Buffett letter leaves out Johnson & Johnson

The letter from Warren Buffett, chairman of Berkshire Hathaway, is closely followed.
The letter from Warren Buffett, chairman of Berkshire Hathaway, is closely followed. (NATI HARNIK / AP)
Posted: March 06, 2013

Warren Buffett's annual shareholder letter is much followed by investors, and the latest version does not include Johnson & Johnson for the first time since 2005.

The letter, released over the weekend, lists the companies in which the billionaire or Berkshire Hathaway, of which he is chairman, hold at least $1 billion in stock.

With product recalls, patient lawsuits, and a federal investigation pending, Buffett was critical of J&J in February 2012 when he discussed his annual letter, telling CNBC that the health-care giant "obviously messed up in a lot of ways in the last few years."

Despite the problems, J&J's stock price has risen in recent months and closed Monday at $77.20, a 52-week high. A J&J spokesman declined to comment.

There was no mention of J&J in the latest letter from Buffett, which was released Friday. A separate filing with the Securities and Exchange Commission indicated that Buffett had only 327,100 shares, worth about $22.9 million, as of Dec. 31, 2012. The cutoff point for being included in the annual letter was $1 billion.

Over the last 12 months, Buffett or Berkshire sold the vast majority of 31.4 million shares of J&J they held. The holdings had been worth an estimated $2.1 billion, according to Buffett.

Drugmaker Sanofi-aventis, which is based in Paris and has operations in the Philadelphia region, remains on Buffett's list of top holdings. Berkshire's stake remained unchanged at 25.8 million shares, estimated to be worth $2.4 billion at the end of 2012. GlaxoSmithKline is the other pharmaceutical company among Berkshire holdings, also unchanged at 1.5 million shares, worth about $65.6 million at the end of 2012.

Besides selling off J&J stock in 2012, Buffett dispensed with stock of CVS Caremark, the drugstore and pharmacy benefits manager. Berkshire increased its stake in DaVita Healthcare Partners Inc., which runs about 2,000 kidney dialysis centers nationwide, including more than a dozen in the Philadelphia area.

Buffett did not explain the reduction in J&J stock in his letter, nor in an extended Monday interview with CNBC. But in the interview, he lamented the rise in health-care costs in the United States generally and as compared with the rest of the world.

"The number-one economic problem of the United States is the rising cost of health care," Buffett said, compared with other major industrialized nations.

According to figures compiled by the Organization for Economic Cooperation and Development (OECD), the United States spent 7.1 percent of gross domestic product on health care in 1970. In that year, Canada (6.9 percent), Sweden (6.8), and Germany (6) were the only other nations that spent 6 percent or more.

In 2010, the United States spent 17.6 percent of GDP on health care. The Netherlands was next at 12 percent, with six nations spending between 11 and 12 percent.

"This is the tapeworm on the American economy," Buffett said.

Contact David Sell at dsell@ phillynews.com or 215-854-4506. Read his blog at www.philly.com/phillypharma and on Twitter @phillypharma.

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