Tracking Warren Buffett's Berkshire Hathaway Portfolio - Q4 2016 Update

| About: Berkshire Hathaway (BRK.A)
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Summary

Berkshire Hathaway's 13F stock portfolio value increased from $129B to $148B this quarter.

The largest three holdings are at ~48% of the entire portfolio.

Berkshire Hathaway increased Apple and the stakes in the major airlines, while reducing Wal-Mart and Verizon. They also dropped Deere & Kinder Morgan.

This article is part of a series that provides an ongoing analysis of the changes made to Berkshire Hathaway's (BRK.A, BRK.B) US stock portfolio on a quarterly basis. It is based on Warren Buffett's regulatory 13F Form filed on 02/14/2017. 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 for the moves in Q3 2016.

During Q3 2016, Berkshire Hathaway's US long stock portfolio increased from $128.79B to $147.99B. The top five positions account for ~65% of the portfolio: Kraft Heinz Co. (NASDAQ:KHC), Wells Fargo (NYSE:WFC), Coca-Cola (NYSE:KO), International Business Machines (NYSE:IBM), and American Express (NYSE:AXP). There are 44 individual stock positions, many of which are minutely small compared to the overall size of the portfolio.

Warren Buffett's writings (pdfs here) are a treasure trove of information and are a very good source for anyone starting out on individual investing.

New stakes:

Southwest Airlines (NYSE:LUV), Monsanto Company (NYSE:MON), and Sirius XM Holdings (NASDAQ:SIRI): These are the new stakes this quarter. LUV is a 1.46% portfolio stake purchased at prices between $38.50 and $51, and the stock is now above that range at $55.31. The 0.57% MON position was established at prices between $98 and $106, and the stock currently trades at $108. The 0.50% SIRI stake was purchased at prices between $4.08 and $4.61, and it currently goes for $4.74.

Note 1: Berkshire owns 7% of LUV and 3.5% of SIRI.

Note 2: In September 2016, Bayer AG (OTCPK:BAYRY) agreed to acquire Monsanto in a $128 per share cash deal.

Stake Disposals:

Deere & Company (NYSE:DE): DE stake was first acquired in Q3 2012 when around 4M shares were purchased at prices between $75 and $83. The position remained steady until Q3 2014, when an additional ~3.6M shares were purchased at prices between $82 and $91.50. In Q4 2014, the position was increased by another 125% at prices between $80 and $91. Q4 2015 also saw another ~34% increase at prices between $72.50 and $81. The last two quarters have seen a combined ~10% trimming at prices between $76 and $88. The disposal this quarter was at prices between $85 and $104. The stock currently trades at $110. Berkshire's cost basis was ~$80, and his ownership stake as of last quarter was ~6.7%. The disposal indicates a bearish bias.

Kinder Morgan Inc. (NYSE:KMI): KMI was a very small 0.36% of the 13F portfolio stake established in Q4 2015 at prices between $14.54 and $32.68. Last quarter saw a ~25% selling at prices between $18 and $23. The remaining position was disposed of this quarter at prices between $19.50 and $23. The stock currently trades at $22.54.

Liberty Formula One (FWONA, FWONK), previously Liberty Media (LMCA, LMCK): FWONA was a petite 0.10% stake first purchased in Q4 2011. It was increased by ~75% in Q1 2012 and roughly doubled the next quarter. Q2 2014 saw a ~24% stake reduction, and since then, it had been kept steady. Q4 2015 saw the stake almost doubled at prices between $20 and $22.41, and that was followed with another ~29% increase the following quarter at prices between $18.56 and $22.62. The pattern reversed last quarter: ~40% reduction at prices between $19 and $29. The disposal this quarter was at prices between $22 and $33. The stock is currently at $30.98.

Note 1: Liberty Media acquired Formula One in a deal that closed last month. Following the transaction, the name and stock tickers were changed to Liberty Media Formula One and FWONA/FWONK respectively.

Note 2: The shares held showed a ~75% reduction in Q2 2016 due to the recapitalization of Liberty Media in April 2016. Liberty Media Corporation shareholders received 1 share of Liberty SiriusXM Group, 0.25 share of Liberty Media Group, and 0.1 share of Liberty Braves Group for each share held. Berkshire had 30M shares of Liberty Media Corporation, for which they received 7.5M shares of Liberty Media Group. The prices quoted above are adjusted for this transaction.

