Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Warren Buffett is a familiar name to anyone who follows the investment world, with his Berkshire Hathaway (NYSE: BRK-B ) company increasing its per-share book value by an annual average of almost 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.
Berkshire Hathaway's stock portfolio totaled $75 billion in value as of March 31, 2012, up about 14% in just the last quarter. The company's biggest stock holdings are long-held Coca-Cola, along with Wells Fargo and recent newcomer to the portfolio 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 Mr. Buffett. For many years Lou Simpson managed the investments of Berkshire subsidiary GEICO, and now there are two newcomers in the fold, 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 is now managing about $2.75 billion of Berkshire's money.
So what does Berkshire's latest quarterly 13-F filing tell us? Here are a few interesting details:
New holdings include Viacom and General Motors (NYSE: GM ) . General Motors has been firing on lots of cylinders lately, not only domestically, but also abroad. It sells more vehicles in China than anywhere else, and more there than any rivals. In North America, the company has posted record profits recently, and is consolidating its product line.
Among holdings in which Berkshire increased its stake were Bank of New York Mellon (NYSE: BK ) , DaVita, Liberty Media, and Wal-Mart. Bank of New York Mellon is the world's largest custody bank. Since it focuses more on providing custodial services for other financial institutions than on serving individual consumers, it's not as affected by banking reforms as others are. The company has been cutting costs and seeing its assets under management grow at a good clip.
Berkshire reduced its stake in several companies, including Intel (Nasdaq: INTC ) , Verisk Analytics (Nasdaq: VRSK ) , Dollar General, and Kraft. Intel has been performing well, growing its market share and aiming to take a bigger bite of the mobile telecom pie. It's also focusing on serving the cloud market, and its future looks bright. Verisk Analytics provides analytical services for the critical insurance, mortgage, and health-care industries, and has posted double-digit revenue and earnings growth over the past year. It's a capital-light business, and enjoys long-term contracts with customers and much repeat business.
Finally, here's an interesting tidbit: Berkshire seems to be building a sizable new position right now, and has secured permission from the SEC not to reveal the company's name as it does so, since a revelation will lead copycats to also buy, driving up the price. Buffett got this permission last year as he spent more than $10 billion buying up about 5% of IBM.
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 13-F forms can be great places to find intriguing candidates for our portfolios.
Note, too, that Buffett favors companies that have wide moats and whose futures seem predictably assured. With Coca-Cola, for example, he's confident that in 10 or 20 years, billions of people will still be quaffing the stuff. If you'd like to add more such companies to your own portfolio, check out our special free report, "3 American Companies Set to Dominate the World."