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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 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 Dec. 31, 2012.
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:
Berkshire Hathaway didn't sell out of any positions completely, but it did add a few.
The biggest new holdings are Archer Daniels Midland (NYSE: ADM ) and VeriSign (NASDAQ: VRSN ) . Farming giant ADM is the world's largest corn producer, poised to benefit from the world's growing population. Recent quarterly results showed a sixfold increase in profits due in part to robust oilseed demand. Drought conditions over the past year, though, results in record crop insurance claims, and ADM is a crop insurer.
VeriSign, an Internet infrastructure services company, recently posted solid fourth-quarter results, with revenue up 13% over year-ago levels and operating margins surging by nearly 30%. The company also realized a net gain in registered domain names of 6.4% for the year. It raised its registry fee for .net names by 10%. VeriSign enjoys recurring revenue, and is also looking into developing new sources of revenue.
Among holdings in which Berkshire Hathaway increased its stake were National Oilwell Varco (NYSE: NOV ) and Precision Castparts (UNKNOWN: PCP.DL ) -- both, interestingly, are recommendations of our Stock Advisor newsletter. National Oilwell Varco is the biggest U.S. maker of oil-field equipment and was recently sporting a record capital-equipment backlog of nearly $12 billion. (It has actually been reporting other record numbers recently, too.) It's also involved in the profitable offshore drilling arena (which the company sees growing in 2013), and has been growing in part via acquisitions as well.
Precision Castparts reported third-quarter revenue up 13% and operating earnings up 9%, but both its rising revenue and earnings were below estimates. The company is digesting its purchase of Titanium Metals, which is expected to start delivering savings of $30 million to $40 million annually within the coming few years. One catalyst for the company is expected growth in commercial airplane sales.
Berkshire Hathaway reduced its stake in lots of companies, including Mondelez International (NASDAQ: MDLZ ) . The Kraft spin-off just reported fourth-quarter results featuring 2012 revenue up 4.4% on an organic basis but down 2.2% overall. Sluggishness in Europe has hurt the company, but its gross margins did rise. Mondelez is putting a lot of hope in developing markets, where growth is often more rapid.
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. 13-F forms can be great places to find intriguing candidates for our portfolios.
Warren Buffett's long track record of success has made him one of the best investors of all time. With Buffett at the helm, Berkshire Hathaway has grown book value per share at a compounded annual rate of 19.8% for nearly 50 years! Despite an incredible historical track record, investors have to understand the key issues to watch moving forward. To help investors, the Fool's resident Berkshire Hathaway expert, Joe Magyer, has created this premium research report on the company. Inside, you'll receive ongoing updates as key news hits, as well as reasons to both buy and sell the stock. Claim a copy by clicking here now.