Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) and Warren Buffett had a solid October, as the combined return of the stocks held in its portfolio as of June 30 was essentially equivalent to the S&P 500 over the same time period -- both moved up about 3.5%.
While Buffett had three stocks that each netted him more than $500 million in paper returns (about $2.3 billion in total for those three alone), and two others that returned more than 10% in the month, the portfolio did have one stock drag down the entire ship, as it lost more than $400 million in value thanks to a tough earnings announcement (which we'll get to later).
Highfliers
Both Precision Castparts and Phillips 66 (PSX +4.26%) had tremendous months in which each saw their stock prices rise 11.5%. As of the most recent SEC filing, Berkshire Hathaway had about $1.6 billion invested in Phillips 66, one of the country's largest refiners of oil and natural gas, and roughly $500 million in Precision Castparts, a manufacturer of metal components and other products.
Precision Castparts' great month was due in large part to its Oct. 24 second-quarter earnings announcement, in which it reported a 23% increase in sales and a 28% increase in net income and earnings per share over the same period last year. The company as a whole attributed this to "solid commercial aerospace demand and steady recovery in power markets."
Phillips 66, on the other hand, saw third-quarter earnings plummet to $0.87 per share versus $2.51 per share in the same period last year. But many were expecting that drop in earnings, and the stock stayed relatively stable on the news. The big news came when it announced a 25% increase in its dividend earlier in the month, which sent the stock higher.
Although the two companies represent only about 2.3% of the Berkshire Hathaway portfolio, it is cause for joy any time a stock goes up 10% in one month.
Cash cows
On the other side of the portfolio are Wells Fargo, Coca-Cola (KO 0.40%), and American Express, which are three of Berkshire Hathaway's largest holdings. As of the last quarter, Berkshire held $46.5 billion worth of these three stocks, which made up just north of 50% of the total portfolio.
Both Wells Fargo and Coca-Cola reported solid, unspectacular earnings. Each company is a stalwart in its respective industry and the stocks have paced the broader market. Wells Fargo delivered its 10th consecutive quarter of record net income. Although income dipped at Coca-Cola thanks to currency fluctuations, and its soft drink sales slowed, its tea and other beverage businesses had solid results and the stock was up on the news.
The big winner was America Express, which knocked its third-quarter earnings out of the ballpark. The stock soared on the news, and in total the company saw shares rise almost 8.5% during the month. Earnings per share was up 15% as the company boosted its revenue and net income, and it also bought back 6% of its shares.
In total these three companies earned Berkshire Hathaway about $2.3 billion this month, a gain of roughly 5%.
The laggard
While Berkshire had a number of companies that delivered, tech-giant IBM (NYSE: IBM) lagged. For the third quarter, the company reported higher net income, but revenue dipped as a result of weakening sales in China. The stock plummeted 6% on the news. On the bright side, the stock has gained by about 2.5% since the day after its fall (compared to 1.5% for the S&P 500), so Berkshire Hathaway has been able to recoup some of the losses. However, since Berkshire Hathaway owned almost $13 billion worth of the stock the fact that it was down 3.2% still hurts.
All in all, the stocks in the Berkshire Hathaway portfolio had solid performance; if not for IBM they would have been up almost 4% on the month. We'll likely get an updated picture of the Berkshire Hathaway holdings in two weeks; once those are in, it'll be curious to see whether Buffett thought any of these movements were enough to warrant buying more, or perhaps even cashing out.
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