"Tracking Warren Buffett’s Berkshire Hathaway Portfolio – Q1 2015 Update"
"Warren Buffett's US long stock portfolio decreased ~2% from $109.37B to $107.13B this quarter.Berkshire Hathaway's largest three holdings are at ~50% of the entire portfolio.Berkshire Hathaway significantly increased Phillips 66, Precision Castparts, and Twenty First Century Fox while reducing National Oilwell Varco during the quarter.This article is part of a series that provides an ongoing analysis of the changes made to Berkshire Hathaway’s US stock portfolio on a quarterly basis. It is based on Warren Buffett’s regulatory  filed on 05/15/2015. Please visit our  article series for an idea on how his holdings have progressed over the years and  highlighting the moves during Q4 2014.During Q4 2014, Berkshire Hathaway’s (BRK.A) (BRK.B) US long stock portfolio decreased ~2% from $109.37B to $107.13B.  The top-five positions account for over two-thirds of the portfolio: Wells Fargo (23.88%), Coca Cola (15.14%), International Business Machines (11.92%), American Express (11.06%), and Wal-Mart (4.64%). There are 45 individual stock positions many of which are minutely small compared to the overall size of the portfolio.() are a treasure trove of information and are a very good source for anyone starting out on individual investing.New stakes:None.Stake Disposals:None.Stake Increases:International Business Machines (IBM): IBM is Buffett’s third-largest stake at 11.92% of the portfolio. The original position was purchased in Q3 2011 at prices between $157.54 and $185.21. Since then, the stake has gone up by almost 40% through periodic purchases. Last five quarters have seen minor buying and the stock currently trades at $173. Berkshire’s cost-basis on IBM is at around $170. Buffett is very bullish on IBM and controls ~8% of the business. For investors attempting to follow Buffett, IBM is a very good option to consider for further research.Deere & Company (DE): DE stake was first acquired in Q3 2012 when around 4M shares were purchased at prices between $75.11 and $82.70. The position remained steady until Q3 2014 when an additional ~3.6M shares were purchased at prices between $82 and $91.38 - Berkshire avoided disclosing DE stake in Q3 2014 by making use of the “”. Last quarter, the position was increased by another 125% at prices between $80 and $91. This quarter saw a marginal increase. The stock currently trades at $89.13. The stake is at 1.42% of the portfolio and Buffett controls ~5% of the business.Phillips 66 (PSX): The 2% of the US long portfolio PSX stake as of Q4 2013 was reduced to a 0.71% stake in Q1 2014 at prices between $70.67 and $80.35. The position was further reduced by one-third the following quarter at prices between $76.69 and $86.33. This quarter saw an about-turn: ~14% increase at prices between $59 and $80. The stock currently trades at $81.05. Berkshire’s cost-basis on PSX is much lower.Precision Castparts (PCP): PCP has seen steady buying in the last two quarters. Q4 2014 saw a ~37% increase at prices between $218 and $243 and this quarter saw another ~47% increase at prices between $200 and $241. The stock currently trades at $216. The stake is still very small at 0.82% of the US long portfolio.Twenty First Century Fox (FOX) (FOXA): FOXA is a minutely small 0.20% of the US long portfolio stake established last quarter at prices between $31.77 and $39.01 and increased by ~31% this quarter at prices between $32.80 and $38.40. The stock currently trades at $33.99.US Bancorp (USB): USB, a 3.41% stake has been in the portfolio since 2006. The position was tripled during the 2007-2009 timeframe and since then was reduced by around 15% overall as of EOY 2012. In Q2 2013, ~17M shares were purchased at prices between $32.27 and $36.15. This quarter saw a 4.57% increase at prices between $40.94 and $45.12. Berkshire’s cost-basis on USB is ~$32 and the stock is trading well above that price at $43.93. Buffett controls 4.7% of the business.Wells Fargo & Co. (WFC):  WFC is Buffett’s largest stake at 23.88% of the US long portfolio, well ahead of Coca Cola (KO) which is at 15.14%. This quarter saw a ~7M share stake increase at prices between $50.72 and $56.17. The previous significant activity was in Q2 2013: over 18M