Tracking 10 Years Of Berkshire Hathaway's Investment Portfolio (Part 3)

| About: Berkshire Hathaway (BRK.A)
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This article is the final part of a three-part series. The first two parts can be accessed here and here. Per the latest 13F report, the Top-10 holdings of Berkshire Hathaway’s 27 stocks account for a whopping 95% of the total portfolio value. Although the remaining 17 stocks contribute only towards a 5% stake, they can signify a bullish or bearish bias of the company, depending on the sector allocation and the acquisition/disposal pattern. The list below classifies by sector the list of minnows:

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The following is an analysis of these minnow stakes by sector.


The petite stakes in General Electric (NYSE:GE) ( ~0.3%), Ingersoll-Rand (NYSE:IR) (~0.05%), and USG Corporation (NYSE:USG) (~0.5%) add up the stake in industrials to be below 1%. Of these, USG weathered the decade with Berkshire Hathaway (NYSE:BRK.A) and its share count increased from 6.5 million to over 17 million although percentage-wise the allocation slid from ~1.3% to ~0.5%. The stock price increased almost 30% during the period but the timing of the stake increase is worth mulling over. In the time frame between July and October of 2006 when the share count improved from 6.5 million to 16.7 million (before settling at over 17 million by December of 2006), the share price tumbled from $72.93 to $47.04 – USG emerged out of bankruptcy (asbestos litigation) and there was a rights offering for existing shareholders to buy new USG stock at $40 a piece. The stock continued to drift down over the years and is now trading at $7.37, about 85% below the lowest price Buffett could have paid during the period of his stake increase. USG had an all-time high of $114.45 in August 2005. Warren Buffett appears to have caught a falling knife on that purchase!

Berkshire Hathaway initiated the GE and IR stake in 2006 and its share count has held steady since then. The stock price of GE more than halved during the last five years from the $32 - $38 range it held in 2006. As for IR, the stock price is well below the lowest price that Berkshire could have paid for the stake in 2006 when it was between $35.86 and $46.83.

The industrial sector has consistently denied Berkshire Hathaway (BRK.A) a home run in the last ten years. Buffett eliminated twelve different stakes and reduced the percentage portfolio allocation from 4% to 1%. The three stocks that were retained have performed very poorly as well.

The spreadsheet below summarizes Berkshire Hathaway’s latest industrial holdings among the minnows:

Consumer Staples & Discretionary:

Berkshire Hathaway’s consumer staples and discretionary holdings among the minnows per the latest 13F report include just two stocks - Costco Wholesale (NASDAQ:COST), and Dollar General (NYSE:DG). COST, a Berkshire stock since 2002, is a small stake that accounts for just 0.7% of the portfolio. It performed well returning in the 69-182% range based on the share price range of $27.39 - $45.89 in 2002. Despite this, Berkshire unloaded around 17% of the shares in 2010 which is an indication of a bearish bias. DG stake, initiated in 2011, is too small a stake (0.1%) to point toward a bullish or bearish bias.

The spreadsheet below summarizes these holdings:


Among the minnows, the only energy holding left standing is Exxon Mobil (NYSE:XOM). It is a very small stake accounting for just 0.07% of the portfolio, which has held steady since its stake initiation in 2009. Berkshire however possesses large energy holdings. It controls MidAmerican Energy Holdings Company, a very large energy conglomerate ($11 billion revenue) acquired in March 2000. The latest 13F filing shows a significant stake (around ~4%) in ConocoPhilips (NYSE:COP).

The COP stake, initiated in 2006 (~2% of total portfolio value), saw its share count quadruple by 2008 from 17.9 million to 79.9 million. The stake was trimmed by more than half in 2009 and by another 20% in 2010. Since then, the share count has remained steady at 29.1 million. In the years the stake was built (2006 to 2008), the share price varied between $58 and $92 per share and while being sold (2009 to 2010) varied between $36 and $65. Although Berkshire Hathaway has a significantly large position in COP, the sales and the potential prices realized is indicative of a bearish trend Buffett haS on that holding. The sale of COP shares followed by stake initiation of Exxon Mobil, albeit small, indicates a bullish bias to XOM.


Among the minnows, Berkshire Hathaway has three financial stocks: Bank of New York Mellon (NYSE:BNY) (~0.1% initiated 2010), Mastercard (NYSE:MA) (~0.25% of portfolio initiated 2011), and M&T Bank (NYSE:MTB) ( ~1% throughout the last decade). This is despite the enormous stakes in American Express (NYSE:AXP) (~15%), Wells Fargo (NYSE:WFC) (~19%), and US Bancorp (NYSE:USB) ( ~3.5% initiated 2006). This level of activity clearly signify Buffett’s bullish take on financials and it is only reasonable to assume that Buffett may be actively seeking to increase stake in one or more of these companies.

The spreadsheet below summarizes these holdings:


Berkshire Hathaway had eight other stocks among the minnows per the latest 13F Report.

Berkshire Hathaway has held the stakes in Gannett Inc (NYSE:GCI), Moody’s (NYSE:MCO), and Torchmark (NYSE:TMK) for more than ten years. The GCI stake, valued at around 1% in 2001, has dropped to a very insignificant level of just 0.03% as of the latest 13F. GCI dropped around 85% in the last decade and its stake was reduced by half between 2009 and 2010.

The sales happened well after the precipitous drop in GCI between 2007 and 2008. The company’s MCO stake, valued at around 4% in 2001, has come down to around 2% as of the latest 13F – the stake has fluctuated with the share count doubling in 2005 and then dropping by around 40% between 2009 and 2010. The stake disposals indicate a bearish bias for both these holdings. Torchmark (TMK) stake was comparatively lower at less than 0.3% in 2001. The share count has increased by around 40% as of the latest 13F although percentage-wise the stake has remained at around 0.3%. As it is a very small stake, the increase in share count does not indicate a bullish or bearish bias.

Berkshire Hathaway built a significant stake of around 0.5% on global pharma majors Glaxo SmithKline (NYSE:GSK) and Sanofi Aventis (NYSE:SNY). The share count of GSK has remained steady since the initial investment in 2007 while the SNY stake has increased from an insignificant level (~0.03%) to a relatively significant stake of around 0.2%. The timing of the purchases coincides with stake disposals of health insurance companies that Berkshire had invested in previously. Stake disposals in Health Insurance area followed by a somewhat significant stake build-up in global pharma majors indicate a bearish bias on the former and a bullish bias on the latter sectors.

The investments in Comdisco Holding (OTCQB:CDCO), United Parcel Service (NYSE:UPS), and Verisk Analytics (NASDAQ:VRSK) are very small and as such are not an indication of a bullish or bearish bias.

The spreadsheet below summarizes these holdings:

In summary, although the seventeen minnows in Berkshire’s portfolio add up to less 5% of the total portfolio value, analyzing them based on the sector allocation, holding periods, and trading patterns can reveal insight into whether Berkshire is bullish or bearish on the shares concerned.

Disclosure: I am long UPS, USB and I have written cash covered puts on WFC (April 2012 22) and BRK.B (Jan 2012 75).