The Buffett Effect: Market Response to Berkshire’s Portfolio Changes

After the market closed on February 17, 2015, Berkshire Hathaway (BRK.A, BRK.B) reported its equity holdings of U.S. based companies in its SEC 13F filing for the quarter ending December 31, 2014.  This report revealed numerous changes to Berkshire’s portfolio.  The three largest were:

(1) Warren Buffett sold his $4 billion investment in Exxon Mobil (XOM),

(2) Mr. Buffett added $1 billion (+9%) to his holding in International Business Machines (IBM) ($12 billion), and

(3) Warren Buffett and/or Todd Combs (Fortune Magazine October 27, 2014) added about $800 million to their position in Deere (DE) ($1.5 billion).

So how did these stocks perform on their first day of trading (February 18, 2015) after release of Berkshire’s 13F filing?

(1) XOM declined by 2.19% ($91.01 – $2.04)

(2) IBM rose by 0.76% ($162.19 + $1.23)

(3) DE rose by 3.15% ($92.75 + $2.83)

These large percentage changes in prices occurred in a relatively stable overall market on February 18, with the S&P 500 declining 0.03% and the Dow Jones Industrial Average closing lower by 0.10%.

Thus the “Warren Buffett Effect” of investors closely following the Oracle of Omaha’s transactions appears to be significant.  (It is important to note, however, that either Mr. Buffett or one of his portfolio managers, Todd Combs, purchased the additional shares of DE.)