Buffett may eye stake sales after rail deal

By Lilla Zuill and Paritosh Bansal

NEW YORK (Reuters) - Warren Buffett's latest deal -- huge even by the billionaire investor's own standards -- could put the Oracle of Omaha in the mood to sell some of his massive portfolio of stakes in marquee U.S. companies.

Before embarking on any more big takeovers, Buffett's Berkshire Hathaway Inc could focus on replenishing its coffers by selling some securities' holdings from the 80-odd companies within the conglomerate, some Buffett watchers said.

Berkshire's $26 billion deal to take over Burlington Northern Santa Fe Corp comes on top of a roughly $11 billion spending spree to make a slew of major, high-yielding investments, including in Goldman Sachs Group Inc and General Electric.

The Burlington Northern deal will deplete Berkshire's cash closer to the minimum $10 billion that Buffett likes to hold. The conglomerate will also take on about $8 billion in additional debt, something that Buffett is typically wary to do.

"He is almost fully invested, and while cash is always coming in, there will be less of it unless he gets something sold," said Timothy Vick, senior portfolio manager with Sanibel Captiva Trust Co in Sanibel Island, Florida and the author of "How to Pick Stocks like Warren Buffett."

He added that Buffett often spends as he sells, and has done that in the past year when he sold some of his stake in Johnson & Johnson and Procter & Gamble to go on a spending spree to snap up high-yielding investments elsewhere.

Besides Goldman and GE, these also included deals to buy stock in reinsurer Swiss Re.

In an interview on CNBC, Buffett said that after Burlington Northern "we won't be making any huge deals for a while."

Buffett was not immediately available for comment, said his assistant, Carrie Kizer.

BUSINESS SALES UNLIKELY

While Buffett's focus for the time being is likely to be on divestitures, he is unlikely to sell any of Berkshire's portfolio companies, experts said.

Berkshire operates businesses including See's Candies, Fruit of the Loom underwear and manufactured homebuilder Clayton Homes, and generates about half of its results from insurers such as Geico and reinsurer General Re.

"He has all sorts of levers that he could pull," said Thomas Russo, a partner at Gardner, Russo & Gardner in Lancaster, Pennsylvania which has several billion dollars under management, and counts Berkshire as its second largest holding.

"He could raise capital through divestments," Russo said. "But at the same time he has taken advantage of the downturn in credit markets and made enormous investments with the preferred stock, and I look for those pay-offs to continue for some time."

The value of Berkshire's portfolio of U.S.-listed equities grew to $48.95 billion in the second quarter. His holdings include Coca-Cola Co, Kraft Foods Inc, Wells Fargo & Co and and American Express.

In the end, the question is not if Buffett will make another major investment, but how soon.

"The cash just comes in wave after wave," said Frank Betz, a principal at Carret/Zane Capital Management. "The depleted treasury will of its own volition rebuild itself to an incredible pool that will be available for additional acquisitions."

"And I am sure there will be additional ones," said Betz, whose firm oversees more than $700 million and owns Berkshire stock.

(For more M&A news and our DealZone blog, click http://www.reuters.com/deals)

(Reporting by Lilla Zuill and Paritosh Bansal)