How Warren Buffett Invested Last Quarter

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At The Motley Fool, we understand that it often pays to zig when Wall Street zags. Still, we keep an eye on how leading fund managers buy and sell -- especially if they don't work in lockstep with the larger market.

Every quarter, money managers overseeing more than $100 million must disclose their quarter-end holdings publicly by filing Form 13-F with the SEC. The form lists all U.S.-traded securities the manager held at the end of the quarter. Although it doesn't disclose the manager's short positions or intraquarter trades, it can shine a bright light on his or her "long" stock bets. To help us make use of 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that tracks hedge fund public disclosures and develops investment strategies based on them.

Q2 2011 update
Warren Buffett is a familiar name to anyone who follows the investment world. His company, Berkshire Hathaway (NYSE: BRK-B  ) , increased its per-share book value by an annual average of 20% between 1965 and 2010, and left the S&P 500 in the dust with a 9% average annual return in the same period. Clearly, Buffett has a knack for making smart investments. 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 other companies' stock.

Why should you look at Berkshire's moves? According to AlphaClone's backtest simulation, anyone who invested in Berkshire Hathaway's 10 largest holdings at the time they were disclosed publicly each quarter would have returned 143.8% since 2000, versus a loss of 4.5% for the S&P 500 (including dividends) as of Aug. 19, 2011.

The total market value of Berkshire Hathaway's disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data is available -- was $52 billion across 27 holdings. Since Buffett is famous for his patience and commitment to his investments, and for not trading terribly often, it's not surprising that Berkshire's sector weightings haven't changed much over recent quarters.

Berkshire's 10 largest positions (shares held) and associated changes as of June 30, 2011 were:

  • Coca-Cola (NYSE: KO  )  -- unchanged.
  • Wells Fargo (NYSE: WFC  )  -- increased 2.8%.
  • American Express (NYSE: AXP  )  -- unchanged.
  • Procter & Gamble (NYSE: PG  )  -- unchanged.
  • Kraft Foods (NYSE: KFT  )  -- reduced 5.5%.
  • Johnson & Johnson (NYSE: JNJ  )  -- unchanged.
  • Conoco Philips (NYSE: COP  )  -- unchanged.
  • Wal-Mart (NYSE: WMT  )  -- unchanged.
  • US Bancorp (NYSE: USB  )  -- unchanged.
  • Moody's (NYSE: MCO  )  -- unchanged.

Berkshire is Wells Fargo's largest shareholder, and Buffett has praised the bank for its low-cost funding base. Buffett's love of great companies at good prices likely explains the additional shares, since the stock sank in recent months. The decrease in Kraft shares may be tied to Buffett's lack of love for the company's purchase of Cadbury, though he's reportedly supported the company's plan to split up.

During the quarter, Berkshire Hathaway also increased its position in MasterCard (NYSE: MA  ) , by a whopping 88%. Many believe that the move stems from financial-stock bull Todd Combs, a young investor whom Buffett has tapped to manage some of the company's money. Combs may be one of the candidates to succeed Buffett as well.

Selected Q2 2011 commentary
Within Berkshire's holdings, consumer staples and financial stocks dominate, combining to make up about 80% of the overall portfolio. Here's where the firm is winning and losing currently and making new bets:

Recent winner
American Express was a big winner in the quarter, with gains of more than 14% for the stock. Shares may have risen during the quarter on bullishness over AmEx's plans to introduce a prepaid electronic wallet, or its decision to wring more money out of its popular Blue Cash card via smaller rewards and annual fees. With a market capitalization around $53 billion, the company has a three-star (out of five stars) rating at Motley Fool CAPS.

Recent loser
Drywall and sheet rock giant USG (NYSE: USG  ) didn't do so well, dropping almost 14% in value for the reported quarter, and plunging even more in recent weeks. You can partly blame continued softness of the housing market, along with increased competition. The company has a three-star rating in Motley Fool CAPS.

New bets
Two new holdings for Berkshire are Verisk Analytics (Nasdaq: VRSK  ) and Dollar General (NYSE: DG  ) . Verisk is fitting, given that it specializes in analytics and decision support for the insurance industry, one of Berkshire's main areas of operation. Dollar General also makes sense, given our struggling economy, high unemployment, and the fact that many people are especially interested in discount prices.

That's the latest from Berkshire Hathaway and its latest investment moves. Tell us what you think in the comments below.

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Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson, Wal-Mart, Procter & Gamble, American Express, and Coca-Cola, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. 

The Motley Fool owns shares of Johnson & Johnson, Coca-Cola, Wal-Mart, Wells Fargo, and Berkshire Hathaway, and has created a ratio put spread position on Wells Fargo. Motley Fool newsletter services have recommended buying shares of Moody's, Johnson & Johnson, Coca-Cola, USG, Procter & Gamble, Berkshire Hathaway, and Wal-Mart, as well as creating diagonal call positions on Johnson & Johnson and Wal-Mart. 

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.

Read/Post Comments (2) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 22, 2011, at 5:57 PM, midnightmoney wrote:

    will be watching out for vrsk and dg to soon become mf recommendations.

  • Report this Comment On August 23, 2011, at 9:02 AM, rrockw wrote:

    Verisk is not a new holding. Berkshire has for many years, maybe decades, held the Class B shares. See prospectus, annual reports, etc... It's new only to the 13F because the Class A shares converted from the Class B shares. Class A are publicly traded vs. Class B which are not.

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