shares were purchased at the time at prices between $34.66 and $38.20. The stock currently trades at $55.52. Berkshire’s average cost-basis is at around $25.Stake Decreases:Bank of New York Mellon Corp (BK):  BK is a 0.78% of the US stock portfolio stake. The bulk of the original position was purchased in Q2 2012 at prices between $19.51 and $24.67. The stake was increased by 30% in Q2 2013 at prices between $26.70 and $30.55 and since then had been kept relatively steady. Last three quarters have seen a combined ~16% reduction at prices between $35.95 and $41.53. The stock currently trades at $43.09.Charter Communications (CHTR): CHTR is a 1.08% of the US long portfolio position. It was established in Q2 2014 at prices between $118 and $158 and more than doubled in Q3 2014 at prices between $151 and $164. Last quarter saw a further ~25% increase at prices between $140 and $170. This quarter saw a minor ~3.5% reduction. The stock currently trades at around $181.National Oilwell Varco Inc. (NOV):  NOV is a minutely small 0.09% of the US long portfolio stake.  The original position was established in Q2 2012 at prices between $60 and $80.67. It was increased by ~19% in Q2 2013 at prices between $64.14 and $71.57. Last four quarters have seen a combined ~78% reduction at prices between $47.46 and $65.53. The stock currently trades at $51.27.NOTE: The implied performance of this position by the prices quoted above is negatively skewed because of the effect of National Oilwell Varco’s NOW Inc. spinoff. The terms called for NOV shareholders to receive one share of NOW Inc. for every four shares of NOV held.Liberty Global PLC (LBTYA) (LBTYK): The minutely small 0.25% position in Liberty Global established in Q4 2013 at prices between $37.50 and $44.50 (adjusted for the 03/2014 stock-split) was increased significantly to a 0.57% position in Q1 2014 at prices between $40.37 and $46. The stake was further increased by ~17% in the following quarter at prices between $38.49 and $45.61. Last two quarters had seen marginal buying while this quarter saw a marginal reduction. The stock currently trades at $49.43 and the stake is at 0.84% of the US long portfolio.MasterCard Inc. (MA), Viacom (VIAB), Visa Inc. (V), & Wabco Holdings (WBC): These are very small (less than ~0.60% of the US long portfolio each) stakes that were decreased marginally this quarter. Berkshire controls 6.6% of Wabco Holdings.Kept Steady:Restaurant Brands International (QSR): QSR is a 0.30% of the US long portfolio position established last quarter at prices between $35 and $42. The stock currently trades just outside that range at $42.14. The stock started trading in December 2014 following a merger/rename transaction between Tim Hortons and Burger King Worldwide - QSR has already increased ~22% since the first day of trading (12/10/2014). There was heavy activist involvement previously and the latest filing show Bill Ackman directly owning 38M shares (18.80% of business). Berkshire’s stake in the business is at around 4.2%.Suncor Energy (SU): SU is a small 0.61% of the US long portfolio position first purchased in Q2 2013 at prices between $27.40 and $32. Last year saw a ~24% increase at prices between $27.74 and $43.08. The stock currently trades at $30.42.DaVita Inc. (DVA):  DVA is a 2.93% of the US long portfolio position that was aggressively built-up over several quarters: the original stake was doubled in Q1 2012, increased by over 50% in Q2 2012, 24% in Q4 2012, and an additional 16% in Q1 2013. There has been marginal buying since. The bulk of the stake build-up happened at prices between $30 and $49. The stock currently trades at around $81.48. In May 2013, Berkshire’s Ted Weschler signed an accord with DVA, limiting open-market purchases to 25% of the company- the position is currently at 17.9% of the business.DIRECTV (DTV):  DTV is a 2.49% position first purchased in Q3 2011. The bulk of the current stake was purchased in Q4 2011 at prices between $40.60 and $47.87. In Q2 2014, the position was reduced by around one-third at prices between $74 and $88.25. In Q3 2014, the pattern reversed: a ~28% stake increase at prices between $83.55 and $87.72 and that was followed with a ~5% increase last quarter at prices between $82.56 and $87.89. The stock currently trades at around $91.46. AT&T (T) is in the process of acquiring DTV in a $95 per share cash-and-stock deal ($28.50 per share cash and the rest in stock protected with a collar).General Motors (GM):  GM is a 1.44% of the US long portfolio position that was first purchased in Q1 2012 at prices between $21 and $30. The stake was increased by 60% in Q2 2013 at prices between $27.53 and $35.03.  