Berkshire Hathaway (BRK.A +0.69%)(BRK.B +0.86%) CEO Warren Buffett has a knack for making money. Since taking the reins as CEO in 1965, he's created more than $690 billion in value for shareholders (himself included), and overseen an aggregate return of 3,641,613% for the company's Class A shares (BRK.A), as of Dec. 31, 2021. That's a 20.1% annualized return over 57 years, for those of you keeping score at home.
Considering how successful the Oracle of Omaha has been as an investor, it shouldn't surprise anyone that Wall Street and Main Street closely monitor the stocks he buys and sells.
Berkshire Hathaway CEO, Warren Buffett. Image source: The Motley Fool.
Investors eagerly await Berkshire Hathaway's 13F (but it doesn't tell the full story)
A little over two weeks ago (May 16) marked the deadline for money managers with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission (SEC). A 13F provides a detailed snapshot of what some of the most successful money managers on Wall Street were buying, selling, and holding in the most recent quarter. Despite drawbacks (e.g., 13Fs provide a 45-day-old portfolio snapshot), 13Fs can offer insight into the stocks and trends catching the attention of successful asset managers.
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Key Data Points
When Berkshire Hathaway filed its 13F on May 16, we were able to see that roughly $51 billion in capital was deployed by the Oracle of Omaha and his investing team during the first quarter. The sizable pullback in the broader market coerced Buffett to be greedy while other investors were fearful, resulting in the purchase of eight new stocks, as well as additions to seven existing holdings.
As of this past weekend, Berkshire Hathaway held more than four dozen securities in its predominantly concentrated portfolio -- the top five holdings account for 72% of Berkshire's $351.4 billion in invested assets. But what you might be surprised to learn is that Berkshire's 13F doesn't tell the full story about all the stocks Warren Buffett's company has positions in.
Image source: Getty Images.
Warren Buffett has an under-the-radar $6.3 billion investment portfolio
Nearly 24 years ago, on June 19, 1998, Berkshire Hathaway announced its intention to acquire global reinsurance company General Re for $22 billion. While General Re's reinsurance segment was the company's shining star that encouraged Buffett to make the acquisition, it also had a specialized investment services segment known as New England Asset Management (NEAM).
When the all-stock deal closed in December 1998, General Re and all of its owned components, including NEAM, became part of Berkshire Hathaway. The 38-year-old investment firm has continued to grow and manages more-than-enough assets to require it to file a 13F on a quarterly basis.
At the end of March, NEAM's SEC filing showed that the company had $6.31 billion in managed assets invested across 161 securities. I say "securities" and not stocks because some of these 161 investments include index funds, exchange-traded funds, and preferred stock.
Although Warren Buffett isn't involved in the investment decision-making process for New England Asset Management, whatever NEAM buys, parent company Berkshire Hathaway ultimately owns. Thus, Warren Buffett has a $6.3 billion "hidden" investment portfolio that, technically, is hanging out in plain view for the world to see.
Image source: Apple.
New England Asset Management oversees a highly concentrated portfolio
The $64,000 question is: What's in New England Asset Management's $6.3 billion portfolio? While there are, as noted, 161 separate investments, NEAM's investment portfolio is even more concentrated than Warren Buffett's. Just three stocks comprised 86.4% of invested assets, as of March 31, 2022.
Perhaps it's not a surprise to learn that Apple (AAPL +1.18%) is the largest holding, by a long shot. NEAM ended the first quarter with close to 20.5 million shares of Apple, equating to a whopping 56.6% of invested assets.
Apple, which has been a continuous holding of NEAM's for the past nine years, checks all the appropriate boxes fund managers look for when putting money to work. It's a well-recognized brand, has an extremely loyal customer base, and has relied on all types of innovation to push sales and profits to record levels. Apple produces the most popular smartphone in the U.S., and its CEO Tim Cook is overseeing a multiyear transition that focuses on a variety of subscription services.
The second-largest holding in New England Asset Management's portfolio is another company near and dear to Warren Buffett's heart: U.S. Bancorp (USB +1.01%). NEAM held a little over 17.7 million shares of the parent of U.S. Bank at the end of March, which worked out to 14.9% of invested assets.
What makes regional banking-giant U.S. Bancorp so special is its conservative management team and aggressive digitization initiatives. Avoiding riskier derivative investments and focusing on the bread and butter of banking (i.e., loan and deposit growth) has allowed U.S. Bancorp to generate some of the highest return on assets among big banks. Couple that operational conservatism with considerably higher digital engagement trends than other large banks, and you have a recipe for a very efficient bank stock.
Image source: Getty Images.
The third large holding is Bank of America (BAC +0.90%), which also accounted for 14.9% of New England Asset Management's investment portfolio at the end of the first quarter.
In addition to benefiting from long-winded economic expansions, Bank of America's secret sauce is its interest-rate sensitivity. With the Federal Reserve set to aggressively raise interest rates in order to tame inflation, no bank is poised to see a bigger increase in net-interest income than BofA. According to the company, a 100 basis-point parallel shift in the interest-rate yield curve is estimated to bring in $5.4 billion in added net-interest income over 12 months.
Anytime 13Fs are filed, don't forget to take a closer look at Warren Buffett's "hidden" investment portfolio, New England Asset Management.
