Warren Buffet (Berkshire Hathaway) Stock Portfolio – Update 2009 Q1

Warren Buffet’s Berkshire Hathaway (BRK.A / BRK.B) stock updates for the first quarter of 2009 (End of 3/31/2009):

Added to:

BNI [Burlington Northern Santa Fe]

– Berkshire again added to the second largest railroad in the US, increasing his holdings to 76,777,029 shares.  Buffett has been buying up the stock and has once mentioned that the fundamentals for railroads has become better.  Both Buffett and his teacher Benjamin Graham had once concluded that railroads were mostly unprofitable businesses. The change has likely come from the fact that most of the network has now been established and requires much less capital to maintain than to build as it did decades ago.  With the rise of the price of oil and energy, rail has become more important in transportation across the continent.

UNP [Union Pacific Corp.]
– Berkshire also added to this US railroad, increasing its holdings to 9,558,000 shares.

NLC [Nalco Holding Corporation]
– A small increase in the shares of the Naperville, Illinois-based integrated water treatment company was purchased, increasing its stake to 9,000,000 shares.  This was a new holding for Berkshire in Q4 2008.

JNJ [Johnson & Johnson]
– During the first quarter, Berkshire added back about 3.9M shares bringing its total to 32,508,891 shares.  Previously in Q4 2008, Berkshire reduced its stake considerably, by 32,995,757 shares (bringing the total to 28,611,591 shares), down from 61,607,348 shares.

This move caused large media and analyst criticism.  Some called him a “hypocrite” and “selling America”.  Around that time when the market fell to lows not seen in recent years, he called on Americans to invest in American companies and stocks.  Some even went as far to say that Buffett was calling on the public buy, so that he can sell, and sinisterly profit off the unaware public (at a time when they already lost so much money).  Now if we think about that, what would a 78 year old Billionaire, who controls a company that holds billions in cash, and is succession planning for his death (and planning to give most of his wealth to charity) ever need or care to do something like that?  Buffett has mentioned this quarter that the reduction was simply a move to increase and free up capital for other investment moves.  He made a considerable amount of bond & corporate debt purchases that yielded superior payments of 10% with warrants as well!  Rarely does quality corporate bonds, preferred stocks, and other debt instruments, have market price drops & other buying opportunities on a broad scale.  It was really a no brainer.  For example, many of the Wells Fargo preferred share series experienced massive market price declines and were yielding around 13-14% near March, now they are yielding around 7-8% again.


USB [US Bancorp]

– The company increased its holdings by about 2.2% to a total of 69,039,426 shares. In Q4 2008, Berkshire reduced the number of shares by 5,385,700 shares to a total of 67,551,426 shares.  This move also created a huge buzz by media and analysts, accusing Buffett of basically bailing out of the US financial system and America, while at the same time telling the American public to invest.  Again, Buffett mentioned this move was to free up capital, and recently praised the bank along with Wells Fargo.  Like Wells Fargo, USB has been busy buying smaller insurance companies as well as regional banks, but with quiet headlines.

WFC [Wells Fargo Co.]

– Berkshire increased its holdings by around 4.26% to a total of 302,609,212 shares. During the quarter Buffett continually praised and mentioned how much he liked the bank, during a time when the shares plunged down to the $8 range, as well as being surrounded in the bank stress test circus. See my May 4th 2009 article Buffett On Bank Stress Tests.  Buffett also believes that the Wachovia acquisition will greatly benefit Wells Fargo business.

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Reduced:

COP [Conoco Phillips]

– As Buffett has mentioned in his annual report and throughout the quarter, Berkshire reduced its stake in the oil giant to 71,228,096
down from 79,896,273 shares.  Buffett has mentioned  Berkshire will continue to reduce its holdings of this company.

CEG [Constellation Energy Group Inc.]
– Berkshire reduced its holding of the energy company to 14,828,207 shares. MidAmerican, a unit Berkshire Hathaway, agreed in September 2008 to pay $4.7B ($26.50/share), for Constellation Energy, which was close to bankruptcy. But in early December the French power company EDF unveiled a plan to pay $4.5B for 50 percent of the company’s nuclear assets, and give MidAmerican the option to sell it up to $2B more of non-nuclear assets.

KMX [Carmax]
– Again, reduced its stake in largest used car retailer 12,000,000 shares from 17,636,500 shares.

UNH [United Health Group]
– The holdings of the health insurer was reduced to 4,500,000 shares.

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Other comments:

IR [Ingersoll-Rand Company Ltd.]
– News reports (Reuters, etc) have mentioned that Berkshire sold off this holding.  From looking at the filing (link is provided at end of article) the news reports do not look to be correct.  The filing shows he still has 7,782,600 shares of the climate control and industrial technology company. There was not change in his holding that I can see.  If my information is incorrect, please do not hesitate to let me know.

IRM [Iron Mountain Inc.]

– The same news reports also mention that Berkshire sold off this holding as well.  Again, looking at the filing it does not look to be correct.  The filing shows he still has 3,372,200 (no change).

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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].  These companies are the dominant players in their perspective industries.  In the long term those industries might experience superior returns over their less dominant rivals.

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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/1067983/000095013409010823/a52403e13fvhr.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.  Buffet 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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Its easy to follow and copy Warren Buffet’s stock purchases & sales, after the fact.  But what do you think of learning his thought process and selection criteria.  One important criteria is the concept of value.  Buffet’s teacher/mentor Benjamin Graham’s classic book The Intelligent Investor discusses the concept of value and metrics an investor can look at.  It is available from Amazon.ca/com. I have placed a link to the specific version/edition that I recommend. 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 (and investing in general) the way Warren Buffett does.


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

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




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Feel free to post questions, comments, or topic suggestions.  Please also take the poll question on the sidebar to the right!

Thanks & Happy Investing!

The Investment Blogger © 2009

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