Q1 2014 saw a 25% reduction at prices between $34 and $41 and in the following quarter there was an about-turn: 9.86% increase at prices between $31.93 and $37.09. Q3 2014 saw another ~21% increase at prices between $31.94 and $37.97 and last quarter saw a marginal increase. The stock currently trades at $34.91.American Express (AXP), Coca Cola (KO), and Procter & Gamble (PG):  These are very large stakes that were kept steady during the last two years. Buffett has said these positions will be held “permanently”. Berkshire’s cost-basis on AXP, KO, and PG are at around $8.49, $3.25, and $6.40 and ownership stakes are at 14.8%, 9.2%, and 1.9% respectively.Chicago Bridge & Iron (CBI): CBI is a 0.57% of the US long portfolio position that was increased by 47% in Q2 2013 at prices between $50.92 and $63.75. Last quarter saw a 12% stake increase at prices between $65.51 and $87.65. The original position was purchased in Q1 2013 at prices between $46 and $62. The stock currently trades at $55.01.  Berkshire controls 9.9% of the business. For investors attempting to follow Berkshire, CBI is a good option to consider for further research.Goldman Sachs (GS): GS is 2.22% of the US long portfolio stake established in Q4 2013. Berkshire Hathaway received $5B worth of warrants to buy GS stock during the financial crisis (October 2008) at a strike price of $115 (43.5M shares) that was to expire October 1, 2013. Buffett exercised the right before expiry to start this long position. GS currently trades at $203.Liberty Media (LMCA) (LMCK): LMCA is a petite 0.43% stake first purchased in Q4 2011. It was increased by ~75% in Q1 2012 and roughly doubled the next quarter. Q2 2014 saw a ~24% stake reduction and since then has been kept steady.Moody’s Inc. (MCO):  MCO is a 2.39% of the US long portfolio stake that was decreased by 14% in Q2 2013 at prices between $52.23 and $68.62. The stock currently trades at $110. Buffett’s cost basis is ~$10 and so he is sitting on large long-term gains on the ten-bagger. The stock returned around 48% in 2013, 23% in 2014, and another ~13% so far this year. Berkshire controls 11.5% of the business.USG Corporation (USG):  USG is a very long-term holding and there was a significant 21.39M share stake increase in Q4 2013 due to conversion of notes at $11.40 per share - Berkshire acquired the convertible notes during the financial crisis (2/2009) and USG opted to redeem them on 12/16/2013. Q2 2014 saw a ~11.5% stake increase at prices between $29.57 and $33.16. The stock currently trades at $28.10. Buffett controls around 27% of the business and overall cost-basis is at around $19.Verisign Inc. (VRSN): VRSN was first purchased in Q4 2012 at prices between $34.15 and $49.48. The position was more than doubled in Q1 2013 at prices between $38 and $48 and another one-third the following quarter at prices between $44.39 and $49.27. Q1 & Q2 2014 also saw a combined ~17% increase at prices between $47 and $63. The stock currently trades at $64.09. The current position is at ~10% of the business although as a percentage of the portfolio the stake is still very small at 0.81%.Verizon Communications (VZ): VZ is a small 0.68% of the US long portfolio position established in Q1 2014 at prices between $46 and $49.30. It was increased by ~36% the following quarter at prices between $45.94 and $50.05. The stock currently trades at $49.79.Wal-Mart Stores (WMT):  WMT stake was first purchased in 2005. It has since been built up to a 4.64% position (top-five stake). The position was increased by 4% in Q1 2013 at prices between $68 and $75 and another 17% in Q1 2014 at prices between $72.66 and $78.91. The stock currently trades at $79.24. Berkshire’s cost-basis on the position is at around $56.Costco Wholesale (COST), General Electric (GE), Graham Holdings (GHC), Johnson & Johnson (JNJ), Kraft Foods