Warren Buffett (Berkshire Hathaway) Stock Portfolio – Update 2008 Q4

Warren Buffett’s Berkshire Hathaway stock updates for the fourth quarter of 2008:

New Additions:

NLC [Nalco Holding Corporation]
– 8,739,100 shares were purchased.  Based in Naperville, Illinois, Nalco is a integrated water treatment company that produces products and services to prevent corrosion, contamination, and the build up of harmful deposits.  The company operates in the industrial and institutional services, energy services, and paper service business segments, serving the aerospace, paper, chemical, pharmaceutical, petro, steel, power, food, manufacturing, marine, and institutional markets.   Nalco also provides consulting and technical services to its customers.  According to Bloomberg, the shares represent a 6.4% of the stock.

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Added to:

ETN [Eaton Corp]
– Berkshire added to the industrial parts and systems manufacturer, increasing his holdings to 3,200,000 shares.  Last quarter this was a new holding.

IR [Ingersoll-Rand Company Ltd.]
– Added to the climate control and industrial technology company.  2,146,000 shares were purchased, bringing the total to 7,782,600 shares.

NRG [NRG Energy]
– Again added to power wholesale company. 2,200,000 shares were purchased, bringing the total to 7,200,000 shares.  The company is currently in the midst of a hostile takeover bid by Exelon Corp.  The has said it spent an enormous amount of time and resources considering the unsolicited takeover offer, but continues to view it as inadequate. The company has called upon the shareholders to reject the Exelon Corp offer.

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Reduced:

COP [Conoco Phillips]
– Reduced its stake in the oil giant by 4,059,527 shares to 79,896,273 shares.  Berkshire still remains the largest shareholder of the company.

KMX [Carmax]
– Again, reduced its stake in largest used car retailer by 807,600 shares to 17,636,500 shares.

JNJ [Johnson & Johnson]
– Reduced its stake in one of its long time holdings by 32,995,757 shares. This brings the total number to 28,611,591 shares, down from 61,607,348 shares.  Johnson & Johnson has held up quite well in the financial crisis, and has also weathered such economic times before.  Its interesting to see this holding cut.  Although we will never know his reason, one possibility may be that he’s simplying cashing out at a profit after holding it for years, in order invest where he sees more opporunity.  Recently he has been purchasing a lot of fixed income investments primarily in corporate debts.

PG [Procter & Gamble]
– Reduced its stake by 9,530,990 shares to a total of 96,316,010 shares.

USB [US Bancorp]
– Berkshire reduced the number of shares by 5,385,700 shares to a total of 67,551,426 shares.  This is still a significant amount of shares and a very large holding for Berkshire.  Interestingly though, this was the only financial holding that he added to last quarter.  During the last quarter he added 4,306,100 shares.

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Notes:

Its also interesting to see that there was no change to his other financial holdings in American Express Co. [AXP], Bank of America [BAC], Wells Fargo & Co [WFC].  All of the financial companies have see their current market prices plunge.  Perhaps he still sees large potential for investment returns in the long term for these companies.

American Express Co. has been a long time holding, and even at these levels if he cashes out it will likely be at a profit since he purchased them so long ago.  American Express is the most well known credit card company in the world, after the financial crisis, it will probably remain so.

Bank Of America is interesting because they have swallowed up Countrywide Financial, making them the largest mortgage lender in North America.  They also bought up investment firm Merrill Lynch making it now the world’s largest brokerage.
Current CEO Ken Lewis has had a history of making acquistions for BAC trying to expand the bank and gain market share from at the time giants Citigroup and JP Morgan.  In the last few years BAC acquired:
– FleetBoston Financial in 2004.
– credit card company MBNA in 2005.
– BankBoston’s operations in Brazil & Chilie 2006 (including BankBoston N.A. in Uruguay, together with credit card company OCA).
– The United States Trust Company from the Charles Schwab Corporation in 2006.
– ABN AMRO N.A. and LaSalle Bank Corporation in 2007.
The Countrywide & Merrill deals together with the ones in the past few years may make BAC emerge as the largest in the United States after the financial crisis.

Wells Fargo & Co is another interesting holding.  They have been known throughout history with a reputation as being very conservative and careful.  They avoided the mistakes that the other banks have made, that resulted in their collapse and the credit crisis.  However, they have also been acquring companies in the last year, but with very little making national headlines:
– insurance broker American Med-Scan in July 2008.
– Dallas based Century Bancshares Inc (Arkansas & Texas) in August 2008.
– the assets of Char Clark Associates Inc (Washington state, retail banking & insurance) in Sept 2008.
– the assets of Herder – Tarricone Associates (insurance brokerage in New Jersey) in Sept 2008.
The only deal to break national headlines was Wachovia in October 2008, and Prudential’s brokerage stake in Wachovia Securities in Dec 2008.  The Wachovia deal has been the topic of debate even among long time WFC investors, as it is a very large merger, and one that has caused Wells Fargo & Co to lose some money in the short term.  The long term results have yet to be seen, but one thing for certain is that Wells Fargo will now have a much larger financial presence when the financial crisis ends.

With the BAC and WFC acquisitions, Citigroup stands to lose the most in terms of eventual market share, and within several business segments (insurance, brokerage, retail banking).

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Another interesting note is that Berkshire did not reduce his holdings in any building or materials related companies, particularly as they have seen huge stock price declines.  There was no change in the holdings of Home Dept [HD], Lowes [LOW], or USG [USG].  Perhaps the largest reason is that they are the dominant players in their perspective industries.  In the short term those industries will experience considerable challenges.  But as we know, Buffett is a long term investor with the patience to see his investments grow from low points to high points.  In times like this, savvy investors plan and setup their investments.  We have yet to see Buffett’s setup play out.

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SEC Filing:
You can view the official SEC filing which discloses Berkshire Hathaway stock holdings here:

http://www.sec.gov/Archives/edgar/data/1067983/000095013409003064/v51307e13fvhr.txt
The filing does not differentiate between investments Berkshire Hathaway makes and investments its subsidiaries make, or investments Warren Buffett himself makes as the chairman and chief executive of the company.  Buffett usually makes his stock investments for Berkshire Hathaway through his insurance arms (Berkshire Hathaway Life Insurance Co. of Nebraska, Columbia insurance Co, GEICO, National Indemnity Co, Wesco, etc.).
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Although we can easily follow and copy people like Warren Buffett and their stock purchases and sales, it is much better to start learning the thought process and criteria.  One of the criteria is the concept of value.  Buffet’s teacher/mentor Benjamin Graham’s classic book The Intelligent Investor is available online from Amazon.ca/com. I have placed a link to the specific version/edition that I recommend below. There are a few editions out, but this one has the Introduction and Appendix written by Warren Buffet (informative extra commentary). Chapters/Indigo is sold out at the moment but I added a link to the audiobook. However, I find having it in textual format is better for referencing. This book is a must read for followers of Warren Buffet, and the best investment book I ever read.  It is a great starting point for stock investing.

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Thanks & Happy Investing!
The Investment Blogger!


Amazon.com
The Intelligent Investor: A Book of Practical Counsel

Amazon.ca
The Intelligent Investor: A Book of Practical Counsel




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