Tuesday, May 17, 2011

Berkshire Hathaway 1st Quarter 2011 13F-HR

The Berkshire Hathaway (BRKa) 1st Quarter 2011 13F-HR was released yesterday.

Compared to the 4th Quarter 2010 13F-HR, where more than 10 stocks were sold and Buffett continued to build his Wells Fargo (WFC) position, not much has changed.

At least not much that has yet been disclosed.

(Here is a post that summarizes changes made in the previous Berkshire Hathaway 13F-HR.)

In 1Q 2011, there was minimal selling or buying with the exception of some possible new purchase(s) that were kept confidential. The filing says: "Confidential information has been omitted from the Form 13F and filed separately with the Commission."

From time to time, the SEC allows Berkshire Hathaway to keep certain material moves confidential. The intention being to prevent buyers from driving up the price before Berkshire makes its future purchases.

Besides the mystery stock or stocks that Berkshire has been purchasing, there were the following disclosed changes to the stock portfolio:

Equities Purchased
The only entirely new position was Mastercard (MA).

A look at the cash flow statement from the most recent 10-Q reveals that $ 834 million of purchases were made in the 1st quarter.

Since the Mastercard purchase was only an estimated $ 52 million (using the midpoint of the stocks trading range that quarter) that means roughly $ 782 million of other new purchase(s) (ie. the mystery purchases) were transacted by Berkshire Hathaway during 1Q 2011.

Equities Sold
A very small but basically immaterial amount of ConocoPhillips (COP) was sold. It remains a top ten position.

Portfolio Summary
After the changes, Berkshire Hathaway's stock portfolio* is made up of ~ 43% financials, 41% consumer goods, 6% consumer services, and 5% healthcare. The remainder is primarily spread across industrials and energy.

1. Coca-Cola (KO) = $ 13.6 billion
2. Wells Fargo (WFC) = $ 9.5 billion
3. American Express (AXP) = $ 7.6 billion
4. Procter and Gamble (PG) = $ 5.1 billion
5. Kraft (KFT) = $ 3.6 billion

As is almost always the case, it's a very concentrated portfolio with the top five often making up 60-70 percent and, at times, even more of the equity portfolio.

We'll see if some of these mystery purchase(s) could be, at least in part, those of Todd Combs. Initially, Combs is expected to manage just $ 2-3 billion of the 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 nearly $ 120 billion** (excluding cash).

In addition, there was roughly $ 41 billion in cash at the end of 1Q 2011 although $ 9 billion will be needed for the Lubrizol purchase. That pile of cash can grow easily at a rate of $ 10 billion/year so there is no shortage of money to put to work at Berkshire.

Adam

Long positions in BRKb, KO, WFC, AXP, PG, KFT and COP established at lower than recent 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.) are updated in the annual letter.
** This portfolio, of course, excludes all the non-insurance 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, they own insurance businesses (BH Insurance, General Re, GEICO, etc.) that provide plenty of "float" for investments. See page 106 of the annual report for a full list of the operating businesses.
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