Every quarter, many money managers have to disclose what they've bought and sold, via 13F filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at investing giant Warren Buffett. His Berkshire Hathaway (NYSE: BRK-B ) company has increased its per-share book value by an annual average of 20% between 1965 and 2011, leaving the S&P 500 in the dust with its 9%. Clearly, the guy knows a thing or two about investing. With that in mind, let's take a look at his company's recent investment activity, noting that he heads a large corporation, and not a hedge fund or mutual fund. While he owns many businesses in their entirety, from Dairy Queen to GEICO to Fruit of the Loom, he also has tens of billions of dollars invested in the stock of other companies.
The company's reportable stock portfolio totaled $75.3 billion in value as of June 30, 2012, with its top three holdings, representing a whopping 55% of the portfolio, being Coca-Cola, Wells Fargo, and IBM.
Before we delve into changes in the portfolio, it's important to note that the collection of stocks and its management is not handled entirely by Buffett. For many years, Lou Simpson managed the investments of Berkshire subsidiary GEICO, and now there are two newcomers in the fold co-managing some Berkshire money, one or both of whom may end up succeeding Buffett at the company's investment helm. They're Todd Combs and Ted Weschler, and some of Berkshire's investment moves reflect their thinking. Each was managing about $2.75 billion of Berkshire's money not so long ago, but that has been hiked to around $4 billion apiece, suggesting that Buffett is pleased with them. So don't assume that any particular purchase or sale is purely a Buffett decision.
So what does Berkshire Hathaway's latest quarterly 13F filing tell us? Here are a few interesting details:
There were two new significant holdings, Phillips 66 (NYSE: PSX ) , and National Oilwell Varco (NYSE: NOV ) . Phillips 66 is a recent spinoff from ConocoPhillips, in which Berkshire is also invested. ConocoPhillips kept the upstream oil exploration and development business, while Phillips 66, operating fuel stations across the nation and a host of refineries, is a downstream and midstream one. Phillips 66 has hit some record highs recently, profiting from a slip in oil prices, which fattens its margins at refineries.
National Oilwell Varco is the biggest U.S. maker of oil field equipment, with my colleague Aimee Duffy pointing out that "Ninety percent of the world's rigs have National Oilwell Varco equipment on them." The company has been posting solid growth, with recent quarterly earnings up 26%, and it recently bought Robbins & Myers for $2.55 billion, boosting its capacity further (especially in blowout preventers) and expecting immediate bottom-line gains from the deal.
Among holdings in which Berkshire Hathaway increased its stake was Bank of New York Mellon. Suffering from the low-interest-rate environment, it has been cutting costs and seeing its assets under management grow at a good clip. Management recently noted that "we're growing fees in our core businesses, continuing to strengthen our balance sheet and ... investing in new areas to generate organic growth."
Berkshire Hathaway reduced its stake in a handful of companies, including General Electric (NYSE: GE ) and United Parcel Service (NYSE: UPS ) . Up 37% in the past year, GE has less upside now than it did before. Still, it's a compelling powerhouse, beefing up its involvement in alternative energies and seeing its GE Capital unit strengthen and resume paying its parent company a dividend. It has been whacked some by foreign currency translations and the overall global economic slowdown, but those won't last forever.
United Parcel Service, a delivery titan, has been expanding its international capabilities, recently acquiring Europe's TNT Express, for example. It has also benefited from the growth of online shopping, delivering millions of packages for Amazon.com and others. Some see potential for the company in the demise of the U.S. Postal Service, but that's just speculation, which has been known to hurt investors.
Finally, Berkshire Hathaway unloaded all of its shares in Intel. To some degree it's not surprising, as Buffett is famous for not investing outside his circle of competence and has many times explained that while he may admire many high-tech companies, he has little idea how they will be faring in 10 years. Intel has actually become a bit of a blue chip company, though, with fat and growing dividends (recent yield: 3.4%) and average annual revenue and earnings growth over the past three years in the double digits. It's investing in mobile chip technology, too, which is a fast-growing market.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13F forms can be great places to find intriguing candidates for our portfolios.
If you simply can't get enough information about GE, then I suggest getting your copy of our latest premium research report on General Electric. Our analysts have jam-packed this report with the opportunities and threats that could cause GE to rise or fall, and the report and comes complete with a full year of updates. We have a report on Intel, as well, detailing its risks and opportunities.