How Warren Buffett Made More Than $3.5 Billion in Three Months

Berkshire Hathaway watched its stock holdings continue to rise in the second quarter thanks to major gains from Coca-Cola and ConocoPhillips,but the losses at IBM helped drag it down so it trailed the S&P 500.

Jul 3, 2014 at 7:05AM

With the calendar officially closed on the first second quarter of 2014, the Motley Fool takes a look at a few of the stocks which allowed Warren Buffett and Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) to earn $3.7 billion in April, May, and June.

The movers and shakers
On a raw dollar basis -- and a very strong return basis -- the biggest winner in the $106 billion Berkshire Hathaway portfolio was none other than the stock Buffett said he'd never sell a share of, Coca-Cola (NYSE:KO). Through the second three months of the year Coca-Cola saw its stock price jump by nearly 10%, which netted Buffett a staggering $1.5 billion.

More impressively on a percentage basis was the 22% return delivered by ConocoPhillips (NYSE:COP), and while it is a much smaller position than Coca-Cola, it still brought in nearly $175 million in gains based on the $780 million holding.

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Source: Coca-Cola.

So what made the big moves happen? Interestingly enough, one of the reasons Coca-Cola saw its stock price jump was Buffett himself. Or more aptly, speculation Buffett would seek to takeover Coca-Cola in partnership with 3G Capital, similar to the move he made with Heinz last fall.

The beverage giant also delivered strong earnings through the first three months of the year, which sent its stock up nearly 4% on the day of. In addition Coca-Cola also announced it was expanding its stake in Keurig Green Mountain to 16%. 

ConocoPhillips delivered remarkable results in the first quarter, as its $1.71 in earnings per share topped the broader estimates of analysts by $0.25. Thanks to a massive 41% growth in its ability to produce oil from its shale assets in Eagle Ford and Bakken, the company revealed it has been able to continue to ramp up its production of oil, which grew by 3% over the last year.

Altogether the first quarter marked a great one for ConocoPhillips and it proved it could continue to expand its production and profits between 3% and 5% annually, which sent its stock upwards. And while he once said buying ConocoPhillips was "a major mistake of commission," he's likely happy to see it jump so high.

And all this is to say nothing of both Wells Fargo and American Express which each saw their stock prices rise by roughly 5.5% thanks to solid earnings, and combined brought in Buffett a staggering $2 billion combined.

The one big loser
While 33 of the 45 stocks Berkshire Hathaway holds were in the positive -- and saw their values grow by $5 billion -- there was one big loser that helped drag the whole portfolio down. And regrettably it was the last of the "Big Four" that hasn't been mentioned: IBM (NYSE:IBM).

Although IBM announced it would be upping its dividend at the end of April, the biggest news when it reported its first quarter results that saw its sales drop by 4%, and its total earnings per share fell by a somewhat staggering 15% to $2.54, which is before the one-time charge that in total dropped its earnings per share to $2.29. This resulted in its stock falling by nearly 3% on the day.

Altogether its stock fell 6% from the beginning of April to the end of June, which resulted in Berkshire Hathaway seeing the value of its holdings fall by a little more than $750 million. The total holdings are now worth $12.4 billion, which still places it above the cost to Berkshire of $11.7 billion, but one has to wonder how Buffett feels about another six months of difficulties at IBM.

The key takeaway
Knowing Buffett once said, "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes," it's tough to believe Buffett is full of excitement or fear after the movement of the stocks Berkshire holds over just three months. But it's critical to keep an eye on them to see if his, or our, decisions and perspective should be changed.

Warren Buffett: This new technology is a "real threat"
A $3.5 billion gain is a great thing, but at the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Patrick Morris owns shares of Berkshire Hathaway and Coca-Cola. The Motley Fool recommends Berkshire Hathaway and Coca-Cola. The Motley Fool owns shares of Berkshire Hathaway and International Business Machines and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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