Many investors are now craving safe equity options, relatively speaking. The recent steep selling has again spooked many retail investors, with most still fearful since 2008. Now investors are looking for safe places to put money, with the hopes that losses will not be significant and the belief that many equities are now reasonable long-term investments.
There are literally thousands of equities, mutual funds, closed-end funds, ETFs, MLPs and other options for the American retail investor, even if they restrict themselves to the major markets. A prudent idea may be to restrict consideration of new investment decisions to those high-conviction investments made by one or a few of the more respected investors currently participating in the open market.
For example, Warren Buffett is considered one of the best long-term investors out there and Berkshire Hathaway (BRK.B
) currently holds several large positions in equities, both in terms of value and the total stake held in those companies. In fact, several of his largest investments are also major stakes in those underlying equities; as of last quarter, five of Berkshire’s top 10 holdings
, including the top three, represented between a 5.99% and 12.4% interest stake in those companies.
Below, I have listed the equities traded on a major American exchange in which, as of its last reporting, Berkshire Hathaway owned at least a 5% stake. I have also included their performance so far in 2011, not counting dividends (and several Berkshire holdings do pay above average dividends
). The positions are listed in order of stake size within the underlying company.
The Washington Post Company (WPO)
Shares Owned (Value): 1,727,765 ($661,474,830)
Percent Stake: 21.59%
2011-to-date Performance: -12.89%
USG Corporation (USG)
Shares Owned (Value): 17,972,192 ($167,136,759)
Percent Stake: 16.55%
2011-to-date Performance: -41.82%American Express Company (AXP)
Shares Owned (Value): 151,610,700 ($7,157,541,147)
Percent Stake: 12.61%
2011-to-date Performance: 10%Moody’s Corp. (MCO)
Shares Owned (Value): 28,415,250 ($934,293,420)
Percent Stake: 12.46%
2011-to-date Performance: 23.89%The Coca-Cola Company (KO)
Shares Owned (Value): 200,000,000 ($13,354,000,000)
Percent Stake: 8.74%
2011-to-date Performance: 1.52%Wells Fargo & Company (WFC)
Shares Owned (Value): 342,623,925 ($8,637,549,149)
Percent Stake: 6.48%
2011-to-date Performance: -18.64
Kraft Foods, Inc. (KFT)
Shares Owned (Value): 105,214,584 ($3,668,832,544)
Percent Stake: 5.99%
2011-to-date Performance: 10.66%
While several of Berkshire’s largest percentage positions were up, the largest two positions in terms of stake size -- Washington Post and USG -- are down almost 13% and 42%, respectively. Wells Fargo, Berkshire's second-largest investment, has performed poorly in 2011, but this followed two relatively strong years for the bank. The other listed investments within Berkshire's largest holdings -- AXP, KO and KFT -- have all appreciated within 2011, with KFT and AXP up over 10% plus their dividend payouts.
The substantial declines some of these equities have undergone show that Berkshire’s ownership alone is not sufficient to presume an investment comes with a margin of safety. Nonetheless, those substantial stakes do indicate that Berkshire has a high level of conviction in the businesses, and Berkshire tends to accumulate and increase such stakes in times of depreciation.