I’m a bit late on the update for Q3, which was filed 11/16/2009, but a lot has been happening with Berkshire Hathaway and Warren Buffett in the third quarter (end of 9/30/2009) and early this quarter (Q4). There has been lots of stock activity, as well as Buffett’s biggest deal involving the railroad Burlington Northern Santa Fe (BNI).
XOM [Exxon Mobil Corp.]
– Not really a new addition, since the Q2 SEC filing was amended to reveal 854,490 shares were purchased in its initial stake. In Q3, 421,800 shares were purchased bringing the total holdings to 1,276,290 shares. The entire holding is worth about $87.6M as of 9/30/2009.
– A new stake was purchased in Nestle, the world’s largest food maker. 3,400,000 ADR shares (American depositary receipts) were purchased in the 3rd quarter and was worth about $144.6M as of 9/30/2009. This is not much of a surprise since Nestle fits the profile of a company that Buffett looks for. It is the most dominate in its industry, with international brand recognition, performs well, and is in great financial condition. Why didn’t Buffett buy shares earlier? It was very likely that he wanted to take advantage of opportunities that came up earlier and would not be around too long (i.e. the corporate debt deals, entire acquisitions, mergers, etc.).
Republic Services Inc. [RSG]
– A new stake was purchased in Republic Services Inc., one of the largest solid waste service providers. Last December (2008) the company merged with Allied Waste Industries. 3,625,000 shares were purchased, with a market value of $96.3M as of 9/30/2009. The holding is about 0.17% of the portfolio.
The Travelers Companies [TRV]
– A small initial stake of 27,336 shares worth about $1.35M on 9/30/2009 was purchased. The company is involved in providing a range of insurance products and services.
WMT [Walmart Stores Inc.]
– This quarter, Berkshire added significantly to the holdings of this retailer, increasing its position by 89.71% to 17,892,342 shares. This brings its total to 37,836,642 shares. Its value as of 9/30/2009 was $1.86B.
WFC [Wells Fargo Co.]
– Berkshire increased its holdings in the bank by 10,746,445 shares (3.55%), which brings the total to 313,355,657 shares. Buffett has been very open about WFC being his favorite bank and one of his favorite long time holdings. In Q1 Berkshire also increased its holdings of WFC by around 4.26%. On 9/30/2009 the value of its holdings in WFC was approximately $8.8B!
COP [Conoco Phillips]
– As Buffett has mentioned in his 2008 annual report and in Q1, Berkshire will continue to reduce its stake in the oil giant. This quarter, Berkshire reduced its holdings by another 10.94%, or 7,055,591 shares. Its remaining shares total 57,430,168. The Q2 reduction left Berkshire with 64,485,759 shares. In Q1 it had 71,228,096 shares.
MCO [Moody’s Corp.]
– The total Q3 filing shows that during the entire third quarter it sold 8,780,688 shares, reducing its holding by 18.29%. It had 39,219,312 shares left at the end of the quarter. Berkshire has been reducing its holdings continually since Q2.
In the current quarter (Q4), filings indicate that Berkshire has further reduced its holdings. On 12/7/2009 it reduced its stake by 2,000,946 shares and on 12/8/2009 another reduction of 704,346 shares. Its current position is at 35,357,393 shares.
See previous Berkshire article on reduction of Moody’s shares:
NRG [NRG Energy]
– The holdings of the power and energy company was reduced by 16.67%, a decrease of 1,200,000 shares to 6,000,000 shares. On 9/30/2009 the remaining holding was worth $169.1M.
STI [SunTrust Banks Inc.]
– The holdings of this bank was reduced by 3.90%, a decrease of 124,822 shares to 3,079,778 shares. On 9/30/2009 the remaining holding was worth $69.4M.
WLP [WellPoint Inc.]
– The holdings of the health benefits company was reduced by another 3.02% or 105,787 shares to 3,394,213 shares, down from 3,500,000 shares in Q2. In Q2 Berkshire had already reduced its holdings by 26.74%.
