No other investor's moves are scrutinized as closely as Warren Buffett. This is why Buffett at times is granted permission by the SEC to delay disclosing certain moves. In the latest Berkshire Hathaway (BRK.A) 13F-HR filing, we found out Buffett has been secretly amassing a large stake in International Business Machines (IBM) -- a 5.5% stake in the company worth $10B. According to the latest 13F-HR filing, IBM is now Berkshire's 2nd largest equity holding, behind only Berkshire's Coca-Cola (KO) stake worth $13B.
Keep in mind that much of Berkshire's portfolio are long-term holdings and have appreciated by large amounts. KO grew into its current $13B stake but IBM was basically a straight $10B purchase.
Much is being made of Buffett's entry into the tech sector, with a smaller position worth about $200M opened in Intel (INTC) joining Buffett's big IBM bet, but much of the press over Buffett's tech aversion has been overwrought. Buffett simply doesn't buy into unproven businesses that he can't understand or predict and in the late 90s, nearly every tech stock was either unproven or operated in technologies too new for Buffett to reliably predict outcomes. Buffett also does not invest in speculative bio-pharmas or junior gold miners.
IBM's business profile hardly qualifies as a speculative tech stock -- over half its revenues are generated by recurring services business and Buffett highly values consistent earnings streams. Intel is another old tech stock with a wide economic moat. Much as Buffett once surmised that it would be nearly impossible to penetrate Coke's brand even with an unlimited advertising budget, Intel has proven its competitive advantages in the chip market to be nearly as robust as evidenced by the sorry state of its nearest competitor, Advanced Micro Devices (AMD). However, with the proliferation of smart-phones and tablets, Intel's lack of strength in this field relative to players like ARM Holdings (ARMH) may be expose Berkshire to the changing winds of technology here, which seems unlike Buffett.
Berkshire's other new buys in the quarter included General Dynamics (GD), CVS Caremark (CVS), DirecTV (DTV) and Visa (V). The company also added significantly to stakes in Dollar General (DG), Torchmark Corp (TMK) and Verisk Analytics (VRSK). Buffett's long-term record is impeccable but even so, I hesitate to blindly piggyback Berkshire's stock buys. Of the added investments in Q3, only GD seems remotely attractive to me based on free cash flow metrics. Investors should also keep in mind that Buffett has hired two unheralded investment managers, one as recently as a few months ago, to manage relatively small sums of money in preparation for his succession. So investors may be piggybacking on someone other than Buffett, a much less attractive prospect.
If investors are keen on Buffett, an investment in Berkshire Hathaway (BRK.A, BRK.B) may be the best option. Shares have rallied off lows in recent weeks but remain reasonably priced. Much of Buffett's investment acumen such as wholly-owned subsidiaries and sweetheart deals like the recent Bank of America preferred stock and warrants investment can not be piggybacked. Investors need to own Berkshire to gain full exposure to Buffett's midas touch and as well as access to "Woodstock for Capitalists", aka Berkshire's annual shareholder meeting.
Similar to other value investors like Seth Klarman, Berkshire did far more buying than selling. Buffett put over $20B to work in Q3 and only sold small 10%-12% portions of Johnson & Johnson (JNJ) and Kraft Foods (KFT).
Readers can view all of Buffett's Q3 moves in spreadsheet format here.