Tuesday, August 15, 2017

Berkshire Hathaway 2nd Quarter 2017 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 both some buying and selling during the quarter. Here's a quick summary of the changes:*

Added to Existing Positions
Apple (AAPL): 835 thous. shares bought (<1% incr.); stake = $ 18.8 bil.
Bank of New York (BK): 17.2 mil. shares (52% incr.); stake = $ 2.6 bil.
General Motors (GM): 10.0 mil. shares (20% incr.); stake = $ 2.1 bil.
Lib. SiriusXM (LSXMK): 8.8 mil. shares (39% incr.); stake = $ 1.3 bil.

I generally include above only those positions that were worth at least $ 1 billion at the end of the 2nd quarter. In a portfolio this size -- ~$ 307 billion (equities, fixed income, cash, and other investments including Kraft Heinz: KHC at end of quarter market value) according to the latest available filing with just about half made up of common stocks** -- a position that's less than $ 1 billion doesn't really move the needle much.

Liberty SiriusXM (LSXMA) is the only position added to worth less than $ 1 billion.

New Positions
STORE Capital (STOR): 18.6 mil. shares; stake = $ 418 mil.
Synchrony Financial (SYF): 17.5 mil. shares; stake = $ 521 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
Wells Fargo (WFC): 11.7 mil. shares sold (2% decr.); stake = $ 25.9 bil.
IBM (IBM): 10.5 mil. shares (16% decr.); stake = $ 8.3 bil.
Delta Airlines (DAL): 1.9 mil. shares (3% decr.); stake = $ 2.9 bil.
American Airlines (AAL): 2.3 mil. shares (4% decr.); stake = $ 2.4 bil.
United Airlines (UAL): 740 thous. shares (2% decr.); stake = $ 2.1 bil.

Warren Buffett previously said that Berkshire had been selling its IBM shares during the 1st and 2nd quarter.

Berkshire also had previously announced they will need to sell some of their Wells Fargo shares to keep the ownership stake below 10%.

No other positions valued at more than $ 1 billion were partially sold off during the quarter. Reduced position worth less than $ 1 billion included Sirius XM (SIRI) and WABCO Holdings (WBC).

Sold Positions
General Electric (GE)

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 technology stocks (primarily IBM and Apple).

1. Kraft Heinz (KHC) = $ 27.9 bil.
2. Wells Fargo (WFC) = $ 25.9 bil.
3. Apple (AAPL) = $ 18.8 bil.
4. Coca-Cola (KO) = $ 17.9 bil.
5. American Express (AXP) = $ 12.8 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 also 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 ~ 367,000 employees (25 being at headquarters) according to the latest available annual report.

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, Berkshire Hathaway Automotive, Oriental Trading Company, Precision Castparts, and Duracell.
(Among others.)

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 while providing plenty of "float" for their investments.

See page 116 of the annual report for a more complete listing of Berkshire's businesses.


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

* All values shown are based upon the last trading day of the 2nd 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. Also, certain equity holdings are reported separately while investments in things like preferred shares (along with valuable warrants, where applicable, as explained in the recent letters) are not included in the Berkshire 13F.
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