This series of articles are an ongoing analysis of the changes made to Berkshire Hathaway's (BRK.A) (BRK.B) U.S. stock portfolio on a quarterly basis. The spreadsheet below highlights changes to Berkshire Hathaway's U.S. stock holdings in Q4 2011:
In this quarter Berkshire's U.S. stock portfolio increased in size by 11.78% - from $59.2B to $66.2B. Unlike the previous quarter when Warren Buffett invested over $11B in new stakes, this quarter saw only a modest $336M investment in brand new stakes. The growth in the U.S. stock portfolio size can be attributed mainly to the increase in share prices as the performance roughly paralleled the S&P 500 index which returned ~11% during the quarter. In keeping with his tradition of holding shares for the very long-term, majority (22 out of 34) of the holdings was left untouched and the remaining ones were only modestly adjusted.
Da Vita Inc (DVA): DVA, a diminutive position (0.3% of the U.S. stock portfolio) initiated this quarter when the price-per-share varied between $60.64 and $76.81, is trading currently at $84.75. The company dominates the dialysis business in the U.S. with over 1600 such centers across the country. This pick is slightly unusual as DVA is the subject of a lawsuit that questions the company's business practices on ethical grounds. The whistle-blower lawsuit filed by two former employees (Daniel Barbin, a former nurse and Dr. Alon Vainer, a medical director at Da Vita) allege DVA illegally received hundreds of millions of dollars from the Medicare program by systematically requiring nurses to use higher dosage vials of medicines (iron, vitamins, etc); thereby wasting what is not used. Investors attempting to follow Buffett are better off giving the stock a miss as it is trading well above the price range Buffet could have bought it at.
Liberty Media Capital (LMCA): LMCA, a petite position (0.2% of the U.S. stock portfolio) initiated this quarter when the price-per-share varied between $61.11 and $79.67, is trading currently at $85.59. LMCA is a media conglomerate with interests in a number of businesses including SiriusXM, LiveNation, Barnes & Noble, Time Warner, Viacom, Starz, The Atlanta Braves organization, etc. Here again, the tiny stake is trading outside the range Buffett could have bought it at leading investors to adopt a wait-and-see approach for the time being.
Exxon Mobil (XOM): XOM, a minute position (0.05% of the U.S. stock portfolio) initiated in Q3 2009 when the price-per-share varied between $65.12 and $72.29, was finally disposed off this quarter. In Q4 2011, the price-per-share varied between $71.15 and $81.88 allowing Buffett only modest annual gains even in the best case scenario. As the stake was small, the disposal does not indicate a bearish bias to XOM or the energy sector, in general. In fact, Berkshire Hathaway holds a sizable 3.2% position in ConocoPhilips (COP). Buffett trimmed his position from a peak of 80M shares (Q4 2008) to the current share count of ~29M shares over the last few years. However, the position was held steady in Q4 2011 and an insignificant amount (700 shares) were sold in Q3 2011. Buffett is still fairly bullish on COP.
CVS Caremark Corp (CVS): CVS, a small position (~0.5% of the U.S. stock portfolio) initiated in Q3 2011 when the share price varied between $32.06 and $38.54, was upped in Q4 2011 by around 25% when the price-per-share varied between $32.97 and $39.24. The investment is still very small but is significant as Buffett enlarged the stake by a sizable amount. The stock is currently trading at $43.38, well above the range Buffett could have bought it at. Given the bullish bias, for investors attempting to follow Buffett, CVS definitely commands a position in the watch-list for possible purchase should the valuation come down.
Directv (DTV): DTV, a significant ~1.5% stake initiated in Q3 2011 when the price-per-share varied between $41.02 and $53.08, was almost quadrupled in Q4 2011 when the price-per-share varied between $40.60 and $47.87. The stock currently trades at $45.85 which is within the range Buffett could have bought it at. Buffett harbors a bullish bias on media companies and that is evident with DTV too. For investors attempting to follow Buffett, DTV is a good option.
General Dynamcis (GD): GD, a ~0.4% stake first purchased in Q3 2011 when the price-per-share varied between $55.87 and $75.81, was upped by 25% in Q4 2011 when the price-per-share varied between $55.67 and $66.50. The stock currently trades at $70.16. The purchase appears to be a strict value play as projected defense spending cuts caused the share-price to drop significantly. As the stake is minor, it does not indicate a clear bullish bias.
Intel Corporation (INTC): INTC, a ~0.4% stake first purchased in Q3 2011 when the price-per-share varied between $19.19 and $23.23, was upped by 23% in Q4 2011 when the price-per-share varied between $20.62 and $25.66. The stock currently trades at $26.78. The INTC stake along with the large stake in IBM form Buffett's foray into technology companies. This move is significant as it is indicative of Buffett's bullish take on large technology companies.
International Business Machines (IBM): IBM, a very large ~18% stake first purchased in Q3 2011 (the biggest stake that Berkshire Hathaway has built up in 2011) when the price-per-share varied between $157.54 and $185.21, was upped by ~10% in Q4 2011 when the price-per-share varied between $173.29 and $194.56. The stock currently trades at $192.22. It is palpable Buffett is extremely bullish on IBM and is finding value in the large technology space.
Visa Inc (V): V, a ~0.4% stake first purchased in Q3 2011 when the price-per-share varied between $79.24 and $92.84, was upped by 25% in Q4 2011 when the price-per-share varied between $84.26 and $103.15. The stock currently trades at $115.24. Warren Buffett has always been partial to credit card companies with stakes in American Express (large ~11% stake) and MasterCard (~0.2% stake). Hence, despite the very small stake in V, it signifies his bullish bias.
Wells Fargo Bank (WFC): Berkshire Hathaway's stake in WFC was increased by ~6% in Q4 2011. The stake is huge and accounts for 16% of the U.S. stock portfolio. WFC is one of Buffet's favorite holdings and he has consistently expanded his position over the last decade.
Johnson & Johnson (JNJ): JNJ holdings were decreased further by ~23% in Q4 2011 following the ~10% decrease in Q3 2011. Buffett's stake is still valued at around 2.9% of the portfolio. JNJ was first purchased in 2006 and the stake was increased significantly in 2010. The about-turn in the last two quarters indicates a clear bearish bias.
Kraft (KFT): KFT holdings were decreased by a very modest 3.1% in Q4 2011 following the 10% decrease in Q3 2011. The stake is still valued at ~5% of the portfolio. Berkshire Hathaway's stake in KFT peaked at 138 million shares in Q4 2009 and the current stake stands at 87M shares (37% decline). Buffett definitely has a bearish bias on Kraft. However, his slow rate of disposal in the last quarter is masking his bias regarding the split-up of Kraft.
Verisk Analytics (VRSK): VRSK is a very small 0.2% stake that was decreased by ~20% in Q4 2011 when the price-per-share varied between $33.06 and $40.13. The stake was first purchased in Q2 2011 and was doubled in Q3 2011. The price-per-share varied between $32.61 and $34.91 during the period.
The rest of the positions have remained unchanged during the quarter. The portfolio had a steady performance largely in line with the overall market with just a couple of small positions providing large returns - Gannett Inc (GCI), a very small ~0.03% position increased roughly 50% regaining most of the losses from the previous quarter and USG Corporation (USG), a small ~0.25% position increased more than 50% but still did not recoup the losses from the previous quarter. The share currently trades at $14.01, a stunning ~40% return in the last 45 trading days.
Please visit our Tracking 10 Years Of Berkshire Hathaway's Investment Portfolio article series for an idea on how his holdings have progressed over the years and our previous update highlighting the fund's moves during Q3 2011.