Buffett's Berkshire Stock Portfolio

Apr. 7.14 | About: Berkshire Hathaway (BRK.A)

While the momentum in the equity market's highfliers has started to work its way into the rest of the market over the last two trading days, one stock that has been insulated so far is Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B). Whenever the overall market runs into trouble, shares of the stock usually hold up better as investors view it as a port in the storm. To be sure, the stock is by no means immune to stock market weakness, but when uncertainty increases, investors place a premium on the wisdom and experience of the Oracle of Omaha.

While investors will often put a premium on Berkshire when times are bad, when the going is good it's a different story. As highlighted in a New York Times column this weekend, Berkshire has trailed the return of the S&P 500 and the average mutual fund in four of the last five years. What makes this recent weakness all the more noteworthy is that "in the previous decades, he had underperformed the S&P only six times."

Not only has the stock of Berkshire done poorly relative to the market, but the company's stock portfolio has also been middling as of late. The table below lists the recent performance (in USD) of the company's top 15 equity positions as of the end of 2013, as well as Bank of America (NYSE:BAC). While Berkshire doesn't actually hold common stock in BAC, it owns preferreds that are convertible into common stock, which the company plans to convert upon expiration.

Berkshire's top holding as of year-end 2013 was Wells Fargo (NYSE:WFC), which made up 18.7% of the company's $118 billion stock portfolio. Over the last year, the stock has been one of Berkshire's biggest winners and so far this year it is the company's second best performing stock. Berkshire's second largest holding - Coca-Cola (NYSE:KO) - has not fared quite as well. Over the last year, the stock is down 3.1%, and it's down 6% on the year. On an unweighted basis, Berkshire's stocks are up an average of 15.5% over the last year, which is about 310 basis points (bps) less than the S&P 500. On a weighted basis, the returns are slightly better (approximately 16.4% vs. 18.6%), but still trailing. Year to date (YTD), Berkshire's top holdings are down 1.1% compared to a decline of 0.3% for the S&P 500. Here again, the returns improve on a weighted basis, but only marginally.

While the performance of Berkshire's stock and its top equity holdings have trailed the market recently, keep in mind that these stocks, like Berkshire, are on the more conservative side of the spectrum. If the market is in the early stages of a prolonged sell-off, we would expect Berkshire and its holdings to once again deliver the alpha that it has recently lacked.