Friday, May 16, 2014

Berkshire Hathaway 1st Quarter 2014 13F-HR

The Berkshire Hathaway (BRKa) 1st 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 4th Quarter 13F-HR.)

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

New Positions
Verizon (VZ): Bought 11.0 million shares worth $ 529 million
Liberty Global Class C (LBTYK): 7.35 million shares worth $ 306 million

The above new position in Liberty Global is at least mostly -- though likely entirely -- related to this announcement. Berkshire received a stock dividend of one Liberty Global Class C ordinary share for each Liberty Global Class A (LBTYA) ordinary share they owned (some of which, as shown below, were purchased during the 1st quarter).

Further information on this can be found here.

Berkshire's latest 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
IBM (IBM): 233 thousand shares worth $ 43.5 million, total stake $ 12.7 billion
Wal-Mart (WMT): 8.57 million shares worth $ 658 million, total stake $ 4.46 billion
U.S. Bancorp (USB): 706 thousand shares worth $ 28.6 million, total stake $ 3.25 billion
DaVita (DVA): 1.16 million shares worth $ 78.6 million, total stake $ 2.55 billion
Verisign (VRSN): 724 thousand shares worth $ 35 million, total stake $ 566 million
Liberty Global Class A (LBTYA): 4.40 million shares worth $ 192 million, total stake $ 321 million

Reduced Positions
DirecTV (DTV): 2.0 million shares worth $ 170 million, total stake $ 2.94 billion
General Motors (GM): 10.0 million shares worth $ 344 million, total stake $ 1.03 billion
Phillips 66 (PSX): 17.4 million shares worth $ 1.43 billion, total stake $ 799 million
Starz (STRZA): 2.62 million shares worth $ 77.7 million, total stake $ 56.9 million

The reduction in shares of Phillips 66 came about as a result of this deal.

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 (mostly IBM).

1. Wells Fargo (WFC) = $ 22.7 billion
2. Coca-Cola (KO) = $ 16.2 billion
3. American Express (AXP) = $ 13.3 billion
4. IBM (IBM) = $ 12.7 billion
5. Wal-Mart (WMT) = $ 4.46 billion

The additional purchases of Wal-Mart shares moved the position into the top five in place of Procter & Gamble (PG).

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.**

According to their latest filing, the combined portfolio value (equities, cash, bonds, and other investments) at the end of the most recent quarter was ~ $ 227 billion (including the investment in Heinz).

The portfolio, of course, excludes all the operating businesses that Berkshire owns outright with, according to the latest letter, a bit more than 330,000 employees combined.

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, Oriental Trading Company, as well as 50% of Heinz.
(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 111 of the annual report for a full list of Berkshire's businesses.

Adam

Long positions in BRKb, WFC, KO, AXP, PG, USB, WMT, DTV and PSX 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 Thursday'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 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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