Most people, even the most diligent and active investors, are bored silly by regulatory filings. One of the rare exceptions is the 13F forms submitted by Warren Buffett's Berkshire Hathaway. These documents always make for compelling reading, as they itemize the holdings in Berkshire's considerable equity portfolio, and therefore serve as a way to track its additions and disposals.
One piece of information included in Berkshire's latest 13F -- released in mid-November -- was its complete exit from highly specialized retail stock Floor & Decor Holdings(NYSE: FND). Here are two important things worth keeping in mind about that company, and Berkshire's investment in it.
1. This was not a long-term Buffett play
One of the reasons Buffett is such a legendary figure in the investing world is that he can be a very, very long-term player. One of his most quoted utterances about Berkshire is, "Our favorite holding period is forever," and the company has put its money where its mouth is more than a few times. Current portfolio occupant American Express, for example, has been a Buffett stock since 1964.
Floor & Decor wasn't a forever holding; it didn't even last half a decade. Berkshire first bought into it in the third calendar quarter of 2021 with a buy-in of slightly over 817,000 shares. Over the next two quarters Buffett and the gang added a bit over 30,000 shares, but these were the last of the buys. The sell-off started in the second quarter of this year, and by the end of the following frame the Floor & Decor position was completely vacated.
This is illustrative of one aspect of Buffett's investing strategy that has helped bring him great success -- he is not sentimental about stocks. Many of us have been guilty of hanging on to a tumbling equity simply because we like the business, we're fond of management, we enjoy the products, etc. Berkshire, though it favors super long-term holdings, isn't shy to unload positions when a once-liked stock's future starts to look cloudy.
With a stalling housing market and a customer base spooked by inflation, Floor & Decor was posting notable declines in same-store sales across 2024. A fundamental investor to his core, Buffett might have felt that that dynamic alone was reason enough to exit the stock.
2. It wasn't a major Berkshire holding either
The previous 13F filing, (i.e. the final one including the now-departed Floor & Decor stake), revealed that Berkshire held just under 4 million shares of the retailer. The listed market value of the holding was a bit over $395 million, which to you or me is a staggering amount of capital.
But Buffett and Berkshire are not you or me. These days, the combined market cap of all Berkshire's equity positions is slightly over $292 billion (how's that for staggering?).
Placed against this, the Floor & Decor investment was relatively small potatoes. If the stock were still in the portfolio it would comprise barely over 0.1% of the portfolio's total market cap. As for absolute value, Floor & Decor's $395 million wouldn't even crack the Berkshire top 10 (which are all stakes above $6 billion, by the way). In fact, of the current 46 equities, Floor & Decor would be larger than only 13 of those positions.
This lack of prominence probably left it vulnerable to Berkshire's recent strategy of aggressive stock sales in favor of loading up on U.S. Treasury bills and maintaining an immense cash position (over $325 billion as of the end of September).
All told during the quarter, Berkshire sold just over $36 billion worth of stocks and bought only $1.5 billion (in a blend of new buys and additions to existing stakes). That's the eighth time in a row Buffett and company have been net sellers of stocks; he clearly believes the immediate future for equities is not inspiring. As a small holding and a company perhaps not facing a bright immediate future, Floor & Decor's days were likely numbered.
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American Express is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
