Thursday, August 15, 2013

Berkshire Hathaway 2nd Quarter 2013 13F-HR

The Berkshire Hathaway (BRKa) 2nd 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 1st Quarter 13F-HR.)

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

New Positions
Suncor (SU): Bought 17.8 million shares worth $ 581.4 million
Dish (DISH): 547 thousand shares worth $ 24.5 million

Added to Existing Positions
Wells Fargo (WFC): Bought 4.96 million shares worth $ 213.8 million, total stake now $ 20.0 billion
U.S. Bancorp (USB): 16.8 million shares worth $ 621.8 million, total stake $ 2.9 billion
General Motors (GM): 15.0 million shares worth $ 533.6 million, total stake $ 1.4 billion
BNY Mellon (BK): 5.7 million shares worth $ 175.1 million, total stake $ 756.3 million
National Oilwell Varco (NOV): 1.4 million shares worth $ 102.4 million, total stake $ 651.8 million
Chicago Bridge & Iron (CBI): 3.0 million shares worth $ 183.7 million, total stake $ 576.9 million
Verisign (VRSN): 2.7 million shares worth $ 134.1 million, total stake $ 536.7 million

Not all of the activity has been disclosed. In the 2nd quarter of 2013, apparently some activity was kept confidential. Berkshire's latest filing says: "Confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission."

Occasionally, the SEC allows Berkshire 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.

This makes sense because the total value of disclosed purchases in this 13F-HR do not come close to equaling the total purchases indicated by the Consolidated Statement of Cash Flows in their latest quarterly results.

Reduced Positions
Moody's (MCO): Sold 3.5 million shares worth $ 228.8 million, total stake now $ 1.6 billion
Mondelez International (MDLZ): 6.5 million shares worth $ 204.6 million, total stake $ 18.3 million
Kraft Foods Group (KRFT): 1.4 million shares worth $ 77.8 million, total stake $ 10.6 million
GlaxoSmithKline (GSK): 34.5 thousand shares worth $ 1.8 million, total stake $ 76.6 million

Sold Positions
Gannett (GCI): 1.7 million shares worth $ 44.6 million

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, consumer, and technology stocks (primarily IBM).

1. Wells Fargo (WFC) = $ 20.0 billion
2. Coca-Cola (KO) = $ 15.8 billion
3. IBM (IBM) = $ 12.8 billion
4. American Express (AXP) = $ 11.5 billion
5. Procter and Gamble (PG) = $ 4.3 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 roughly $ 200 billion at the end of the most recent quarter.

The portfolio, of course, excludes all the operating businesses that Berkshire owns outright with ~ 290,000 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, Lubrizol, and 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, PG, USB, and GSK established at much lower than recent market prices. Also, new small long position in IBM established near recent market prices.

* All values shown are based upon yesterday's closing price.
** 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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