Group (KRFT), Lee Enterprises (LEE), M&T Bank (MTB), Media General (MEG), Mondelez International (MDLZ), NOW Inc. (DNOW), Sanofi (SNY), Torchmark Corporation (TMK), United Parcel Service (UPS), Verisk Analytics (VRSK), : These are minutely small positions (less than ~0.5% of the portfolio each) kept steady this quarter. Although the relative size of the position is small, it should be noted that Berkshire controls 3.6% of Media General. The DNOW position was established in Q2 2014 as a result of National Oilwell Varco’s spin-off of its distribution business. Also, per the , Berkshire has a $2.03B position in Sanofi - so in addition to the 13F securities listed in the spreadsheet, Berkshire also owns Sanofi securities listed in Euronext Paris. The only other large non-US individual stock position reported in the AR is Munich RE at $4B (11.8% of the business).Note: Tesco plc (TSCDY) was another position listed in the 2013 annual report. Berkshire liquidated that stake in 2014: sold 301M shares and realized $444M in losses.The spreadsheet below highlights changes to Berkshire Hathaway’s US stock holdings in Q1 2015:: Book Value increased from $146,186 to $146,963 per share. Float is down marginally from $84B to $83.5B.11/14/2014: P&G Duracell deal with Berkshire Hathaway - .:Berkshire did a few deals whereby ownership stakes in businesses were exchanged for parts of operating businesses: Phillips 66 and Graham Holdings shares were exchanged in tax-free transactions. Also, they have a contract with Procter and Gamble to acquire Duracell the same way.Average cost-basis info: AXP - $8.49, KO - $3.25, DVA - $45.53, DE - $81.20, DTV - $59.06, GS - $57.42, IBM - $170.93, MCO - $10.05, Munich Re - $149.05, PG - $6.40, Sanofi - $77.63, USB - $31.30, USG - $19.27, WMT - $56.09, WFC - $24.55.Ownership stake increases due to buybacks: KO: 9.1% to 9.2%, AXP: 14.2% to 14.8%, WFC: 9.2% to 9.4%.Tesco plc exit: EOY 2012 - held 415M shares. Sold 114M shares in 2013 for profit of $43M. Sold remaining 301M shares in 2014 and realized after-tax losses of $444M - about one-fifth of 1% of Berkshire’s net worth.Note on QSR: for some reason, Google Finance brings up the TSE quotes by default. So, be careful when updating the pricing info. A user pointed out this mistake in my Q4 2014 update and I corrected the article.OFB Post - Berkshire Hathaway 2014 Annual Letter & Report - NotesThe Book Value (BV) of Berkshire Hathaway per  is $146,186 per BRK.A share or $97.46 per BRK.B share compared to $134,973 per BRK.A share or $89.98 per BRK.B share as of last year. The stock currently trades at $147.41 or 151.25% of BV - the premium over book value has gone up substantially over the last year as that percentage was at 128.67% ($115.78 share price) this time last year. Buffett’s repurchase criterion is 120% of BV or $116.95. The premium to book value has widened as the stock returned 27% over the last year compared to book value growth of 8.3%. Net earnings are at $12,092 per BRK.A share for a ttm-PE of 18.29. This is compared to a ttm-PE of 14.66 last year and 16.93 the year before.Historical BV Growth: CAGR 1965-2014 at 19.4% vs 9.9% for S&P500. For 2014, BV-growth was 8.3% for Berkshire Hathaway compared to 13.7% for S&P 500.Earnings: $12,092 in 2014 vs $11,850 in 2013 and $8,977 in 2012 per BRK.A share.  2% YOY increased compared to 32% YOY last year. The increases are attributable to impressive cash generation of its operating entities. It was also helped by realized investment gains (after tax) of $3.3B in 2014, $4.3B in 2013, and $2.2B in 2012. PE is 18.29 including investment gains - at this time last year, PE was at 14.66.  