("UPDATE: Buffett's Berkshire Cuts Stake in Kraft and P&G," at 6:57 p.m. EDT Tuesday, did not include details of a Johnson & Johnson holding decrease. A corrected version follows.) --Berkshire Hathaway cuts stakes in Johnson & Johnson, Kraft and Procter & Gamble --Berkshire discloses a new position in National Oilwell Varco --Repositioning may show a further hand-off of investment duties to new portfolio managers By Erik Holm Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) partially liquidated massive holdings in Johnson & Johnson (JNJ), Procter & Gamble Co. (PG) and Kraft Foods Inc. (KFT) in the second quarter, decisions that may indicate the transfer of more investment duties to the next generation of Berkshire stock pickers. Berkshire also initiated a new position in oil-field equipment maker National Oilwell Varco Inc. (NOV) and boosted already sizable stakes in International Business Machines Corp. (IBM) and longtime holding Wells Fargo & Co. (WFC), among others. The moves, disclosed in a regulatory filing Tuesday, reveal an uncommonly active quarter for Mr. Buffett and Berkshire's new portfolio managers, Todd Combs and Ted Weschler. Together, the three men sold more stocks than they bought in the second quarter, with the cuts in J&J, P&G and Kraft leading the way. Tom Russo, a longtime Berkshire shareholder who manages more than $5 billion as a partner at Gardner Russo & Gardner, theorized that Mr. Buffett was selling off the positions to allocate more capital to Mr. Combs and Mr. Weschler, who are expected to take on ever-larger slices of Berkshire's investment portfolio in coming years. "These two new investors are able to draw (cash) from former equity positions and put it toward ideas that are that are more passionately felt," Mr. Russo said. "It's not an aversion to equities in general." Berkshire's total U.S. stock investments were worth $74.3 billion at the end of the second quarter, down slightly from the $75.3 billion Berkshire reported a quarter earlier. The size of Berkshire's holding in J&J was 10.3 million shares as of June 30 after the company sold off nearly two-thirds of its stake in the quarter. The remaining holding was valued at about $707 million at Tuesday's closing price. Despite challenges including a series of product recalls and legal settlements, J&J shares are near multiyear highs, partly because the company's pharmaceutical unit has scored successes with bringing new drugs to market and recovering from patent expirations for older drugs. Berkshire's stake in P&G fell nearly 20% to about 60 million shares valued around $4 billion Tuesday. Berkshire's retreat from the company comes at a key time for P&G, which continues to lose market share and is feeling increasing pressure from activist hedge-fund investor Bill Ackman. The stake in Kraft, meanwhile, dropped 25% to about 59 million shares, valued at about $2.4 billion. Mr. Buffett is trimming his company's Kraft stake as the food company is close to completing its split up into a global snacks company and a North American grocery business. Since the end of the second quarter, Kraft shares have begun trading regularly above $40 for the first time in more than a decade. The stake in National Oilwell Varco Inc., about 2.8 million shares, was worth around $217 million at the close of trading Tuesday. The position is small enough that it is likely a stock picked by Mr. Combs or Mr. Weschler. The company also showed a new position in Phillips 66 (PSX), likely the result of an April spinoff by another Berkshire holding, ConocoPhillips (COP). The Wells Fargo position, already the second-largest holding in Berkshire's equity portfolio, rose 4.2% to about 411 million shares, amounting to a 7.8% stake valued at $14 billion in the San Francisco-based bank. Mr. Buffett long has spoken highly of Wells Fargo's business model and management. The IBM holding, first disclosed last November, increased 3.5% to about 67 million shares. The position, which amounts to an ownership stake of about 6%, is worth around $13.3 billion, amounting to Berkshire's third-largest equity holding. Berkshire's largest stake, a $15.7 billion position in Coca-Cola Co. (KO), was unchanged. Mr. Buffett's company also reported additional shares of Bank of New York Mellon Corp. (BK), Liberty Media Corp. (LMCA) and dialysis provider DaVita Inc. (DVA), among others. The company appeared to have eliminated a small position in Intel Corp. (INTC). Berkshire also cut its stakes in U.S. Bancorp (USB) and General Electric Co. (GE). It also sold off part of its holdings in CVS Caremark Corp. (CVS), Dollar General Corp. (DG) and United Parcel Service Inc. (UPS), among others. All three were small holdings by Berkshire standards and relatively new positions for a firm that has retained some of its largest holdings for decades. Mr. Buffett's company, like other investment firms that control an investment portfolio of more than $100 million, is required to report stock holdings 45 days after the end of a given quarter, giving the public its freshest possible glimpse into the investing decisions of the "Oracle of Omaha." But Mr. Buffett repeatedly has warned that not all the moves in the investment portfolio are his. A portion of the portfolio was long managed by Lou Simpson, the investment manager at Berkshire-owned car insurer Geico Corp. He stepped down over a year ago, and Mr. Combs and Mr. Weschler have stepped in. "When our quarterly filings report relatively small holdings, these are not likely to be buys I made but rather holdings denoting purchases by Todd or Ted," Mr. Buffett wrote in his widely read shareholder letter in February. An earlier filing with securities regulators disclosed that Berkshire had spent about $1.86 billion on equities in the second quarter, while selling about $3 billion of stocks. --Peter Loftus and Paul Ziobro contributed to this article. Write to Erik Holm at erik.holm@dowjones.com Subscribe to WSJ: http://online.wsj.com?mod=djnwires
