When Berkshire Hathaway (BRK.A -0.42%) (BRK.B -0.56%) CEO Warren Buffett speaks, Wall Street pays close attention. That's because the Oracle of Omaha has generated a return in excess of 3,600,000% on Berkshire's Class A (BRK.A) shares since becoming CEO in 1965.
The easiest way for investors to monitor what Warren Buffett has been buying and selling is to track Berkshire Hathaway's quarterly 13F filings with the Securities and Exchange Commission (SEC). But what if I told you that Berkshire's 13F doesn't tell the entire story about Buffett's company's holdings?
In 1998, Berkshire Hathaway acquired insurance company General Re for $22 billion. Among General Re's numerous working parts was specialty investment service New England Asset Management (NEAM). With $6.31 billion in assets under management, as of March 31, 2022, NEAM is large enough that it's required to file a 13F with the SEC on a quarterly basis.
Although Warren Buffett isn't in control of this $6.31 billion in assets under management, the more than 160 holdings NEAM has in its portfolio are, nevertheless, owned by Berkshire Hathaway. This means, in an indirect way, Buffett owns stakes in far more companies than Wall Street and investors realize. What follows are five surprising stocks you probably had no clue were held by Warren Buffett's company.
The first stock you might be shocked to learn that Warren Buffett technically owns is content leader Walt Disney (DIS 0.33%). According to NEAM's first-quarter 13F, it held nearly 14,300 shares of the "House of Mouse."
What makes this holding so interesting is that selling Walt Disney stock early on two separate occasions cost Buffett an estimated $17 billion in aggregate capital gains and dividend income.
In 1966, Buffett and a consortium of investors took a 5% stake in Walt Disney for a cool $4 million. However, in a very un-Buffett-like move, he and his investors sold for a 50% gain (a price tag of $6 million) just one year later. That same stake would be worth $8.7 billion, as of this past weekend (not counting dividends).
The Oracle of Omaha received a second chance to own Disney stock in the mid-1990s, after Disney acquired Capital Cities/ABC, which Berkshire Hathaway had a position in. But after a couple of years, Buffett's company disposed of the entirety of its more than 73 million split-adjusted shares of Walt Disney.
Although Buffett has done just fine as an investor, selling his Disney stake may rank as his biggest gaffe.
It's no secret that Warren Buffett dislikes gold as an investment. He views the precious yellow metal as something that's dug out of the ground and placed in a safety deposit box, and that has no utility. That's why you might be surprised to learn that, through NEAM, Berkshire Hathaway holds a more than 37,300-share stake in gold miner Newmont Mining (NEM 2.21%).
Gold-mining stocks are generally a smart way to play for large moves in the precious-metal market. While physical gold offers no yield, mining companies like Newmont can provide leverage by pushing and pulling levers that increase production. Newmont also happens to pay a dividend, which can boost shareholder returns.
However, leverage is a two-way street. With the Federal Reserve scrambling to get inflation under control and rapidly increasing interest rates, bonds are suddenly looking more attractive than holding precious metals. In other words, bond yields are rising, and so is the prospect of higher near-guaranteed returns.
Although Newmont Mining's scale should help keep its all-in sustaining costs below the gold-mining industry average, gold stocks look to be entering their toughest stretch in years.
Another surprise is that Warren Buffett technically still owns a stake in one of his most disappointing tech investments of all time: IBM (IBM 1.71%). NEAM had a 31,580-share position in IBM at the end of the first quarter.
Not known for his technology-investing prowess, the Oracle of Omaha plowed into IBM beginning in 2011. The expectation had been that the strong operating cash flow from IBM's legacy operations would allow it to invest aggressively in higher-growth initiatives, such as cloud computing. Unfortunately, IBM's tardiness to cloud investing made it extremely difficult for the company to gain ground on its competitors. As a result, IBM spent much of the 2010s in a slow sales spiral. Warren Buffett eventually ditched Berkshire Hathaway's position in IBM as of 2018 (or so we thought!).
On the bright side, IBM has found its identity as a hybrid-cloud company. In the wake of the COVID-19 pandemic, there's a growing need to combine public and private clouds under one umbrella. As long as remote work remains at the forefront, IBM's hybrid cloud has the opportunity to deliver sustained low double-digit growth.
But ultimately, not much has changed since Buffett gave up on his company's direct investment in IBM. Legacy software remains a drag on total sales, and IBM's share buybacks haven't provided the lift to the company's valuation that investors like Buffett had expected.
Molson Coors Beverage
You might also be shocked to learn that, through Buffett's secret portfolio, Berkshire Hathaway has a stake in alcoholic beverage giant Molson Coors Beverage (TAP -0.47%). NEAM held a greater than 101,000-share stake in Molson Coors at the end of March 2022.
This position is eyebrow-raising for two reasons. First, the Oracle of Omaha generally invests in wholesome, family-oriented brands. A company that makes its living by selling beer doesn't exactly fit the traditional mold of a wholesome business.
But what makes this Molson Coors position even more surprising is the company's existing joint venture with Canadian marijuana licensed producer HEXO. This joint venture, known as Truss, has introduced nonalcoholic, cannabis-infused beverages in Canada, as well as cannabidiol (CBD)-based drinks in the United States. When asked years ago if longtime holding Coca-Cola should get involved with the cannabis-drink craze, Buffett noted concern that doing so could tarnish Coke's brand power.
In other words, not only does Warren Buffett's company have some form of vice exposure, but through NEAM's Molson Coors stake, it has direct involvement in the North American cannabis industry.
Last but not least, you might be surprised to learn that, through NEAM, Warren Buffett still has a stake in money-center bank Wells Fargo (WFC -0.95%). NEAM held almost 166,500 shares of Wells Fargo at the end of the first quarter.
Berkshire Hathaway's first-quarter 13F showed that Buffett's company sold its remaining stake in Wells Fargo. This marked the first time in over three decades that Wells Fargo wasn't a continuous direct holding of Warren Buffett's. But when factoring in Berkshire's secret portfolio, we can see that Buffett still has indirect exposure to his previous longtime holding.
The mystery behind Buffett's exit of Wells Fargo really is no mystery at all. Between 2009 and 2016, Wells Fargo admitted to opening 3.5 million unauthorized accounts at the branch level as part of an aggressive cross-selling promotional campaign. Not only did this admission eventually cost Wells Fargo a $3 billion settlement with U.S. regulators and lead to executive turnover, but it tarnished the company's reputation. The Oracle of Omaha is a big believer in a company's reputation and simply couldn't stand behind Wells Fargo after it breached its customers' trust.
If there's a silver lining here, it's that banking customers have short memory spans when it comes to scandals. Wells Fargo already looks to be on track to growing its loans and deposits, and isn't having any trouble courting affluent clientele. Nevertheless, it could be some time before Warren Buffett feels comfortable welcoming Wells Fargo back into Berkshire Hathaway's portfolio with open arms.