Lee Enterprises (NYSE:LEE) and NOW Inc. (NYSE:DNOW): These are minutely small positions (less than ~0.1% of the portfolio each) disposed of this quarter.

Stake Increases:

Apple Inc. (NASDAQ:AAPL): AAPL is a ~4.5% of the 13F portfolio stake established in Q1 2016 at prices between $93 and $110 and increased by ~55% the following quarter at prices between $90 and $112. This quarter saw another ~275% increase at prices between $106 and $118. The stock currently trades at $135. The activity indicates a clear bullish bias.

American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), and United Continental Holdings (NYSE:UAL): AAL, DAL, and UAL stakes were first added last quarter. AAL is a 1.44% portfolio position established at prices between $28 and $39 and doubled this quarter at prices between $36.50 and $50. It is now at $46.57. DAL was a very small 0.19% position last quarter. The stake saw a whopping ~850% increase to a ~2% portfolio stake this quarter at prices between $39 and $52. The stock currently trades at $49.86. The similarly small 0.18% UAL position also saw a huge ~540% increase to a 1.43% portfolio stake this quarter at prices between $52.50 and $76. It currently goes for $73.74.

Note 1: Combined, the positions in the four major airlines add up to ~$9.4B (~6.5% portfolio stake).

Note 2: Berkshire controls 8.8% of AAL, 9.1% of UAL, and 8.2% of DAL.

Bank of New York Mellon Corp (NYSE:BK): BK is a 0.69% of the US stock portfolio stake. The bulk of the original position was purchased in Q2 2012 at prices between $19.50 and $25. The stake was increased by 30% in Q2 2013 at prices between $26.50 and $30.50. The five quarters through Q3 2015 had seen an about-turn, as there was a combined ~20% reduction at prices between $36 and $45. The stock currently trades at $46.82. The last two quarters have seen marginal increases.

Stake Decreases:

Wal-Mart Stores (NYSE:WMT): WMT stake was first purchased in 2005. It was built up to a ~3% portfolio stake as of Q1 2016. The last two quarters saw a ~76% combined reduction at prices between $63 and $74. The remaining position was almost sold out (~90% reduction) this quarter at prices between $67 and $72. The stock currently trades at $68.66. Berkshire's cost basis was ~$56. The large reduction in a long-term stake indicates a clear bearish bias.

Verizon Communications (NYSE:VZ): VZ position was established in Q1 2014 at prices between $46 and $49. It was increased by ~36% the following quarter at prices between $46 and $50. The 0.61% portfolio position was almost sold out (less than 1000 shares remain) this quarter at prices between $46 and $54. The stock currently trades at $48.27.

Kept Steady:

Kraft Heinz Co.: KHC is currently the largest 13F stock position at 19.21% of the portfolio. Kraft Heinz started trading in July 2015, with Berkshire owning just over 325M shares (~27% of the business). The stake came about as a result of two transactions with 3G Capital as partner: a ~$4B net investment in 2013 for half of Heinz, and a ~$5B investment for the acquisition of Kraft Foods Group earlier this year. Berkshire's cost basis on KHC is below $30 per share, compared to the current price of $90.81.

Wells Fargo & Co.: WFC is Buffett's second-largest stake at 17.86% of the US long portfolio. Q1 2015 saw a ~7M share stake increase at prices between $51 and $56. The previous significant activity was in Q2 2013: over 18M shares were purchased at the time at prices between $34.50 and $38. The stock currently trades at $57.98. Berkshire's cost basis is at ~$25.50.

Note: Per a regulatory filing, Berkshire's stake in WFC has crossed the 10% ownership threshold as a result of Wells Fargo's buybacks.

American Express and Coca-Cola: These two very large stakes were kept steady over the last ~4 years. Buffett has said these positions will be held "permanently". Berkshire's cost basis on AXP and KO are at around $8.49 and $3.25 respectively, and the ownership stakes are at ~15.6% and ~9.3% respectively.

International Business Machines: IBM is Buffett's fourth-largest stake at 9.11% of the portfolio. The original position was purchased in Q3 2011 at prices between $158 and $185. Since then, the share count has gone up by almost 40% through periodic purchases. The stock currently trades at ~$180, and Berkshire's cost basis is at around $170. Buffett controls 8.5% of the business. For investors attempting to follow Buffett, IBM is a good option to consider for further research.

