Friday, February 15, 2013

Berkshire Hathaway 4th Quarter 2012 13F-HR

The Berkshire Hathaway (BRKa4th Quarter 13F-HR was released yesterday. Below is a summary of the changes that were made to the Berkshire equity portfolio.
(For a convenient comparison, here's a post from last quarter that summarizes Berkshire's 3rd Quarter 2012 13F-HR.)

There was plenty of stocks bought during the quarter. Some brand new positions were established while Buffett and his portfolio managers continued to build upon existing positions.

Here's what changed during the 4th quarter:*

New Positions
Archer Daniels Midland (ADM): Bought 5.96 million shares worth $ 187 million
Verisign (VRSN): 3.69 million shares worth $ 168 million

Added to Existing Positions
Wells Fargo (WFC): Bought 17.3 million shares worth $ 609 million, total stake now $ 15.5 billion
IBM (IBM): 598 thousand shares worth $ 119 million, total stake $ 13.6 billion
Wal-Mart (WMT): 793 thousand shares worth $ 56.2 million, total stake $ 3.36 billion
DirecTV (DTV): 4.48 million shares worth $ 225 million, total stake $ 1.71 billion
DaVita (DVA): 3.41 million shares worth $ 407 million, total stake $ 1.62 billion
Liberty Media (STRZA): 122 thousand shares worth $ 15.2 million, total stake $ 697 million**
General Motors (GM): 10 million shares worth $ 278 million, total stake $ 694 million
National Oilwell Varco (NOV): 1.11 million shares worth $ 77.9 million, total stake $ 372 million
Precision Castparts (PCP): 728 thousand shares worth $ 134 million, total stake $ 365 million
Wabco Holdings ((WBC): 2.47 million shares worth $ 170 million, total stake $ 280 million

In the 4th Quarter of 2012, there apparently was nothing purchased that was kept confidential. Berkshire's 13F-HR filings will sometimes say: "Confidential information has been omitted from the Form 13F and filed separately with the Commission."

Not this time.

Occasionally, the SEC allows Berkshire Hathaway to keep certain moves in the portfolio confidential. The permission is granted by the SEC when a case can be made that the disclosure may cause buyers to drive up the price before Berkshire makes its additional purchases.

Reduced Positions
Mondelez International (MDLZ): Sold 17.6 million shares worth $ 468 million, total stake $ 341 million
Kraft Foods Group (KRFT): 8.49 million shares worth $ 400 million, total stake $ 78.7 million
Johnson & Johnson (JNJ): 165 thousand shares worth $ 12.5 million, total stake $ 24.8 million
Lee Enterprises (LEE): 1.04 million shares worth $ 1.52 million, total stake now $ 130 thousand

Berkshire owns both Mondelez International (global snack-food company) and Kraft Foods Group (North American grocery-food business) as a result of the spin-off

The spin-off is now called Kraft Foods Group while the remaining Kraft business has been named Mondelez International. Berkshire would own 30.4 million Mondelez International shares and 10.2 million Kraft Foods Group shares if no selling had been done in 4Q 2012 (as this Bloomberg article explains).

Of course, there was quite a bit of selling as noted above and in the latest 13F-HR filing. 

Todd Combs and Ted Weschler are responsible for an increasingly large number of the moves in the Berkshire equity portfolio, even if they still manage only a small percentage of the overall portfolio.

These days, any changes involving smaller positions will generally be the work of the two portfolio managers.

Top Five Holdings
After the changes, Berkshire Hathaway's portfolio of equity securities remains mostly made up of financial (~ 35%) and consumer stocks (~ 30%).

The remainder is spread across technology (primarily IBM), healthcare, industrials, and energy.

1. Wells Fargo (WFC) = $ 15.5 billion
2. Coca-Cola (KO) = $ 14.7 billion
3. IBM (IBM) = $ 13.6 billion
4. American Express (AXP) = $ 9.5 billion
5. Procter and Gamble (PG) = $ 4.1 billion

As is almost always the case it's a very concentrated portfolio.

The top five often represent 60-70 percent and, at times, even more of the equity portfolio. In addition, Berkshire owns equity securities listed on exchanges outside the U.S., plus cash and cash equivalents, fixed income, and other investments.***

We'll get more details when the annual report is released but the combined portfolio value (equities, cash, bonds, and other investments) should easily be greater than $ 180 billion at this point.

The portfolio, of course, excludes all the operating businesses that Berkshire owns outright with 288,000 employees.

Here are some examples of the non-insurance businesses:

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, Lubrizol, and the recently purchased Oriental Trading Company (among others).

In addition, the insurance businesses (BH Reinsurance, General Re, GEICO etc.) owned by Berkshire have naturally provided plenty of "float" for their investments over time and continue to do so.

See page 101 of the annual report for a full list of Berkshire's businesses.

Adam

Long positions in BRKb, KO, WFC, AXP, PG, WMT, and JNJ established at much lower than recent market prices.

* All values based upon yesterday's closing price with the exception of Liberty Media.
** The Starz/Liberty Media spin-off was completed last month (spin-off of Liberty from Starz). Liberty Media changed its name to Starz and trades as STRZA. The spin-off is called Liberty Media Corporation and trades as LMCA. The value shown above for Liberty Media are based upon the closing price as of the last trading day prior to spin-off. So Berkshire would now own shares of both STRZA and LMCA unless portfolio moves related to Starz or Liberty have been made since the end of the quarter.
*** Berkshire Hathaway's holdings of ADRs are included in the 13F-HR. What is not included are the shares listed on exchanges outside the United States. The status of those shares are updated in the annual letter. So the only way any of the stocks listed on exchanges outside the U.S. will show up in the 13F-HR is if Berkshire happens to buy the ADR. Investments in things like preferred shares (and related warrants) are also not included in the 13F-HR.
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