Roughly a third of Berkshire earnings are realized gains historically and so the last few years have shown a divergence on that count.Intrinsic Business Value:  The two quantitative components of value:Per-share investments grew 8.4% to $140,120 in 2014 - lower compared to 13.6% for 2013. CAGR since 1970 is at 19% but was only 6.6% in the 2000-2010 time period - long-term growth is stunning but lumpy over shorter timeframes, andPre-tax earnings from businesses other than insurance and investments increased 19% to $10,847 - higher compared to 12.8% for 2013. CAGR since 1970 is at 20.6% and 20.5% in the 2000-2010 time period.The third is a measure of the efficacy with which retained earnings will be deployed in the future - the subjective component.Growing operating earnings is the main focus. Berkshire did a few deals whereby ownership stakes in businesses were exchanged for parts of operating businesses: Phillips 66 and Graham Holdings shares were exchanged in tax-free transactions. Also, they have a contract with Procter and Gamble to acquire Duracell the same way.Plans to continue building Berkshire’s per-share intrinsic value by:Focusing on increasing earning power at subsidiaries both organically and through bolt-on acquisitions,Growth of equity investments,Repurchasing when there is meaningful discount to intrinsic value,Making acquisitions while rarely issuing new shares.Earnings at the non-insurance businesses: Pre-tax earnings at $17.5B in 2014 compared to $15.5B in 2013. One bad news: $6B capex projected for BNSF in 2015.“Powerhouse Five” - Berkshire Hathaway Energy (BHE - formerly MidAmerican Energy), BNSF, IMC (Iscar), Lubrizol, and Marmon - $12.5B of the earnings is from these five businesses.This year, they contracted for 31 bolt-on acquisitions - to cost $7.8B in aggregate - Duracell to close H2 2015 and to be placed under Marmon.BHE & BNSF are capital intensive with a huge amount of regulated assets partially funded by long-term debt. The debt coverage is very good (8:1 for BNSF currently) even under worst-case assumptions about economic conditions - further, the coverage ratios are based on pre-tax earnings - EBITDA to interest is the commonly used measure but that is flawed as it ignores the capital-intensive nature of the business.Manufacturing, service & retail operations: ROC at 18.7% after-tax on $24B of tangible assets.Finance Products - ~31K homes sold - $13B mortgage portfolio. Leasing businesses benefit as manufacturing is in-house in some cases: this reduces the cost-of-inventory compared to retail pricing which will filter over to the income statement (smaller annual depreciation charges) in coming years.Underwriting profit at the insurance businesses stood at $2.7B for 2014.Van Tuyl Automotive dealerships acquisition: ambition is to grow it to multiples the size of $9B of sales at Van Tuyl currently.3G Capital Partnerships: Successful Heinz partnership and participation in the Tim Hortons acquisition by Burger King in a financing role. They are also conducive to more partnerships with 3G, Mars, Leucadia, and others.Co-Managers: Todd Combs and Ted Weschler invested $7B each and they outperformed Buffett in 2013. For 2014, their roles were expanded to also include running businesses - they took over as Chairman of one business each - combined, those businesses are very small earning around $100M annually - Buffett’s way of developing a deep-bench!Long-term economic goal: maximize average rate of gain in intrinsic business value on a per share basis. Preference is to own a diversified group of businesses with consistent above-average ROC and second choice is to own parts of such businesses.Look-through earnings relevance: “Undistributed earnings of our investees, in aggregate, have been fully as beneficial to Berkshire as if they had been distributed to us”. So,It is preferable to purchase $2 of earnings that are not reportable rather than $1 of reportable earnings for the same acquisition cost, andLook-through earnings realistically portray yearly gain from operations.“Big-four investments” (AXP, KO, IBM, WFC) - Berkshire’s share of their earnings was $4.7B - this is compared to the $1.6B dividends that is reported. But, since these are excellent businesses, the unreported $3.1B in earnings are as valuable as the $1.6B reported.Use of leverage: “We use debt sparingly and, when we do borrow, we attempt to structure our loans on a long-term fixed-rate basis”Selling businesses: No interest in selling good businesses Berkshire owns. Sub-par businesses are also not sold as long as they are able to generate at-least some cash and managers/labor relations are good. Capex decisions for the latter are made in a much more cautious fashion compared to the former - it is unlikely that sub-par businesses will see increased profitability with increased spending.BV growth vs S&P 500 