Buffett Bought Costco in Bulk, SEC Filing Says

Warren Buffett and Charles Munger made good on their long-spoken admiration of Costco Wholesale Corp., purchasing almost 24 million shares of the retailer last year, according to a new regulatory filing.

Berkshire Hathaway Inc. (BRK/A), the investment holding company run by Buffett and Munger, bought most of the stock during the second quarter of last year, according to the filing with the Securities and Exchange Commission. That was when shares of Costco, the nation’s largest wholesale-club retailer, fell 37%.

The shares represent about 5.4% of the 450 million shares Costco reported as outstanding as of March 16.

Costco has received accolades from both Munger and Buffett during Berkshire’s last several annual meetings, according to attendees. Munger, Berkshire’s vice chairman, has served on Costco’s board since January 1997 and also shops at the wholesale stores, said Richard Galanti, chief financial officer at the Issaquah, Wash., company.

Costco has seen sales increase at a compounded annual rate exceeding 10% for the five years ended Sept. 3. Annual earnings growth was above 20% during that time, Galanti said.

Meanwhile, Costco shares had increased sixfold between September 1995 and April 2000, becoming pricey for bargain hunters such as Munger and Berkshire’s chairman, Buffett. The stock began declining that April, and the fall accelerated May 24, when Costco said quarterly earnings missed forecasts for the first time since 1995.

Investors didn’t greet Monday’s news with much excitement. In fact, Costco shares (COST) slid $3.06 to $36.19 on Nasdaq.

Berkshire, in an amended document filed with the SEC for the quarter ended Dec. 31, didn’t list any Costco holdings. An interpretation could be that Berkshire sold its Costco stake during the fourth quarter. But Buffett followers said it was more likely that Berkshire continued to hold the Costco shares and was still negotiating with the SEC over disclosure of the stake for the end of the year.

Buffett has made short-term trades in stocks in recent years--such as in electronics firm Bell Industries--but generally has remained a buy-and-hold investor.