Wednesday, February 17, 2016

Berkshire Hathaway 4th Quarter 2015 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 both some buying and selling during the quarter. Here's a quick summary of the changes:*

Added to Existing Positions
Wells Fargo (WFC): 9.41 mil. shares (2% incr.); tot. stake $ 26.1 bil.
Deere & Co. (DE): 5.83 mil. shares (20%); tot. stake $ 1.75 bil.

I've included above only those positions worth at least $ 1 billion at the end of the 4th quarter. In a portfolio this size -- more than $ 246 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.

Shares that were bought among positions worth less than $ 1 billion include Axalta Coating Systems (AXTA), Liberty Global (LBTYA), and an entirely

One relatively small brand new position was also added during the quarter.

New Position
Kinder Morgan (KMI): 26.5 mil. shares; tot. stake $ 396 mil.

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
AT&T (T): 12.7 million shares (21% decr.); tot. stake $ 1.60 bil.

The only other reduction was Berkshire's relatively small position in WABCO (WBC).

Sold Positions
Berkshire's position in Chicago Bridge & Iron (CBI) was 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.

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) = $ 26.1 bil.
2. Kraft Heinz (KHC) = $ 23.7 bil.
3. Coca-Cola (KO) = $ 17.2 bil.
4. IBM (IBM) = $ 11.2 bil.
5. American Express (AXP) = $ 10.5 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. The relatively new and very large stake in Kraft Heinz has, in fact, simply made the portfolio even more concentrated. 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. Numbers like these -- along with many other things of interest especially for Berkshire shareholders -- should be updated in the next annual report and 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, and Oriental Trading Company.
(Among others.)

Berkshire recently added Precision Castparts to it's expanding list of non-insurance businesses it owns outright. At approximately $37.2 billion (including outstanding net debt), this purchase is a significant one even for an enterprise the size of Berkshire. The deal was announced in August of last year and completed in January of this year.

Also, earlier in 2015, Berkshire acquired the Van Tuyl Group, the largest privately held auto dealership in the United States.

In addition to the above businesses and investment portfolio, Berkshire's large insurance operation (BH Reinsurance, General Re, GEICO etc.) has historically been rather profitable (underwriting profits for 12 consecutive years through 2014) while providing plenty of "float" for their investments.

See page 125 of the 2014 annual report for a more complete listing of Berkshire's businesses.

Adam

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

* All values shown are based upon the last trading day of the 4th quarter.
** Berkshire Hathaway's holdings of ADRs are included in the 13F. What is not included are 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 is if Berkshire buys the ADR. Investments in things like preferred shares (and valuable warrants, where applicable, as explained in the recent letters) are also not included in the 13F.
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