Wednesday, May 16, 2018

Berkshire Hathaway 1st Quarter 2018 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 both some buying and selling during the quarter. Here's a quick summary of the changes:*

Added to Existing Positions**
Apple (AAPL): 74.2 mil. shares bought (45% incr.); stake=$ 40.2 bil.
US Bancorp (USB): 3.8 mil. shares (4% incr.); stake=$ 4.6 bil.
Bank of NY Mellon (BK): 1.4 mil. shares (2% incr.); stake=$ 3.2 bil.
Delta Air Lines (DAL): 489,000 shares (< 1% incr.); stake=$ 2.9 bil.
Monsanto (MON): 7.3 mil. shares (62% incr.); stake=$ 2.2 bil.

I generally include above only those positions that were worth at least $ 1 billion at the end of the 1st quarter.

Berkshire also roughly doubled its stake in Teva (TEVA) but it remains a relatively small position (i.e. below $ 1 billion).

In a portfolio this size a position that's less than $ 1 billion doesn't really move the needle much.

Reduced Positions
Wells Fargo (WFC): 1.7 mil. shares sold (<1% decr.); stake=$ 23.9 bil.
Phillips 66 (PSX): 35.0 mil. shares (43% decr.); stake=$ 4.4 bil.
Charter (CHTR): 267,000 shares (3% decr.); stake=$ 2.6 bil.
United Continental (UAL): 506,000 shares (2% decr.); stake=$ 1.9 bil.

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

Other small positions that were to an extent reduced further in size this past quarter include Liberty Global (LBTYA), Sanofi (SNY), and Verisk (VRSK).

Sold Position
IBM (IBM)
Graham Holdings (GHC)

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.

Also, Todd Combs and Ted Weschler are responsible for part of the Berkshire equity portfolio. So some of the changes -- especially those involving smaller positions -- will generally be the work of the two portfolio managers.

Top Five Holdings
After the changes, Berkshire's portfolio of equity securities remains mostly made up of financial, consumer, and technology stocks (mostly Apple).

1. Apple (AAPL) = $ 40.2 bil.
2. Wells Fargo (WFC) = $ 23.9 bil.
3. Bank of America (BAC) = $ 20.4 bil.
4. Kraft Heinz (KHC) = $ 20.3 bil.
5. Coca-Cola (KO) = $ 17.4 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 ~ 377,000 employees (26 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.

Page A-1, near the end of the annual report, has a complete listing of Berkshire's businesses.

Adam

Long positions in BRKb, AAPL, USB, WFC, BAC, and KO established at much lower than recent market prices. Also, long position in IBM established slightly above 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. 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 -- in some cases contributing to a mismatch between what's reported in the annual letter and the end of year 13F -- while investments in things like preferred shares and warrants, when applicable, are not included.
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