Friday, August 15, 2014

Berkshire Hathaway 2nd Quarter 2014 13F-HR

The Berkshire Hathaway (BRKa2nd 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 1st Quarter 13F-HR.)

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

New Positions
Charter Communicatons (CHTR): Bought 2.31 million shares worth $ 361 million
Now Inc. (DNOW): Bought 1.83 million shares worth $ 58.1 million

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): 1.82 million shares worth $ 342 million, total stake $ 13.2 billion
Wal-Mart (WMT): 745 thousand shares worth $ 55.4 million, total stake $ 4.37 billion
U.S. Bancorp (USB): 67.8 thousand shares worth $ 2.82 million, total stake $ 3.33 billion
General Motors (GM): 2.96 million shares worth $ 100 million, total stake $ 1.12 billion
USG Corporation (USG): 4.11 million shares worth $ 113 million, total stake $ 1.07 billion**
Verizon (VZ): 3.98 million shares worth $ 195 million, total stake $ 735 million
Verisign (VRSN): 1.30 million shares worth $ 72.1 million, total stake $ 721 million
Suncor (SU): 3.46 million shares worth $ 133 million, total stake $ 633 million
Chicago Bridge & Iron (CBI): 1.15 million shares worth $ 66.8 million, total stake $ 621 million
Liberty Global Class A (LBTYA): 2.52 million shares worth $ 109 million, total stake $ 428 million
Visa (V): 244 thousand shares worth $ 51.9 million, total stake $ 382 million

Reduced Positions
DirecTV (DTV): 11.0 million shares worth $ 933 million, total stake $ 1.98 billion
National Oilwell Varco (NOV): 1.58 million shares worth $ 127 million, total stake $ 590 million
Liberty Media (LMCA): 1.30 million shares worth $ 184 million, total stake $ 565 million
Phillips 66 (PSX): 3.25 million shares worth $ 272 million, total stake $ 544 million
Precision Castparts (PCP): 101 thousand shares worth $ 24.2 million, total stake $ 451 million
ConocoPhillips (COP): 9.72 million shares worth $ 780 million, total stake $ 109 million
Graham Holdings (GHC): 1.62 million shares worth $ 1.14 billion, total stake $ 76 million

The reduction in shares of Graham Holdings came about as a result of this deal.

Sold Positions
Starz (STRZA): 1.92 million shares worth $ 55.2 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 (mostly IBM).

1. Wells Fargo (WFC) = $ 23.3 billion
2. Coca-Cola (KO) = $ 16.1 billion
3. American Express (AXP) = $ 13.2 billion
4. IBM (IBM) = $ 13.2 billion
5. Wal-Mart (WMT) = $ 4.37 billion

The Wal-Mart position is only barely larger than Berkshire's position in 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 ~ $ 233 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, KO, WFC, AXP, PG, USB, WMT, DTV, COP, and PSX established at much lower than recent market prices. Small long position in IBM established at slightly less than recent market prices. Also, small long positions in USG and GHC established near current prices.

* All values shown are based upon Thursday's closing price with the exception of Liberty Media. After the 2nd quarter ended, Liberty Media implemented a stock split and spin-off. The numbers shown above for Liberty Media are based upon the closing price as of the last trading day prior to the stock split and spin-off.
** This is resulting from USG notes held by Berkshire that were converted into USG common stock. The SC 13D/A reflects all of the 43.39 million shares (30.4%) of USG owned by Berkshire. 
*** 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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