Monday, February 17, 2014

Berkshire Hathaway 4th Quarter 2013 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 during that quarter.
(For a convenient comparison, here's a post from last quarter that summarizes Berkshire's 3rd Quarter 13F-HR.)

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

New Positions
Goldman Sachs (GS): Bought 12.6 million shares worth $ 2.1 billion**
Liberty Global (LBTYA): 2.9 million shares worth $ 246.5 million

Berkshire's latest 13F-HR filing did not indicate any activity was kept confidential. 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.

Added to Existing Positions
Wells Fargo (WFC): Bought 326,500 shares worth $ 15 million, total stake $ 21.4 billion
Exxon Mobil (XOM): 1.04 million shares worth $ 97.9 million, total stake $ 3.9 billion
Wal-Mart (WMT): 236,498 shares worth $ 17.9 million, total stake $ 3.75 billion
U.S. Bancorp (USB): 203,400 shares worth $ 32.2 million, total stake $ 3.2 billion
DaVita (DVA): 5 million shares worth $ 332.8 million, total stake $ 2.4 billion**
USG Corporation (USG): 17.8 million shares worth $ 610.4 million, total stake $ 1.2 billion**
General Electric (GE): 9.99 million shares worth $ 257.3 million, total stake $ 272.5 million**

Reduced Positions
Moody's (MCO): Sold 252,400 shares worth $ 20.1 million, total stake $ 1.96 billion
ConocoPhillips (COP): 2.45 million shares worth $ 160.5 million, total stake $ 726.1 million
Liberty Media Corporation (LMCA): 322,340 shares worth $ 43.6 million, total stake $ 716.8 million
Suncor (SU): 5 million shares worth $ 167.3 million, total stake $ 434.2 million
Starz (STRZA): 1.1 million shares worth $ 32.3 million, total stake $ 135.6 million

Sold Positions
Dish Network (DISH): Sold 547,312 shares worth $ 31.1 million
GlaxoSmithKline (GSK): 345,819 shares worth $ 19.3 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 a small percentage of the overall portfolio.

These days, any changes involving smaller positions will generally be the work of the two portfolio managers.
(Though some of the holdings they're responsible for have become more substantial over time.)

Top Five Holdings
After the changes, Berkshire Hathaway's portfolio of equity securities remains mostly made up of financial, consumer and, to a lesser extent, technology stocks (primarily IBM).

1. Wells Fargo (WFC) = $ 21.4 billion
2. Coca-Cola (KO) = $ 15.6 billion
3. American Express (AXP) = $ 13.5 billion
4. IBM (IBM) = $ 12.5 billion
5. Procter and Gamble (PG) = $ 4.2 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 firm numbers when the annual report is released, but the combined portfolio value (equities, cash, bonds, and other investments) will likely exceed $ 210 billion.

The portfolio, of course, excludes all the operating businesses that Berkshire owns outright with ~ 290,000 employees (we'll soon get an updated number that's almost certainly much higher).

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 also the deal Berkshire closed last year for 50% ownership of H.J. Heinz.

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.


Long positions in BRKb, WFC, KO, AXP, PG, USB, WMT, COP, GSK, and GE 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 Friday's closing price.
** Goldman Sachs and General Electric common shares came from warrants converted via net share settlement. USG notes held by Berkshire were also converted resulting in additional shares of USG common stock. These all came out of moves made by Buffett during the financial crisis. Berkshire received shares in Goldman Sachs and General Electric from exercised warrants with both deals being amended from cash settlement to net share settlement. The DaVita moves were first disclosed in early December.
*** 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 the preferred shares (and, where applicable, related warrants) are also 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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