratings score of A. TheStreet Ratings team has this to say about its recommendation:

"We rate Bank of New York Mellon (BK) a buy. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, attractive valuation levels, expanding profit margins, good cash flow from operations and growth in earnings per share. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for Bank of New York Mellon is currently very high, coming in at 98.21%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.03% is above that of the industry average.
  • Net operating cash flow has remained constant at $913.00 million with no significant change when compared to the same quarter last year. Even though Bank of New York Mellon's cash flow growth was minimal, the firm managed to surpass its industry's average growth rate of -217.06%.
  • Bank of New York Mellon has improved earnings per share by 13.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Bank of New York Mellon reported lower earnings of $1.74 versus $2.05 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $1.74).

You can view the full analysis from the report here: BK Ratings Report

Phillips 66

Phillips 66 (PSX) comprises 0.5% of the Berkshire Hathaway portfolio as of Sept. 30. In the most recently reported quarter, Buffett trimmed his position in the stock by 4.5%, to 6.2 million shares.

TheStreet Ratings team rates Phillips 66 as a hold with a ratings score of C. TheStreet Ratings team has this to say about its recommendation:

"We rate Phillips 66 (PSX) a hold. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 120.6% when compared to the same quarter one year prior, rising from $535.00 million to $1,180.00 million.
  • PSX's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.86 is somewhat weak and could be cause for future problems.
  • PSX has underperformed the S&P 500 Index, declining 21.78% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has significantly decreased to $429.00 million or 77.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

You can view the full analysis from the report here: PSX Ratings Report

For Warren Buffett's top 30 holdings, visit the Warren Buffett portfolio at Stockpickr.

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