Berkshire Hathaway 3rd Quarter 2011 13F-HR

The Berkshire Hathaway (BRKa3rd Quarter 2011 13F-HR was released yesterday.

For comparison purposes here's the 2nd Quarter 2011 13F-HR. This quarter some new positions were added while continuing to build upon several existing positions.

There also was a bit of selling.

Here is a post that summarizes changes made in the previous Berkshire Hathaway 13F-HR.

Here's what changed during the quarter:

Equities Purchased
New positions:
IBM (IBM): Bought 57.3 million shares*, value ~$ 10.7 billion
Intel (INTC): 9.3 million shares, $ 230 million
CVS (CVS): 5.6 million shares, $ 220 million
Visa, Inc. (V): 2.3 million shares, $ 215 million
General Dynamics (GD): 3.1 million shares, $ 200 million
DirecTV (DTV): 4.3 million shares, $ 194 million

In my previous 13F-HR summary, I mentioned that some of the confidential or "mystery purchase(s)" made that quarter must be relatively significant in size. I made that comment back then because there was clearly a large gap between the dollar value of equities purchased per Berkshire's 2nd Quarter 10-Q cash flow statement versus what was disclosed in the 13F-HR.

We obviously now know what that gap was at least mostly all about:

IBM

Buffett said,in this CNBC interview yesterday, the quarterly filing will probably only show 57 million shares of IBM but more has been purchased since the end of the quarter. The total is now more like 64 million according to Mr. Buffett.

Buffett on IBM: Berkshire Buys Big Blue

From time to time, the SEC allows Berkshire Hathaway to keep certain moves in the portfolio confidential. 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.

With Buffett's disclosure on CNBC yesterday, we learned that Berkshire has been purchasing IBM since March and the SEC giving permission to keep it confidential until yesterday.

The 3rd Quarter 13F-HR says: "Confidential information has been omitted from the Form 13F-HR and filed separately with the Commission." 
(Update: It turns out to not be the case. In an amended 3rd Quarter 13F-HR filing, Berkshire removed a reference to being granted permission from the Securities and Exchange Commission to omit some confidential information.)

Added to Existing Positions:
Wells Fargo (WFC): Bought 9.0 million shares, ~$ 228 million (2.6% increase)
Dollar General (DG): 3.0 million shares, $ 116 million (200% increase)
Verisk (VRSK): 2.1 million shares, $ 78 million (100% increase)
(an amended 13F-HR later filed by Berkshire revealed no shares of VRSK were added)**

Equities Sold
Reduced Positions:
A little less than 10 million shares of Kraft (KFT) was sold (a 10% decrease). Remaining shares are now worth ~ $3.2 billion and the stocks is no longer a top five position.

Approximately 4.5 million shares of Johnson & Johnson (JNJ) were sold (a 12% decrease). Remaining shares are worth $2.4 billion.

No positions were sold outright.

Portfolio Summary***
After the changes, Berkshire Hathaway's stock portfolio is made up of ~ 36% consumer goods, 31% financials, 17% technology, 6% consumer services, and 4% healthcare. The remainder is primarily spread across industrials and energy.

1. Coca-Cola (KO) = $ 13.6 billion
2. IBM (IBM) = $ 12.0 billion
3. Wells Fargo (WFC) = $ 9.0 billion
4. American Express (AXP) = $ 7.5 billion
5. Procter and Gamble (PG) = $ 4.9 billion

As is almost always the case, it's very concentrated with the top five making up often 60-70 percent and, at times, even more of the equity portfolio.

Many of these purchase(s), especially the smaller ones, could at least in part be those of Todd Combs. Initially, Combs is expected to manage just $ 2-3 billion of the Berkshire equity portfolio.

As of the last 10-Q (the best view available until the annual report comes out), the combined value of  the Berkshire portfolio including the above equities plus fixed maturity securities and other investments is more than $ 120 billion (excluding cash).

That portfolio, of course, excludes all the operating businesses that Berkshire owns. Things like: GEICO, General Re, National Indemnity, MidAmerican Energy, Burlington Northern Santa Fe, McLane Company, The Marmon Group, Shaw Industries, Benjamin Moore, Johns Manville, Acme Building, MiTek, Fruit of The Loom, Russel Athletic Apparel, NetJets, Nebraska Furniture Mart, See's Candy, Dairy Queen, The Pampered Chef, Business Wire, Iscar Metalworking, and Lubrizol among others.
(The insurance businesses naturally provide plenty of "float" for investments.)

The earning power of these combined businesses is easily north of $ 10 billion/year.

In addition to the nearly $ 7 billion of equity investments last quarter, roughly $ 14 billion of Berkshire's cash was used to close the Lubrizol transaction and the Bank of America (BAC) preferred shares.

After all these moves, there remained $ 35 billion or so in cash on Berkshire's balance sheet at the end of the 3rd quarter. With that pile of cash growing at a rapid rate, there remains no shortage of money to put to work at Berkshire.

Adam

* Using the 57.3 million shares as of the end of 3Q. Because of Buffett's disclosure yesterday on CNBC, we know that additional shares were purchased since then. I've included the total of 64 million shares in the calculation of IBM's value when I list the top five holdings. Current value is based upon yesterday's closing price (as it is for the calculation of value for all other holdings). Obviously, the actual price paid for the shares during the quarter could be very different.
** Initially reported in the 13F but later corrected in an amended 13F. No new shares of Verisk were actually added. Check out this Wall Street Journal article for more information. In the amended filing, Berkshire also removed a reference to being granted permission from the Securities and Exchange Commission to omit some confidential information.
*** Berkshire Hathaway's holdings of ADRs are included in the 13F-HR. What is not included are the shares listed on exchanges outside the US. The status of those shares (BYD, POSCO, Sanofi, Tesco etc.) is updated in the annual letter.
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Berkshire Hathaway 3rd Quarter 2011 13F-HR
Berkshire Hathaway 3rd Quarter 2011 13F-HR
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