Performance Comparison: While this comparison is shown in the first page of the Annual Letter, it has become less meaningful over time. The reasoning has to do with how Berkshire’s business structure has evolved: equity holdings tend to move with S&P 500 and that is now a much smaller portion of overall value. Also S&P 500 gains are reported at 100% while Berkshire’s realized gains get reported at 65% because of taxes.Also, there is another major shortcoming with this comparison: The carrying value of the businesses that are controlled by Berkshire is much more than their carrying value and so the BV far understates Berkshire’s Intrinsic Value. But, IV by definition (discounted value of cash that can be taken out during the remaining lifetime) is an estimate and so is not quoted in any of the releases.Below is a YoY comparison of Berkshire Hathaway's largest equity investments:Exxon Mobil (XOM) and Tesco plc (TSCDY) are not in the list as they were both sold-out. Phillips 66 (PSX) is not in the list as the shares held were exchanged for an operating business acquired from PSX in a tax-free-transaction. Davita HealthCare Partners (DVA), Deere &amp; Company (DE), and USG Corporation (USG) are new to this list this year as those holdings and their values have grown to be among his top investments - not because they are new positions.Below is a comparison of Berkshire Hathaway's asset distribution in the "Insurance & Other" area for the last five years:The equity exposure is at just over 53% - it is near the highs reached last year. So, it is apparent that Buffett is not that concerned about valuation of his holdings despite the increases in the last few years.Expects stocks to outperform with lesser risk over the long-term: Vast out-performance of stocks versus other securities (treasuries, etc.) historically can be traced back to the fact that currency-denominated-securities are far less volatile but higher risk (purchasing power reduction of currencies over time constantly works against you). This is the opposite of what is taught in business schools - volatility is synonymous with risk. Vast majority of investors should have a long-term (lifetime) orientation - the focus should be on increasing purchasing power over time - for that, partial ownerships in a diversified set of businesses (stocks) purchased over time is far less risky compared to currency-denominated options.Conglomerate Advantage: Conglomerates receive a bad rap mainly because of CEO dishonesty and/or incompetence: many CEOs go for easy ways out - buying low-quality businesses with low-PE and projecting per-share-earnings growth is a classic but deeply flawed strategy. If done right, conglomerates can develop a deep competitive advantage over time: the CEO does the role of capital allocator amongst the various businesses and his focus is on doing it in the most optimal way - compare that to a declining business where it is much more difficult to redeploy capital (would involve admitting mistakes made, firing associates and probably the current CEO as well, etc.) into unrelated businesses (would involve hiring expensive “money shufflers” - hiring experts in the field, investment bankers, lawyers, accountants, etc.).() are a treasure trove of information and are a very good option for anyone starting out on individual investing. In this year’s letter Warren Buffett recommended two books:,.To learn more about how to profit from a strategy of cloning super-investors, check out our book .Note: 13G/13D/A updates: MEG - 4.65M shares - 3.6%, CBI - 10.7M shares - 9.9%. Both consistent with 13F.Note: AT&T DTV acquisition terms: DIRECTV shareholders will receive $95.00 per share under the terms of the merger, comprised of $28.50 per share in cash and $66.50 per share in AT&T stock. The stock portion will be subject to a collar such that DIRECTV shareholders will receive 1.905 AT&T shares if AT&T stock price is below $34.90 at closing and 1.724 AT&T shares if AT&T stock price is above $38.58 at closing. If AT&T stock price at closing is between $34.90 and $38.58, DIRECTV shareholders will receive a number of shares between 1.724 and 1.905, equal to $66.50 in value. - See more at:http://about.att.com/story/att_to_acquire_directv.html#sthash.xOGBWTHj.dpuf"