ETN [Eaton Corp]
– Berkshire sold off its remaining stake in the industrial parts and systems manufacturer. It sold 2,000,000 shares. In Q2 it sold 1,200,000 shares. Interestingly, this was a new holding one year ago from 2008 Q3, and is considered a short holding period for Berkshire/Buffett.
TMK [Torchmark Corp.]
– Berkshire sold off its remaining 2,823,879 shares in the company.
WBC [Wabco Holdings Inc.]
– Berkshire sold off its remaining stake in the vehicle parts and control system manufacturer. It sold 2,700,000 shares. Berkshire’s initial stake was made in 2007 Q3.
The Burlington Northern Santa Fe (BNSF) Deal:
No changes were reported in the Q3 filing regarding the railroads. However from an interview on The Charlie Rose Show, that was broadcast on 11/13/2009, Buffett stated that Berkshire had already sold the railroads and “done that just to facilitate the transaction”. Buffett also had this to say regarding the two railroads he owned: “I think they’re good investments, but I would have held them if this hadn’t happened”.
SEC Form 425 filed on 11/16/2009 containing statements from The Charlie Rose Show can be found here:
NSC [Norfolk Southern Corp]
– At the end of Q3 Berkshire held 1,933,000 shares with a value of $83,3M as of 9/30/2009.
UNP [Union Pacific Corp.]
– At the end of Q3 Berkshire held 9,558,000 shares with a value of $497.6M as of 9/30/2009.
The Burlington Northern Santa Fe Corp deal values BNSF (BNI) at $34B. It is is $100/share , 31.5% premium, and 18 times its estimated 2010 earnings. Buffett agreed to a 50-for-1 split of Berkshire Class B stock for the deal as well. Buffett has been long opposed to stock splits. The deal is Warren Buffett’s largest acquisition for Berkshire Hathaway Inc. It is not at all surprising given Buffett’s historical behaviour and investment style, and was only a matter of time. Berkshire had been acquiring a very large number of shares since 2007 Q2 and continued to do so through 2009, owning 23% of the company.
On numerous occasions he talked about the railroad industry and railroads as a good investment, whereas in the past decades they would not have been. They have become more efficient, and the groundwork has already all been laid. The increase in the price of oil in recent years, and environmental pressures, have made railroads an attractive investment.
” a train replaces 280 trucks on the road. It emits far less into the atmosphere that’s damaging than trucking, and it moves— I’m talking about the whole rail industry— it moves 40 percent of the goods.”
“Well, I felt it was an opportunity to buy a business that is going to be around for 100 or 200 years, that’s interwoven with the American economy in a way that if the American economy prospers, the business will prosper. It is the most efficient way of moving goods in the country. It is the most environmentally friendly way of moving goods, and both those things are going to be very important. “
You can view the 11/24/2009 SEC filing which discloses Berkshire Hathaway stock holdings here:
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.).
I always mention to people who are investing or following Warren Buffett’s stock purchases/sales, that it is easy to follow and copy his moves. However, we only learn of his actions months after it has been done (SEC filing is always a bit later for Berkshire Hathaway), and we would never know for sure why the move was made or what other reasons are behind the idea. Are the attractive features that we see in BNSF the same as what he sees? Did he sell those companies because he no longer likes something about the businesses? Could they be moves to free up capital or reduce taxes? What investment need does a purchase fill in his overall strategy for the company?
Buffett is a teacher at heart, having taught courses in University, just like his own mentor Benjamin Graham did. But he also teaches his shareholders by publishing his principles and knowledge in his annual reports and letters to shareholders. Investing and investment choices depend largely on the plan, situation, temperament, knowledge, and other characteristics of the individual investor.
Buffett recommends investors who want to learn to read his current and past annual reports from the Berkshire Hathaway website. They have a huge amount of information in them. He also suggests to read books that he specifically endorses and recommends. The following is list of those books (I’ve taken his advice and have read these myself as well):
Thanks & Happy Investing! — The Investment Blogger © 2009