Thursday, May 16, 2013

Berkshire Hathaway 1st Quarter 2013 13F-HR

The Berkshire Hathaway (BRKa1st 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 4th Quarter 13F-HR.)

There was plenty of buying and selling during the quarter. Here's a quick summary of the changes:*

New Positions
Chicago Bridge & Iron (CBI): Bought 6.51 million shares worth $ 376 million
Liberty Media (LMCA): 5.62 million shares worth $ 714 million**

Added to Existing Positions
Wells Fargo (WFC): Bought 18.3 million shares worth $ 720 million, total stake now $ 18.0 billion
IBM (IBM): 6.50 thousand shares worth $ 1.3 million, total stake $ 13.9 billion
Wal-Mart (WMT): 1.75 million shares worth $ 139 million, total stake $ 3.93 billion
DirecTV (DTV): 3.24 million shares worth $ 211 million, total stake $ 2.43 billion
U.S. Bancorp (USB): 193.5 thousand shares worth $ 6.64 million, total stake $ 2.1 billion
DaVita (DVA): 1.37 million shares worth $ 178 million, total stake $ 1.95 billion (Previously disclosed in SEC filings. Also, a "Standstill Agreement" between Berkshire-DaVita is now in place.)
National Oilwell Varco (NOV): 2.19 million shares worth $ 149 million, total stake $ 510 million
Verisign (VRSN): 4.49 million shares worth $ 403 million
Wabco Holdings (WBC): 4.40 thousand shares worth $ 341 thousand, total stake $ 316 million

In the 1st quarter of 2013, 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
BNY Mellon (BK): Sold 695 thousand shares worth $ 21 million, total stake $ 572 million
Mondelez International (MDLZ): 5.79 million shares worth $ 182 million, total stake $ 222 million
Kraft Foods Group (KRFT): 66.7 thousand shares worth $ 3.7 million, total stake $ 88.4 million

Sold Positions
Archer Daniels Midland (ADM)
General Dynamics (GD)

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 (approaching ~ 40%) and consumer stocks (~ 30%).

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

1. Wells Fargo (WFC) = $ 18.0 billion
2. Coca-Cola (KO) = $ 17.2 billion
3. IBM (IBM) = $ 13.9 billion
4. American Express (AXP) = $ 11.0 billion
5. Procter and Gamble (PG) = $ 4.26 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.***

The combined portfolio value (equities, cash, bonds, and other investments) was just under $ 200 billion at the end of the most recent quarter.

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 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 106 of the annual report for a full list of Berkshire's businesses.

Adam

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

* All values based upon yesterday's closing price.
** The Starz/Liberty Media spin-off was completed earlier this year (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. These new shares are a reflection of the spin-off. So Berkshire now owns shares of both STRZA and LMCA.
*** 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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