Phillips 66 (NYSE:PSX): PSX is a fairly large 4.71% of the portfolio stake. It is a long-term position. As of Q4 2014, the stake was very small at ~0.5% of the portfolio (~6.5M shares). Q1 2015 saw a ~14% increase at prices between $59 and $80. The following quarter saw an additional ~300% increase at prices between $76.50 and $82, and that was followed with a stake doubling in Q3 2015 at prices between $70.50 and $84.50. Q2 2016 saw another ~23% increase in the high $70s price range, while last quarter saw a ~4% further increase at ~$80. The stock currently trades at $79.98, which is very close to Berkshire's overall cost basis. For investors attempting to follow Berkshire Hathaway, PSX is a good option to consider for further research.

Note: Berkshire avoided disclosing PSX stake in the original Q2 2015 13F by making use of the "Section 13(f) Confidential Treatment Requests". An amendment filed on 9/4/2015 disclosed the huge stake build-up. Berkshire controls 15.5% of PSX.

US Bancorp (NYSE:USB): USB, a ~3% stake, has been in the portfolio since 2006. The position was tripled during the 2007-2009 time frame. In Q2 2013, ~17M shares were purchased at prices between $32 and $36. The last significant activity was a ~5% increase in Q1 2015 at prices between $41 and $45. Berkshire's cost basis on USB is ~$32, and the stock is now at $54.55. Buffett controls 4.7% of the business.

Charter Communications (NASDAQ:CHTR): CHTR is a 1.84% of the US long portfolio position. It was established in Q2 2014 at prices between $118 and $158, and more than doubled the following quarter at prices between $151 and $164. Q4 2014 saw a further ~25% increase at prices between $140 and $170. In Q2 2015, the position was again increased by ~42% at prices between $168 and $193, and that was followed with another ~21% increase the following quarter at prices between $167 and $195. Q2 2016 saw a ~10% trimming at prices between $198 and $233. The stock currently trades at $322, compared to Berkshire's cost basis of around $160.

Note: Berkshire controls 3.5% of CHTR.

Goldman Sachs (NYSE:GS): GS is a 1.77% of the US long portfolio stake established in Q4 2013. Berkshire Hathaway received $5B worth of warrants to buy GS stock during the financial crisis (October 2008) at a strike price of $115 (43.5M shares) that was to expire on October 1, 2013. Buffett exercised the right before expiry to start this long position. Q3 2015 saw a ~13% reduction at prices between $172 and $213. It currently trades at ~$250.

DaVita Inc. (NYSE:DVA): DVA is a 1.67% of the US long portfolio position that was aggressively built up over several quarters: the original stake was doubled in Q1 2012, increased by over 50% in Q2 2012, 24% in Q4 2012, and an additional 16% in Q1 2013. There has been marginal buying since. The bulk of the stake build-up happened at prices between $30 and $49. The stock currently trades at $64.73, compared to Berkshire's overall cost basis of $45.33.

Note: In May 2013, Berkshire's Ted Weschler signed an accord with DVA, limiting open-market purchases to 25% of the company; the position is currently at 17.9% of the business.

Moody's Inc. (NYSE:MCO): MCO is a 1.57% of the US long portfolio stake. It is a very long-term position, and Buffett's cost basis is ~$10. The stock currently trades at ~$109. Berkshire controls 11.5% of the business.

General Motors (NYSE:GM): GM is a 1.18% of the US long portfolio position that was first purchased in Q1 2012 at prices between $21 and $30. The stake was increased by 60% in Q2 2013 at prices between $27.50 and $35. Q1 2014 saw a 25% reduction at prices between $34 and $41, and the following quarter saw an about-turn: a ~10% increase at prices between $32 and $37. Q3 2014 saw another ~20% increase at prices between $32 and $38. There was another ~20% increase in Q3 2015 at prices between $27 and $33.50. The stock currently trades at $37.24.

USG Corporation (NYSE:USG): USG is a very long-term holding, and there was a significant 21.39M share stake increase in Q4 2013 due to conversion of notes at $11.40 per share - Berkshire acquired the convertible notes during the financial crisis (2/2009), and USG opted to redeem them on 12/16/2013. Q2 2014 saw a ~12% stake increase at prices between $30 and $33. The stock currently trades at $33.41. Buffett controls around 27% of the business, and his cost basis is ~$19.

Liberty SiriusXM Group (LSXMA, LSXMK): The tracking stock was acquired as a result of Liberty Media's recapitalization in April 2016. Shareholders received 1 share of Liberty SiriusXM Group, 0.25 share of Liberty Media Group, and 0.1 share of Liberty Braves Group for each share held. Berkshire held 30M shares of Liberty Media, for which he received the same amount of Liberty SiriusXM Group shares. Last quarter saw an ~8% increase at prices between $31 and $36, and the stock is now at $35.92.

