Buffett Bails on Level 3

It was considered a good sign for telecom when Warren Buffett decided to invest big in Level 3. What does it say when he sells? Buffett's Berkshire Hathaway Investments has apparently sold the vast majority of its position, according to an SEC filing Wednesday night that reported a 1.6 million-share stake in Level 3, down from close to 20 million shares as recently as June 30. Has Buffett decided its a good time to get out of telecom? Or is the stock sale based on the performance of Level 3, rather than a sector-based analysis?

The company's shares were trading at about $2.75 when Buffett bought his Level 3 position last summer, and are valued at about $5.25 in early trading this morning. That's about a 90 percent gain in 16 months, which is not bad at all.

It's interesting timing, since Level 3 chairman Jim Crowe said last month that the company is eager to acquire distressed telecom assets. More than few industry observers expected that the investment by Berkshire and its partners would allow Level 3 to go shopping for cheap telecom assets. Instead, the company's investments have focused on software, with the notable exception being the purchase of Genuity's assets. Level 3 is regularly mentioned as a possible buyer for Cable & Wireless' US assets. Rumors of a prepackaged Chapter 11 filing by C&W's US unit are probably feeding speculation, since Level 3 structured the Genuity deal as a prepackaged bankruptcy. Stay tuned.