Buffett's Holdings Outperforming in Q4

With the release of Berkshire Hathaway's holdings as of the end of the third quarter yesterday, we can take a look at how these holdings have been doing so far this quarter. As shown at the bottom of the table, Buffett's Berkshire holdings are currently up 8.61% since the start of October, while the S&P 500 is up 4.41%.

Buffett's top holding with a value of more than $11 billion, Coca-Cola (KO), is even outperforming the S&P 500 so far this quarter (5.66% to 4.41%). Unsurprisingly, Buffett's position in Burlington Northern (BNI) has done the best so far this quarter with a gain of 22.87%. Buying one of your biggest positions at a nice premium is one way to boost returns!

Other big winners for Buffett this quarter have been AXP (+20.59%), COP (+18.7%), MCO (15.91%), IR (19.99%), NLC (18.2%), NSC (19.28%), and UNH (15.06%). Ten of his 41 holdings are down so far this quarter, with USG down the most at -15.13%.

click to enlarge

Comments

[BlueOkie]

Buffett thinks in years not quarters. How about adding comparison for 1,5,10 years?

2009 Nov 18 08:23 AM

[CaptainJJack]

I have owned BRK for years, now, and I am amazed at how few people understand it.

Many, many years ago, conglomerates were all the rage. The sale was that you got "top managers" to oversee the business and allocate capital. Since "management skills" were guided more by the financial results than process results, you did not need to have industry experts, the argument went, you just needed people with discipline.

The reality was much different. They performed well, initially, as management skills and discipline really do make a difference, but it wasn't long before things fell apart.

First, there was a tendency to centralize, and this created massive bureaucracy and decisions often became political more than analytical, especially since the founder was usually charismatic and tended toward empire building.

Secondly, and related, overhead and "home office" staffs and costs skyrocketed.

Third, in order to keep the party going, they had to keep buying at ever higher prices.

Wall Street started to figure out, that the investor could do his/her own capital allocation without all this, and that conglomerates were adding nothing. They were, in effect closed end mutual funds with far higher costs.

But. what if you could hire one of the world's greatest capital allocators for $100,000/year, and he was so sure of his own skills, he put virtually ever dime he had into the deal.

What if, instead of having a huge bureaucracy, you had a "home office" consisting of 18 people.

What if the person almost never over paid for a business or a CEO to run the business ( the main exception being Conoco).

What if the person managed the businesses with far more discipline than any other manager you know -- again for $100,000/year, e.g. sitting on $50 Billion in very low yielding cash even when it clearly hurt.

I own Buffet's stock because it is by far the lowest cost mutual fund I can buy, and that he manages businesses as though he personally owns them.

For the most part, he does.

2009 Nov 18 09:09 AM

[Daniel Eskin]

I agree with BlueOaki - it would be nice to see a comparison over an extended period of time based on Buffett's mentality. Also, this year, almost every single stock I'm seeing is at or close to its 52-week high, so these results, especially from a proven firm like BRK are expected. In fact, I'd be REALLY surprised if he was doing WORSE than the market at a time like this. I'd like to see how BRK fares during the upcoming market correction...

For more analysis, check out my blog: youngandinvested.com

2009 Nov 18 09:16 AM

[talld]

The market dropped almost half near the beginning of the year, and now has recovered most of that (for a time). With such wild gyrations in prices caused by forces beyond the control of any ticker, value investing is just silly.

A few months ago Buffett was on the cover of Forbes because he was down so far. The market going back up so far, has made it appear value investing is somehow relevant during such wild market times.

2009 Nov 18 11:15 AM

[Dave Shafer]

Funny, how the book value of BRK is at a all-time high! One would think over the long run that intrinsic value would be represented by the stock price [at least that is how it has worked in the past].

That market drop that some folks are expecting will have little effect on the cash flow Berkshire is throwing off, only add more opportunities for Buffett to invest in!

Another couple of years of opportunities for Buffett to exploit is a great thing for us Berkshire holders!

We win either way!

