Warren Buffett’s Berkshire Hathaway stock holdings for Q3 2011 was filed on 11/14/2011 (and amended 11/15/2011). There was a lot of activity this quarter with new stakes in CVS Caremark, DIRECTV, General Dynamics, Intel, Visa, and a very large stake in IBM. Holdings of ConocoPhillips, Johnson & Johnson, and Kraft were reduced. Stakes in Dollar General, M&T Bank Corp, and Wells Fargo were increased. Warren Buffet’s Berkshire Hathaway [BRK.A /BRK.B] stock updates for the third quarter of 2011 (End of 9/30/2011):
Berkshire’s New Stock Holdings:
International Business Machines [IBM]
– A new stake was initiated in International Business Machines Corporation. IBM is an information technology (IT) company that provides IT services, hardware, software, financing, and is also heavily involved in fundamental research. Solutions include IT infrastructure and business process services, professional and application management services, as well as middleware and operating systems software.
– The SEC filing shows a total of 57,348,984 shares of IBM were purchased by the end of the 3rd quarter of 2011, and was worth about $10 billion ($10,028,617,000) as of 9/30/2011.
– However, during an interview with CNBC on 11/14/2011, Buffett said, that he had started buying shares in March to build a $10 billion position in IBM. He had been acquiring for Berkshire in both the first and second quarters of the year. An amendment for the Q1 filing or the quarter ended 3/31/2011, showed Berkshire purchased 4,517,774 shares with a market value of $736.7 million ($736,713,000) at the end of Q1. An amendment for the Q2 filing or quarter ended 6/30/2011, showed Berkshire added 24,854,744 shares with a market value of $4.2 billion ($4,263,831,000) at the end of Q2. Berkshire’s request for confidential treatment expired yesterday (11/15/2011).
– Buffett had also mentioned that his purchases also extend into the current quarter (Q4 2011) and that Berkshire owns a total of 64 million shares (approximately 7 million additional shares from the 57.3 million in the Q3 filing) at a cost of approximately $10.7 billion. Berkshire holds a 5.5% stake in the company.
– Many investors have wondered why Buffett took such a large stake in the company. During the CNBC interview, he said that he had been reading the annual reports of the company every year for the last 50 years, and that this year he “got a different slant on it”, and then proceeded to look at it further. Buffett had avoided technology related companies over the years, says the reason is that he “doesn’t understand technology”. I think what he really means is that he doesn’t know technology well enough to be able to foresee a company’s future (in a financial sense) 5 to 10 years down the road, and how changes in technology might impact it.
– Indeed, technological changes tend to have very dramatic effects and occur very quickly, as well frequently. There have been many giants that have either succumb to the effects of technological change, or have struggled for survival. Some more recent names include Yahoo, RIM, Nokia, Palm, and Nortel. Older technology giants have even experienced difficulty a number of times, including Digital Equipment Corporation (1998, Compaq 2002), McDonnell Douglas (McDonnell Aircraft, Douglas Aircraft), and General Motors (1910, 2009).
However, Buffett said that he can’t think of any other big company that has done a better job of “laying out where they’re going to go, and then having gone there”. He said that IBM laid out a road map 5 years ago for 2010 and was able to follow it. They have now laid out another road map for 2015. Buffett sees IBM more as a services company rather than a high-tech hardware/software company, that “helps IT departments do their job better” .
CVS Caremark Corp. [CVS]
– A new stake was initiated in CVS Caremark Corp, a provider of pharmacy healthcare in the United States with over 7000 retail pharmacy stores (CVS), retail-based health care clinics (MinuteClinic), and an online pharmacy (CVS.com)
– A total of 5,661,000 shares of CVS were purchased purchased in the during third quarter of 2011, and was worth approximately $190 million ($190,153,000) as of 9/30/2011.
– A stake was initiated in digital television provider DIRECTV. The company promotes, sells, and distributes digital entertainment programming mainly through satellite to residential and commercial subscribers in the United States (DIRECTV U.S.) and Latin America (DTVLA). The company also operates regional sports networks and owns a 65% interest in Game Show Network LLC (GSN).
– A total of 4,249,400 shares of DTV were purchased during the quarter, and was worth about $179 million ($179,622,000) as of 9/30/2011.
