Warren Buffett is considered one of the best living long-term investors. His company, Berkshire Hathaway (BRK.A) (BRK.B), wholly owns several large businesses, such as Geico and Dairy Queen, while also holding substantial positions in many publicly-traded equities. This is a review of the purchases made by the Buffett's company last quarter.
According to Berkshire's recently filed 13F for the fourth quarter of 2012, Berkshire's U.S. equity holdings totaled $75.3B at the end of last year. The company really only added two new positions, but other new equities are listed on the filing due to the splitting of a prior holding, Kraft, into two businesses, Kraft Foods Group Inc. (KRFT) and Mondelez International (MDLZ). The company held a position in Kraft for several years, and has actually sold shares in the recent past, including selling some of its new spin-off shares last quarter. Therefore, Berkshire's positions in them do not indicate a new positive investment thesis, and the position reductions may indicate quite the opposite.
Last quarter, Berkshire Hathaway acquired nearly six million shares of Archer Daniels Midland (ADM), worth about $165 million at the end of 2012. The position is small enough that it appears unlikely to be made by Warren Buffett, and was probably taken by either Todd Combs or Ted Weschler. Both men are reasonably well known investors that Buffett hand-picked as investment managers in 2011. Buffett has given them a large and growing amount of cash to allocate on Berkshire's behalf. The shares have recently performed well and are trading well above any potential acquisition price Berkshire paid for the shares. A recent dividend increase and the revelation of this investment may have caused ADM shares to spike, making a near-term correction entirely possible. Below is a recent performance chart for ADM: (click to enlarge)
Similarly, Buffett's company took a position in Verisign (VRSN) in the last quarter of 2012. Verisign fell about 20 percent last quarter but quickly rebounded, indicating this may be more of a trade than a long-term position. The same may be true for ADM. Berkshire listed that it acquired about 3.7 million shares of VRSN, worth about $143, which also appears likely taken by either Todd Combs or Ted Weschler. Below is a recent performance chart for VRSN: (click to enlarge)
Berkshire has been acquiring shares in DaVita Inc. since the fourth quarter of 2011. DaVita is a major U.S. kidney dialysis services provider. Buffett's company bought more shares of DaVita in the first, second and fourth quarters of 2012, taking the company's position in DaVita to a valuation of about $1.4 billion at the end of the year, or about 13 percent of the company. DaVita has also consistently appreciated since Berkshire began accumulating shares. This continued purchasing indicates the company is likely to acquire more DaVita over time. Below is a recent performance chart for DVA: (click to enlarge)
Berkshire also purchased more shares in DIRECTV (DTV) last quarter. The company first invested in DTV in Q3 of 2011, and it was believed Ted Weschler may have initiated the position as his former hedge fund was known to also hold a position in the satellite services provider. Berkshire purchased almost 4.5 million shares of DTV last quarter and held over 34 million shares at the end of 2012, worth around $1.7 billion, or nearly six percent of the company. This growing and already significant position indicates at least one of the company's investment managers continues to be bullish on satellite data services, and that more buying may continue. Below is a recent performance chart for DTV: (click to enlarge)
Berkshire Hathaway also increased its position in General Motors (GM) last quarter. The company first purchased GM in the first quarter of 2012, and substantially added to the position in the third and fourth quarters. Last quarter, ten million GM shares were added to the portfolio, bringing the total stake in the large automaker to 25 million shares, worth about $720 million at the end of 2012. Below is a recent performance chart for GM: (click to enlarge)
Berkshire Hathaway also increased its stake in an auto related company, Wabco (WBC), a maker of anti-lock brakes. Berkshire initiated a position in Wabco during the third quarter of 2012, which it more than doubled from about 1.6 million to just over four million shares, worth about $265 million at the end of 2012. Wabco has been appreciating since this position was initiated, and the business looks likely to benefit from growing global automobile sales and enhanced safety regulations in emerging markets.
Buffett also added to his company's stake in tech giant International Business Machines (IBM) last quarter. IBM is Berkshire's third largest public equity stake and was increased marginally this quarter. Buffett first disclosed adding a major stake in IBM during the third quarter of 2011 and has since increased it. Berkshire now owns over 68 million shares of IBM, or roughly six percent of the company, worth about $13 billion at the end of 2012. It appears that Buffett may be adding to this position when IBM trades at or around $190 per share. Below is a recent performance chart for IBM: (click to enlarge)
Berkshire also increased its position in National Oilwell Varco Inc. (NOV), which it initiated in the second quarter of 2012. The position started off as somewhat minor but has been consistently growing and now totals just fewer than 5.3 million shares, worth about $362 million at the end of 2012. This continued accumulation looks likely to continue, and the corresponding demand should be good for share valuations. Below is a recent performance chart for NOV: (click to enlarge)
Another small but growing position is in Precision Castparts (PCP). Berkshire increased its PCP stake by around 60 percent last quarter, after initiating a position during the third quarter of 2012. At the end of 2012, the company owned just fewer than two million shares of PCP, worth about $275 million. This continued buying likely contributed to PCP's strong performance last quarter. Below is a recent performance chart for PCP: (click to enlarge)
Last quarter, Berkshire also added to its significant stake in Wal-Mart Stores (WMT). Buffett has held a position in WMT since 2005. Last quarter's addition was minor, increasing the stake by about two percent, but the company now owns about 47.5 million shares of WMT, worth about $3.24 billion at the end of 2012. In any event, after a strong 2012, WMT appears unlikely to perform quite so well in 2013. Below is a recent performance chart for WMT: (click to enlarge)
Berkshire also added to its already substantial stake in Wells Fargo & Co. (WFC) last quarter. Buffett increased his WFC holdings by around four percent, making WFC his largest publicly-traded equity investment, representing about 20 percent of Berkshire's equity holdings. The company now owns nearly 440 million shares of the bank, worth around $15 billion at the end of 2012. Buffett has consistently added to his WFC stake and is likely to continue doing so, especially on weakness. Below is a recent performance chart for WFC:
Most of the activity within the portfolio last quarter appears to be the work of Todd Combs and Ted Weschler, though Warren Buffett is likely behind at least some of last quarter's purchases, including IBM and WFC, and possibly some other growing positions. To the extent that the positions in companies such as GM, DTV and possibly DVA may be growing holdings by the new managers, it appears they are likely to continue growing in 2013 and soon become rather substantial within the greater portfolio.
It was also recently announced that Berkshire is involved in acquiring ketchup maker Heinz (HNZ), in a deal where the company will primarily obtain preferred stock, but also own about $4 billion of common equity in the company. That deal has not yet been finalized and was announced after the time period of this most recent filing.