Berkshire Hathaway 3rd Quarter 2012 13F-HR

The Berkshire Hathaway (BRKa) 3rd Quarter 13F-HR was released yesterday. Below is a summary of the changes that were made to the Berkshire equity portfolio.
(For a convenient comparison, here's a post from last quarter that summarizes Berkshire's 2nd Quarter 2012 13F-HR.)

As I noted in this post last week, Berkshire was a net seller of equities in the most recent quarter. The latest 10-Q made it clear a good portion of the selling was one or more of Berkshire's consumer stocks.
(The clue was the drop in cost basis of Berkshire's consumer products equity securities. See Note 5 of the most recent 10-Q then compare to the prior quarter's 10-Q.)

It just wasn't obvious which specific consumer stock (or stocks).

Well, thanks to this most recent 13F-HR, we now know. In addition to selling almost all of their Johnson & Johnson (JNJ) stake, it turns out nearly half of their shares in Kraft (KFT before spin-off) and, to a lesser extent, Procter & Gamble (PG) were sold.

Those three stocks made up the bulk of the selling but quite a few other sales also happened this past quarter.

Details below.

There was also plenty of stocks being bought during the quarter. Some brand new positions were established while Buffett and his portfolio managers continued to build upon existing positions.

Here's what changed during the 3rd quarter:*

New Positions
Deere & Company ((DE): Bought 3.98 million shares worth $337 million
Precision Castparts (PCP): 1.25 million shares worth $216 million
Wabco Holdings ((WBC): 1.6 million shares worth $92 million
Media General (MEG): 4.6 million shares worth $ 18 million

Added to Existing Positions
Wells Fargo (WFC): Bought 11.5 million shares worth $ 362 million, total stake $ 13.3 billion
IBM (IBM): 872.5 thousand shares worth $ 162 million, total stake $ 12.5 billion
DirecTV (DTV): 1.1 million shares worth $ 54.7 million, total stake $ 1.43 billion
DaVita (DVA): 897.57 thousand shares worth $ 101 million, total stake $ 1.14 billion
BNY Mellon (BK): 914.4 thousand shares worth $ 22 million, total stake $ 462 million
General Motors (GM): 5 million shares worth $ 120 million, total stake $ 363 million
Viacom (VIA-B): 794 thousand shares worth $ 38 million, total stake now $ 365 million
National Oilwell Varco (NOV): 1.34 million shares worth $ 94 million, total stake now $ 291 million

In the 3rd Quarter of 2012, there apparently was nothing purchased that was kept confidential. Berkshire's 13F-HR filings will often say: "Confidential information has been omitted from the Form 13F and filed separately with the Commission."

Not this time. Unlike the prior 13F-HR, all equity transactions have now been disclosed (the buying and selling in the latest 13F-HR then reflects what was actually bought in the 2nd quarter plus what had been held back). From time to time, the SEC allows Berkshire Hathaway to keep certain moves in the portfolio confidential. The permission is granted by the SEC when a case can be made that the disclosure may cause buyers to drive up the price before Berkshire makes its additional purchases.

Reduced Positions
Procter & Gamble (PG): Sold 6.8 million shares worth $ 453 million, total stake now $ 3.5 billion
U.S. Bancorp (USB): 4.7 million shares worth $ 148 million, total stake now $ 1.9 billion
Kraft Foods Inc. (KFT before spin-off): 28.4 million shares worth $ 1.2 billion, total stake $ 1.26 billion**
ConocoPhillips (COP): 4.7 million shares worth $ 260 million, total stake now $ 1.3 billion
Visa (V): 524.2 thousand shares worth $ 73.4 million, total stake now $ 218 million
Verisk Analytics (VRSK): 308.44 thousand shares worth $ 15 million, total stake now $ 76 million
Johnson & Johnson (JNJ): 9.8 million shares worth $ 682 million , total stake now $ 34 million
General Electric (GE): 4.4 million shares worth $ 88 million, total stake now $ 12 million
United Parcel Service (UPS): 202.5 thousand shares worth $ 14.2 million, total stake now $ 4.2 million
Lee Enterprises (LEE): 2 million shares worth $ 3.3 million, total stake now $ 1.8 million

Sold Positions
The shares of Ingersoll-Rand (IR), Dollar General (DG), and CVS Caremark (CVS) were sold outright.

Todd Combs and Ted Weschler are responsible for a portion of Berkshire's portfolio. Any changes involving smaller positions will generally be the work of the new portfolio managers. Increasingly, the moves in the portfolio are primarily being done by them.

Top Five Holdings
After the changes, Berkshire Hathaway's portfolio of equity securities is made up of ~ 36% financials, 27% consumer goods, 18% technology, and 9% consumer services.

The remainder is primarily spread across healthcare, industrials, and energy.

1. Coca-Cola (KO) = $ 14.4 billion
2. Wells Fargo (WFC) = $ 13.3 billion
3. IBM (IBM) = $ 12.5 billion
4. American Express (AXP) = $ 8.1 billion
5. Procter and Gamble (PG) = $ 3.5 billion

As is almost always the case, it's a very concentrated portfolio.

The top five often represent 60-70 percent and, at times, even more of the equity portfolio. In addition, Berkshire owns equity securities listed on exchanges outside the U.S.***, plus cash and cash equivalents, fixed income, and other investments that brings the total portfolio value to somewhere north of $ 175 billion.

The above portfolio, of course, excludes all the operating businesses that Berkshire owns outright with 270,000+ employees.

Here are some examples of the non-insurance businesses:

MidAmerican Energy, Burlington Northern Santa Fe, McLane Company, The Marmon Group, Shaw Industries, Benjamin Moore, Johns Manville, Acme Building, MiTek, Fruit of the Loom, Russell Athletic Apparel, NetJets, Nebraska Furniture Mart, See's Candy, Dairy Queen, The Pampered Chef, Business Wire, Iscar Metalworking, Lubrizol, and the recently purchased Oriental Trading Company (among others).

In addition, the insurance businesses (BH Reinsurance, General Re, GEICO etc.) owned by Berkshire have naturally provided plenty of "float" for their investments over time and continue to do so.

See page 101 of the annual report for a full list of the operating businesses.

At the end of the quarter, Berkshire's cash and cash equivalents alone was nearly $ 48 billion.


* All values based upon yesterday's closing price with the exception of Kraft. Naturally, what was actually paid can't be known from the information disclosed.
** Based upon closing price prior to spin-off. KFT became MDLZ post spin-off. If no other portfolio moves related to Kraft have been made since the end of the quarter, Berkshire now owns 1 share of KRFT for every 3 MDLZ shares.
*** Berkshire Hathaway's holdings of ADRs are included in the 13F-HR. What is not included are the shares listed on exchanges outside the United States. Earlier this year, Berkshire disclosed a substantial increase to their position in Britain's dominant supermarket chain, Tesco PLC. The status of those shares (POSCO, Sanofi, Tesco PLC etc.) is updated in the annual letter. So the only way any of these stocks listed on exchanges outside the U.S. will show up in the 13F-HR is if Berkshire happens to buy the ADR. Things like the preferred shares in Bank of America are also not included in the 13F-HR.
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Berkshire Hathaway 3rd Quarter 2012 13F-HR
Berkshire Hathaway 3rd Quarter 2012 13F-HR
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