Friday, November 15, 2013

Berkshire Hathaway 3rd Quarter 2013 13F-HR

The Berkshire Hathaway (BRKa) 3rd Quarter 13F-HR was released yesterday. Below is a summary of the changes that were made to the Berkshire equity portfolio during that quarter.
(For a convenient comparison, here's a post from last quarter that summarizes Berkshire's 2nd Quarter 13F-HR.)

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

New Position
Exxon Mobil (XOM): bought 40.1 million shares worth $ 3.74 billion

Most of the Exxon Mobil shares were actually purchased in the prior quarter but not disclosed.

Berkshire's 2nd Quarter 13F-HR filing did indicate some activity had been kept confidential. That filing said: "Confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission."

We now know it was Exxon Mobil that was omitted.

It's certainly a sizable stake.

This separate 13F-HR/A filing (also released yesterday) reveals the specific number of shares of Exxon Mobil that had already been purchased by the end of the 2nd quarter:

31.2 million shares

So that means only 8.85 million shares were actually purchased in the 3rd quarter.**

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.

The current 13F-HR filing does not indicate any moves were kept confidential for the 3rd quarter.

Added to Existing Positions
U.S. Bancorp (USB): bought 840,200 shares worth $ 32.2 million, total stake $ 3.03 billion
DaVita (DVA): 1.5 million shares worth $ 87.98 million, total stake $ 1.85 billion
(The stake in DVA is actually now higher compared to end of 3Q.)
BNY Mellon (BK): 8,807 shares worth $ 292,000, total stake $ 816.7 million
Suncor (SU): 240,500 shares worth $ 8.58 million, total stake $ 642.4 million
Verisign (VRSN): 64,100 shares worth $ 3.58 million, total stake $ 611.8 million

Reduced Positions
ConocoPhillips (COP): sold 10.59 million shares worth $ 780.6 million, total stake now $ 996.8 million
DirecTV (DTV): 760,700 shares worth $ 48.95 million, total stake $ 2.35 billion
Sanofi (SNY): 157,800 shares worth $ 8.37 million, total stake $ 207.2 million
GlaxoSmithKline (GSK): 1.13 million shares worth $ 58.9 million, total stake $ 18.03 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) = $ 19.96 billion
2. Coca-Cola (KO) = $ 16.08 billion
3. American Express (AXP) = $ 12.42 billion
4. IBM (IBM) = $ 12.41 billion
5. Procter and Gamble (PG) = $ 4.45 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.)

Then there's Berkshire's rather substantial deal for 50% ownership of H.J. Heinz that closed earlier this year.

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, COP, DTV, SNY, and GSK established at much lower than recent market prices. Also, small long position in IBM established at slightly less than recent market prices.

* All values shown are based upon yesterday's closing price.
** It's worth mentioning that Berkshire did establish a small position in Exxon Mobil back in 2009, but later sold it.
*** 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. Also, after the 3rd quarter ended, Berkshire received shares in Goldman Sachs (GS) and General Electric (GE) from exercised warrants (both deals were amended from cash settlement to net share settlement). So, unless sold, those shares will show up in the next 13F-HR filing. Investments in things like the preferred shares (and, where applicable, related warrants) are not included in the 13F-HR. The same is true for the Heinz common shares (i.e. not just the Heinz preferred shares).
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