This is the first article of a three part series about the less known public stock holdings of Mr. Buffett and Mr. Munger. You can find the other two parts (after they are published) here.
In this series I will present to you the lesser known holdings of Berkshire Hathaway (BRK.A, BRK.B) as they can be found in the company's latest fillings and I will provide you with the following information about them.
- What is the business of each company.
- What is its competitive advantage.
- What is the state of the company's valuation (is it cheap or expensive).
My purpose is to provide some investing ideas and some companies that are worth watching in case they become cheap enough to buy. I hope you'll find the information provided here useful.
Chicago Bridge and Iron (CBI)
From Yahoo! Finance:
Chicago Bridge & Iron Company N.V., an energy infrastructure focused company, provides conceptual design, technology, engineering, procurement, fabrication, construction, and commissioning services to customers in the energy, petrochemical, and natural resource industries worldwide.
In simpler words CBI builds a wide range of equipment and facilities for oil, gas and nuclear energy companies all around the world. What it builds ranges from tanks and other storage facilities to gas processing plants, refinery units and many more.
Chicago Bridge & Iron is the largest tank manufacturer in the world and has a reputation for excellence and quality that keep customers loyal. That is because CBI's products and services are used in critical stages of its clients' operations were there is a high cost for mistakes and operational failure.
At $63 CBI is trading at 15 times its 2013 earnings. However with 12% average growth for the last 5 years CBI seems fairly valued. It would be a good buying candidate after a 15% correction or more.
Berkshire Hathaway owned as of March 31, 2013 6.5 million shares.
Gannett Co (GCI)
From Yahoo! Finance (edited excerpts):
The Publishing Segment operates 82 U.S. daily publications with affiliated online sites, including USA TODAY, USA WEEKEND, Clipper magazine, magazines for nurses and allied health professionals; and military and defense publications. In addition, this segment engages in commercial printing, newswire, marketing, and data services operations.
The Digital segment operates CareerBuilder.com, PointRoll.com, ShopLocal.com and Reviewed.com.
The Broadcasting segment operates 23 television stations and affiliated online sites and Captivate Network, a national news and entertainment network that delivers programming and full-motion video advertising on video screens located in elevators of office towers and hotel lobbies in North America.
Gannett Co., Inc. was founded in 1906 and is headquartered in McLean, Virginia.
The company's moat is essentially its flagship newspaper USA TODAY. However although it is the second largest newspaper in the US by sales the newspaper business is a shrinking one making the company's future bleak.
At $21.63 the stock is trading at 10 times the company's expected earnings for 2013 ($2.41/share) which extremely rich for a shrinking company. Furthermore it is trading almost at 2 times its $2.6 billion book value. At these price levels the company may be a good short candidate for a 30% correction.
Berkshire Hathaway owned as of March 31, 2013 1.74 million shares.
M&T Bank (MTB)
From Yahoo! Finance:
M&T Bank Corporation operates as the holding company for M&T Bank that provide commercial and retail banking services to individuals, corporations, and other businesses and institutions. [...]
As of March 6, 2013, it operated approximately 727 branches and 2,000 ATMs located in New York, Maryland, Pennsylvania, Washington, District of Columbia, Virginia, West Virginia, and Delaware. The company was founded in 1856 and is headquartered in Buffalo, New York.
The company's moat is the same one every bank has. Deposits and loans are "sticky" since bank customers are usually extremely unwilling to move their deposits or loans around due to the paperwork and bureaucracy involved.
At $106 the stock is trading at a mediocre 12.5 times the expected 2013 earnings ($8.49/share) and at 1.4 times the book value. The bank has grown its earnings at an average 4% annual rate for the last decade. However past growth is distorted by the recent financial crisis and for the coming years EPS growth will more likely be around 10% annually. The company relatively fairly valued and would probably be a good buy after a 10% to 15% correction.
Berkshire Hathaway owned as of March 31, 2013 5.38 million shares.