Tuesday, February 15, 2011

Berkshire Hathaway 4th Quarter 2010 13F-HR

Berkshire Hathaway's (BRKa) 4th Quarter 2010 13F-HR was released yesterday. Changes to the stock portfolio are as follows:

Equities Purchased
The only position Buffett continued to build upon is the portfolio's 2nd largest position, Wells Fargo (WFC), adding 1.8% to Berkshire's sizable stake. The total value of that position now stands at $ 11.6 billion (~21% of equity portfolio).

Ther are no entirely new positions this quarter.

Here's a summary of other changes made to the portfolio.

Equities Sold
Buffett sold all shares of the following stocks:
Berkshire also reduced stakes in BNY Mellon (BK) and Moody's (MCO).

The value of the shares sold in the above stocks combined represents roughly $ 1.3 billion or just under 2.5% percent of the entire equity portfolio value. 

Portfolio Summary
After the changes, Berkshire Hathaway's stock portfolio* is made up of  ~ 41% financials, 41% consumer goods, 6% consumer services, and 5% healthcare. The remainder is primarily spread across industrials and energy. 

Top five holdings:
  1. Coca-Cola (KO) = $ 12.6 billion (23.3% of the portfolio)
  2. Wells Fargo (WFC) = $ 11.6 billion (21.4%)
  3. American Express (AXP) = $ 7.1 billion (13.0%)
  4. Procter and Gamble (PG) = $ 5.0 billion (9.2%)
  5. Kraft (KFT) = $ 3.2 billion (5.9%)
These top 5 represent approximately 73% of the ~ $ 54 billion equity portfolio value at yesterday's prices. Overall, the changes were minor this quarter with Buffett closing 8 relatively small positions (small in the context of a $ 50 billion+ stock portfolio) while trimming 2 others and using some of those funds to buy more Wells Fargo.

So it's a slightly simpler, more concentrated portfolio.

Consider the fact that of the 8 closed positions only Nike was worth more than $ 300 million with the others each below that threshold. It's possible (even likely) that these sales are related to the recent retirement of Lou Simpson, who quietly managed the smaller GEICO investment portfolio at Berkshire for decades, in preparation for the addition of Todd Combs. Buffett has said previously that positions in the $ 200-300 million range were typically those of Lou Simpson. From the 2004 Berkshire Hathaway Shareholder Letter:

"Lou Simpson manages about $2.5 billion of equities that are held by GEICO, and it is his transactions that Berkshire is usually reporting. Customarily his purchases are in the $200-$300 million range and are in companies that are smaller than the ones I focus on." - Warren Buffett

Initially, Combs is expected to manage just $ 2-3 billion of the entire Berkshire Hathaway Portfolio. As of the last 10-Q (the best view available until the annual report comes out), the combined value of the Berkshire portfolio including the above equities plus fixed maturity securities and other investments is roughly $ 117 billion** (excluding cash).

In addition, there is another $ 34 billion plus in cash. That pile of cash grows by $ 10 billion in a bad year so there will be no shortage of money to manage at Berkshire.

Adam

Long positions in BRKb, KO, WFC, AXP, PG, KFT, and LOW established at lower than recent market prices. Established long position in BAC and MCO near current market prices.

* Berkshire Hathaway's holdings of ADRs are included in the 13F-HR. What is not included are the shares listed on exchanges outside of the United States. The status of those shares (BYD, POSCO, Sanofi, Tesco etc.) will be updated in the upcoming annual letter.
** This portfolio, of course, excludes all the operating businesses that Berkshire owns: MidAmerican Energy, Burlington Northern Santa Fe, McLane Company, The Marmon Group, Shaw Industries, Benjamin Moore, Johns Manville, Acme Building, MiTek, Fruit of the Loom, Russell Athletic Apparel, NetJets, Nebraska Furniture Mart, See's Candies, Dairy Queen, The Pampered Chef, Business Wire, Iscar Metalworking among others. In addition, the company owns insurance businesses (BH Insurance, General Re, GEICO, etc.) that provide plenty of "float" for investments.
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