General Dynamics Corp [GD]
– A new position was initiated in General Dynamics Corporation. General Dynamics is a U.S. defense contractor company that provides products and services in aviation, combat vehicles, weapons systems, munitions, shipbuilding, and communication & information technology.
– A total of 3,064,422 shares of General Dynmaics were purchased in Q3 of 2011, and had a market value of approximately $174 million ($174,335,000) as of 9/30/2011
Intel Corp. [INTC]
– A new stake was initiated in Intel Corporation, the world’s largest semiconductor chip maker. Intel designs and manufactures advanced integrated digital technology components & products, including microprocessors, chipsets, motherboards, wireless/wired connectivity products, and platforms that incorporate such components.
– A total of 9,333,000 shares of Intel were purchased in the 3rd quarter of 2011, and was worth about $199 million ($199,167,000) as of 9/30/2011.
Visa Inc. [V]
– A new stake was initiated in the global payments company, Visa Inc. Visa provides transaction processing and services offers to support credit, debit, prepaid and cash access programs.
– A total of 2,291,708 shares of Visa were purchased in the third quarter, and was worth about $196 million ($196,445,000) as of 9/30/2011. This acquisition adds to the portfolio’s stable of payment companies which includes American Express [AXP] and MasterCard [MA]. Berkshire has always invested heavily in financial services and banking. Other investments include Bank of NY Mellon, Salomon Brothers, US Bancorp, Goldman Sachs, Wells Fargo, M&T Bank, Sun Trust, etc.
Berkshire’s Stock Additions:
Dollar General Corp. [DG]
– Berkshire doubled its stake in the discount retailer by adding 2,999,447 shares (200.25%) from 1,497,800 shares, bringing its total to 4,497,247 shares. On 9/30/2011, the total value of Berkshire’s holdings in Dollar General was approximately $170 million ($169,816,000). Dollar General was a new holding last quarter (Q2 2011)
M&T Bank Corporation [MTB]
– Berkshire increased its stake in M&T Bank by 18,219 shares (0.34%), bringing it up from 5,363,821 shares to a total of 5,382,040 shares. On 9/30/2011, the company’s stake in the bank was worth $376 million ($376,204,000).
Wells Fargo & Co. [WFC]
– Berkshire increased its holdings in the bank by 9,042,200 shares (2.56%), bringing the total number of shares from 352,327,608 to 361,369,808 shares. Berkshire’s stake in Wells Fargo had a market value of approximately $8.7 billion ($8,716,240,000). The company had increased its holdings in WFC during the second quarter of 2011 (9,703,683 shares, 2.83%), the fourth quarter of 2010 (6,215,080 shares, 1.8%), as well as during the 3rd quarter of 2010, and 3 out of 4 quarters in 2009.
– Wells Fargo was a Buffett purchase, and he told CNBC that he likes the price and thinks its a good business, which he also likes over a 5-10 year stretch.
Berkshire’s Stock Reductions:
– Berkshire reduced its holdings of the oil giant by a marginal 700 shares (0.002%), bringing its stake down from 29,101,637 shares to a total of 29,100,937 shares. On 9/30/2011, the company’s stake in ConocoPhillips was worth $1.84 billion ($1,842,671,000).
– During the 1st quarter of 2011, Berkshire had reduced (8,000 shares, 0.03%) its holding of the company and had been reducing since Q4 2008. As Buffett has mentioned in the Berkshire 2008 annual report, the company will continue to reduce its stake in ConocoPhillips.
Johnson & Johnson [JNJ]
– Berkshire made a significant reduction in its holdings in the global healthcare giant by5,177,775 shares (12.15%), bringing its position down from 42,624,563 shares to a total of 37,446,788 shares. On 9/30/2011, the company’s stake in J&J had a market value of about $2.4 billion ($2,384,985,000).
Kraft Foods Inc. [KFT]
– Holdings in the food manufacturing giant was again significantly reduced, this time by 9,720,916 shares (9.77%), bringing its stake down from 99,467,624 shares to a total of 89,746,708 shares. On 96/30/2011, the company’s holdings in Kraft was worth approximately $3 billion ($3,013,695,000).
– Last quarter (Q2 2011), Berkshire had trimmed its holdings by 5,746,960 shares or 5.46%. Buffett had previously mentioned, that he was fine with Kraft’s proposed separation into two companies (confectionery & snacks, and North American grocery), saying that instead of one great company, he would hold two great companies.