Verisign Inc. (NASDAQ:VRSN): VRSN was first purchased in Q4 2012 at prices between $34 and $49.50. The position was more than doubled in Q1 2013 at prices between $38 and $48, and another one-third the following quarter at prices between $44 and $49. Q1 and Q2 2014 also saw a combined ~17% increase at prices between $47 and $63. The stock currently trades at $82.68, and the position is at 0.67% of the portfolio (~10% of the business).

Liberty Global PLC (LBTYA, LBTYK): The position was established in Q4 2013 at prices between $37.50 and $44.50 (adjusted for the 03/2014 stock split) and increased significantly in the following two quarters at prices between $38.50 and $46. The three quarters through Q1 2016 had also seen a combined ~30% increase at prices between $30 and $50. Q2 2016 saw a ~17% further increase at prices between $27 and $39. The stock is now at $35.51, and the stake is at 0.56% of the US long portfolio.

Note: Berkshire controls 7.9% of Liberty Global.

Axalta Coating Systems (NYSE:AXTA): AXTA is a small 0.43% of the portfolio stake established in Q2 2015 at prices between $28 and $36 and increased by ~16% the following quarter at prices between $24.50 and $33.50. The stock currently trades at $29.66. Berkshire owns ~9.8% of the business. For investors attempting to follow Berkshire, AXTA is a good option to consider for further research.

Restaurant Brands International (NYSE:QSR): QSR is a 0.27% of the US long portfolio position established in Q4 2014 at prices between $35 and $42. The stock currently trades well above that range at $54.53. It started trading in December 2014 following a merger/rename transaction between Tim Hortons and Burger King Worldwide.

Note: Berkshire's stake in the business is ~4.2%.

Twenty-First Century Fox (FOX, FOXA): FOXA is a minutely small 0.17% of the US long portfolio stake established in Q4 2014 at prices between $32 and $39 and increased by ~30% the following quarter at prices between $33 and $38. Q3 2015 saw another ~44% increase at prices between $25 and $34.50. The stock currently trades at $30.30.

Liberty LiLAC Group (LILA, LILAK): Liberty LiLAC is a very small 0.06% stake. It saw a huge ~350% increase in Q2 2016, but relative to the size of the portfolio, the allocation is minutely small.

Procter & Gamble (NYSE:PG): PG position is minutely small at 0.02% of the 13F portfolio. The original stake was huge, but was almost eliminated in Q1 2016 as a result of a deal with Procter & Gamble for Duracell: $4.2B in PG stock was exchanged for a recapitalized Duracell. The transaction closed on February 29, 2016.

Costco Wholesale (NASDAQ:COST), M&T Bank (NYSE:MTB), MasterCard Inc. (NYSE:MA), Torchmark Corporation (NYSE:TMK), General Electric (NYSE:GE), Sanofi (NYSE:SNY), Verisk Analytics (NASDAQ:VRSK) Graham Holdings (NYSE:GHC), Johnson & Johnson (NYSE:JNJ), Mondelez International (NASDAQ:MDLZ), United Parcel Service (NYSE:UPS), Visa Inc. (NYSE:V), and Wabco Holdings (NYSE:WBC): These are very small positions (less than ~0.5% of the portfolio each) kept steady this quarter.

Note 1: Berkshire controls ~6% of Wabco Holdings.

Note 2: Per the annual report, Berkshire has a $1.9B position in Sanofi. So in addition to the ADRs listed in the spreadsheet, Berkshire also owns Sanofi securities listed in Euronext Paris.

Note 3: Since November 2015, Warren Buffett is known to own ~8% of Seritage Growth Properties (NYSE:SRG) at a cost basis of $36.50 in his personal portfolio. It currently trades at $44.39. SRG is a REIT spin-off from Sears (NASDAQ:SHLD) that started trading in July 2015.

Note 4: Berkshire has a huge 700M share position in Bank of America (NYSE:BAC) through the ownership of warrants (strike price $7.14, 2021 expiry). The cost to exercise is $5B, and the current value is ~$16.8B. Berkshire will probably wait till 2021 to exercise.

The spreadsheet below highlights changes to Berkshire Hathaway's US stock holdings in Q4 2016:

Disclosure: I am/we are long BAC, GM, IBM, KMI, SHLD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.