Monday, May 18, 2015

Berkshire Hathaway 1st Quarter 2015 13F-HR

The Berkshire Hathaway (BRKa1st 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 though no entirely new positions. Here's a quick summary of the changes:*

Added to Existing Positions
Wells Fargo (WFC): 6.83 mil. shares (incr. 1.5%); total stake $25.6 bil.
IBM (IBM): 2.59 mil. shares (3.4%); tot. stake $ 12.8 bil.
U.S. Bancorp (USB): 3.68 mil. shares (4.6%); tot. stake $ 3.66 bil.
Deere & Co. (DE): 213k shares (1.2%); tot. stake $ 1.52 bil.

I've included above only those positions worth at least $ 1 billion at the end of the 1st quarter. In a portfolio this size -- over $ 238 billion (equities, fixed income, cash, and other investments) as of the latest available filing with roughly half made up of common stocks** -- a position that's less than $ 1 billion doesn't really move the needle much.

Other positions that were added to but worth less than $ 1 billion include: 21st Century Fox (FOXA), Precision Castparts (PCP), and Phillips 66 (PSX).

There were no entirely new positions established during the quarter.

Also, 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.

Reduced Positions
Charter (CHTR): 219k shares (reduced 3.5%); tot. stake $ 1.15 bil.

Other positions that were reduced somewhat but not sold outright include Bank of New York Mellon (BK), Visa (V), Viacom (VIAB), Liberty Global (LBTYA), WABCO (WBC), Mastercard (MA), and National Oilwell Varco (NOV) with each being worth less than $ 1 billion.

No positions were sold outright.

Todd Combs and Ted Weschler are responsible for an increasingly large number of the moves in the Berkshire equity 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) = $ 25.6 bil.
2. Coca-Cola (KO) = $ 16.2 bil.
3. IBM (IBM) = $ 12.8 bil.
4. American Express (AXP) = $ 11.8 bil.
5. Wal-Mart (WMT) = $ 4.97 bil.

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 fixed maturity securities, cash and cash equivalents, and other investments.

The portfolio excludes all the operating businesses that Berkshire owns outright with ~ 340,000 employees (25 being at headquarters) according to the latest letter.

Here are some examples of Berkshire's 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, at least until the Kraft Heinz deal closes, slightly more than 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 125 of the 2014 annual report for a full list of Berkshire's businesses.

Adam

Long positions in BRKb, KO, WFC, AXP, USB, WMT, and PSX established at much lower than recent market prices. Also, long position in IBM established at slightly lower than recent market prices. (In each case compared to average cost basis.)

* All values shown are based upon the last trading day of the 1st quarter.
** 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, if a large enough position, 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 valuable warrants, where applicable, as explained in recent letters) 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). Heinz common and preferred investments are currently valued on Berkshire's books at $ 11.5 billion.
*** A deal was recently announced that will combine Kraft (KRFT) with the Heinz assets. Berkshire will own a smaller percentage (more than 26%) of the much larger combined company after the Kraft Heinz deal closes.
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