Berkshire’s Stock Sell Offs:
Torchmark Corp Stock Split:
– The 13F filing for the third quarter of 2011 shows a doubling in the holding of Torchmark Corp [TMK] by 1,411,939 shares or 50%, from 2,823,879 shares to a total of 4,235,818 shares, with a market value of approximately $147 million ($147,660,000) at 9/30/2011. However that is the result of a 3 for 2 partial stock split paid in the form of a 50% stock dividend on all of Torchmark’s outstanding common shares. The record date was the close of business on June 1, 2011, and it became effective on July 5 2011. It is not the result of new a stake increase by Berkshire.
Bank Of America Investment:
– During the quarter Buffett and Bank of America [BAC] said that he had made an unsolicited call to the bank the morning of 8/24/2011, offering to make an investment. The investment would be similar in nature to the deal Berkshire had made with Goldman Sachs [GS] and General Electric [GE] during the financial crisis in 2008. The deal involves warrants to buy 700 million shares of common stock priced at just over $7.14 per share, with a 10 year exercise period. Bank of America will also sell Berkshire 50,000 shares of cumulative perpetual preferred stock. The preferred shares carry a 6% annual dividend, which is smaller than the 10% dividend in the Goldman and GE deals. Bank of America can buy back the investment at any time by paying Berkshire a 5% premium.
Buffett did previously make a small equity stake in Bank of America, but was sold the stake off during the fourth quarter of 2010.
Buffett, Combs, Weschler:
– With the recent additions of Todd Combs and Ted Weschler as investment managers of Berkshire Hathaway, it is unclear exactly who was associated with each stock purchase/sale. However, Buffett told CNBC that investments in the $200 million area are very likely to be Combs or Weschler, because he personally looks at larger investments. He also mentioned that Weschler has not yet gone to work for Berkshire yet and will not be until January 2012.
– That implies that the new stakes in CVS ($190 million), DIRECTV ($179 million), General Dynamics ($174 million), Intel ($199 million), and Visa ($196 million) were made by Todd Combs. During the last quarter Dollar General was purchased by Combs, and it is likely that the additional shares acquired were also made by him. Buffett also mentioned that Todd does not require approval from Buffett for investment purchases, as he has been allocated a block of money to invest with that is “entirely his book”.
– Buffett declared that he was responsible for the acquisition of IBM shares and additions to Wells Fargo, while the size of the Kraft and Johnson & Johnson holdings suggest he was also responsible for those reductions as well. Although the reduction of Kraft and J&J does not necessarily mean that he doesn’t like them any more, but I suspect it could simply be to free additional capital to make room for IBM purchaes, or even Combs’ & Weschler’s future purchases. ConocoPhillips and M&T Bank were previous Buffett holdings, and it is likely those decisions were made by him.
You can view the 11/15/2011 SEC filing (amended version) which discloses Berkshire Hathaway stock holdings here:
The original 13F filing on 11/14/2011 showed the Verisk Analytics holding had doubled (later amended/corrected).
The filing does not differentiate between investments that are made by Berkshire Hathaway, its subsidiaries, Todd Combs, Ted Weschler, or Warren Buffett himself (as the chairman and chief executive of the company). Buffett usually makes his stock investments for Berkshire Hathaway through his insurance arms (Berkshire Hathaway Life Insurance Co. of Nebraska, Columbia insurance Co, GEICO, National Indemnity Co, Wesco Financial, etc.).
I am long Berkshire Hathaway, Wells Fargo, US Bancorp, American Express, and Kraft. I do not plan on acquiring or selling shares, of any of the companies mentioned within this post, within the next 3 trading days.
Recommended Warren Buffett Related Books:
Although its easy to follow and copy Warren Buffett’s stock moves (buys/sells), we only learn of his actions months after it has been done (SEC filing is always later). We would never know for sure why the move was made or what other reasons were behind it.
Buffett recommends investors who want to learn how he invests, to read books that he specifically endorses and recommends, as well as past Berkshire Hathaway annual reports. The following is list of those few books (I’ve have read these myself and learned to invest like Buffett):
Thanks and Happy Investing! – The Investment Blogger © 2011