2009 Nov 18 12:01 PM

[Jgib]

I didn't notice the Goldman or GE preferred, with warrants attached. Yet they add another $8 BIL (I think) to the BRK portfolio, at cost. Also the GS warrants must be worth billions more, unless BRK already exercised them and cashed in. However, I doubt that.

It is also good to remember that BRK bought the GS preferred a day after GS got $10 bil from TARP. That fact says that Buffet and the Treasury must have known that Treasury and the fed would allow GS to be eligible for Tarp funds if GS got an injection of capital (BRK).

Also, I believe BRK is allowed to exclude most dividend income from its own corporate income in filing an 1120.

2009 Nov 18 12:14 PM

[Crude Oil Trader]

I admit, even though I am a day trader I am sitting on some BRK.B in my Roth IRA and have been surprised it has held up as well as it has. My concern is the collapse of Wells Fargo and Bank of America taking the fund down. SP 500 @ 1130 is an area of great concern for all of these names.

2009 Nov 18 12:17 PM

[CaptainJJack]

I believe the market values of the banks will fluctuate a lot, and we should expect to see prices fall for a while.

But, for me, there is a difference between market fluctuation and risk. Real risk is actually losing money, and the ONLY way you deal with this is not to overpay.

For example, anyone who bought at the 1999 top ACTUALLY lost money.

I deal will market fluctuations differently. Here the issue is psychology and the fact that humans are hard wired to sell when the market bottoms and buy at market tops. The issue is not the value of my portfolio, it is how disciplined I am.

Most investors due far worse than either the pros or the overall market because they tend to buy at market tops and sell at market bottoms. Even a little of this kind of trading will KILL your overall returns.

As Graham pointed out often, it is relatively easy for a disciplined individual investor to consistently achieve adequate (i.e. market plus some nominal amount) returns, but it is very, very difficult to achieve superior (defined as > market + 5%, annually) returns.


On Nov 18 12:17 PM Crude Oil Trader wrote:

> I admit, even though I am a day trader I am sitting on some BRK.B
> in my Roth IRA and have been surprised it has held up as well as
> it has. My concern is the collapse of Wells Fargo and Bank of America
> taking the fund down. SP 500 @ 1130 is an area of great concern for
> all of these names.

2009 Nov 18 06:47 PM

[Mike in COL SPGS]

Captain Jack: I recall the conglomeration mania of the late 1960's and early 1970's when I was working for Domino Sugar in Baltimore at that time. Domino felt a need to get on board this silliness so they went out and bought a smallish company in NC that made chain hoists. No synergy at all, but hey, they became a "conglomerate" overnight. Concept was as you stated, that if you can manage one business well, you can manage any business well, so go out and own a lot of businesses. Of course, the name Domino Sugar would no longer be suitable for a conglomerate so they paid a firm about $50k to come up with AMSTAR Corporation. Big Whoop. Soon enough, high fructose corn syrup came along and kicked the daylights out of the cane sugar biz. Rise and fall.

s/mike


On Nov 18 09:09 AM CaptainJJack wrote:

> I have owned BRK for years, now, and I am amazed at how few people
> understand it.
>
> Many, many years ago, conglomerates were all the rage. The sale was
> that you got "top managers" to oversee the business and allocate
> capital. Since "management skills" were guided more by the financial
> results than process results, you did not need to have industry experts,
> the argument went, you just needed people with discipline.
>
.... snip ....

2009 Nov 18 09:03 PM

[adamnb]

higher oil and higher coal prices.


On Nov 18 01:29 AM chris coonan wrote:

> Of course, Buffett is invested in Goldman Sachs....taking free government
> money isn't just for millionaires anymore....Billionaires can profit
> too. I admire Warren Buffett, but wish he would start to invest
> for society as well as Berkshire's short term profits.
>
> The RR deal was a bet on higher oil prices, another problem that
> will hurt America in the future.

2009 Nov 19 01:39 AM

[Grand Wazoo]

Where do you find this data on Berkshire's holdings?

2009 Nov 19 10:39 AM