"Tracking Warren Buffett’s Berkshire Hathaway Portfolio – Q1 2018 Update"
"Berkshire Hathaway's 13F stock portfolio value decreased from $191B to $189B this quarter.Their largest three holdings are at ~45% of the entire portfolio.Berkshire Hathaway increased Apple, Monsanto, and Teva while reducing Phillips 66.This article is part of a series that provides an ongoing analysis of the changes made to Berkshire Hathaway’s 13F stock portfolio on a quarterly basis. It is based on Warren Buffett’s regulatory  filed on 05/15/2018. Please visit our  article series for an idea on how his holdings have progressed over the years and  for the moves in Q4 2017.During Q1 2018, Berkshire Hathaway’s (BRK.A) (BRK.B) 13F stock portfolio value decreased marginally from $191B to $189B. The top five positions account for ~65% of the portfolio: Apple Inc., Wells Fargo, Bank of America, Kraft Heinz Co., and Coca Cola. There are 43 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:International Business Machines (IBM): The original IBM position was purchased in Q3 2011 at prices between $158 and $185. As of Q4 2016, the share count had gone up by almost 40% through periodic purchases. There was an about-turn in Q1 2017: ~21% selling at prices between $166 and $182 and that was followed with another ~16% reduction in early May at prices between $150 and $160. H2 2017 saw the stake almost sold out at prices between $140 and $162. The stock currently trades at ~$144. The minutely small position that remained was eliminated this quarter.Note: Berkshire’s cost-basis on IBM was ~$170 per share.Graham Holdings (GHC): The minutely small 0.03% position in GHC was disposed this quarter.Stake Increases:Apple Inc. (AAPL): AAPL is the largest 13F portfolio stake at 21.27%. It was established in Q1 2016 at prices between $93 and $110 and increased by ~55% the following quarter at prices between $90 and $112. Q4 2016 saw another ~275% increase at prices between $106 and $118 and that was followed with a stake doubling in January 2017 at prices between $116 and $122. There was another ~23% increase last quarter at prices between $154 and $176 and that was followed with a ~45% increase this quarter at prices between $155 and $182. The stock currently trades at ~$186. Berkshire Hathaway owns ~4.9% of the outstanding shares of Apple Inc.Note: As of Q4 2017, Berkshire’s overall cost-basis on Apple was ~$126 per share.US Bancorp (USB): The 2.43% USB stake has been in the portfolio since 2006. The original position was tripled during the 2007-2009 timeframe. It was then kept relatively steady till Q2 2013 when ~17M shares were purchased at prices between $32 and $36. Berkshire’s cost-basis on USB is ~$32 and the stock is now at $51.12. There was a ~4% increase this quarter.Bank of New York Mellon Corp (BK):  BK is a 1.70% of the 13F portfolio stake. The bulk of the original position was purchased in Q2 2012 at prices between $19.50 and $25. The stake was increased by 30% in Q2 2013 at prices between $26.50 and $30.50. The five quarters thru Q3 2015 had seen an about turn as there was a combined ~20% reduction at prices between $36 and $45. Q1 2017 saw a ~50% increase at prices between $43.50 and $49 and that was followed with another similar increase the following quarter at prices between $46 and $51. There was a ~20% further increase last quarter at prices between $51 and $55. The stock currently trades at $56.89. Berkshire’s cost-basis on BK is ~$42 per share. There was a ~2% stake increase this quarter.Delta Air Lines (DAL): DAL was a very small 0.19% position in Q3 2016. The stake saw a whopping ~850% increase in Q4 2016 at prices between $39 and $52. The stock currently trades at $52.37 and the stake is now at 1.55% of the portfolio. There was a marginal increase this quarter.Note: Berkshire controls ~8% of DAL.Monsanto Company (MON): The 1.17 % MON position was established in Q4 2016 at prices between $98 and $106 and the stock currently trades at ~$125. In September 2016, Bayer AG (BAYRY) agreed to acquire Monsanto in a $128 per share cash deal. The last two quarters had seen a combined ~46% stake increase at prices between $115 and $122 and that was followed with a ~62% increase this quarter at prices between $116 and $124.Teva Pharmaceuticals (TEVA): TEVA is a very small 0.37% of the portfolio stake established last quarter at prices between $11.20 and $19.33 and more than doubled this quarter at prices between $16.50 and $22. The stock currently trades at $20.30.Stake Decreases:Wells Fargo & Co. (WFC):  WFC is Buffett’s second-largest stake at 14.54% of the 13F portfolio. Recent activity follow: around 9M shares were sold in Q2 2017 at around $53 per share to bring the ownership stake below the 10% threshold. The stock currently trades at $54.75. Berkshire’s cost-basis is at ~$24.50. Last three quarters have seen marginal trimming.Phillips 66 (PSX): PSX is a 2.32% of the portfolio stake. It is a long-term position. As of Q4 2014, the stake was very small at ~0.5% of the portfolio (~6.5M shares). The bulk of the current stake was built in Q2 & Q3 2015 at prices between $70.50 and $84.50. In February, it was  that Phillips 66 agreed to repurchase 35M shares from Berkshire at $93.725 per share. Berkshire indicated the transaction’s sole purpose was to eliminate additional regulatory requirements that come with ownership stake above 10%. The stock currently trades at $118.Note 1: Berkshire’s cost-basis as of Q4 2017 was $78.31.Note 2: Berkshire avoided disclosing PSX stake in the original Q2 2015 13F by making use of the “”. An amendment filed on 9/4/2015 disclosed the huge stake build up. Berkshire controlled ~16% of PSX at the time.Charter Communications (CHTR): CHTR is a 1.35% of the portfolio position. It was established in Q2 2014 at prices between $118 and $158 and more than doubled the following quarter at prices between $151 and $164. Q4 2014 saw a further ~25% increase at prices between $140 and $170. In Q2 2015, the position was again increased by ~42% at prices between $168 and $193 and that was followed with another ~21% increase the following quarter at prices between $167 and $195. Q2 2016 saw a ~10% trimming at prices between $198 and $233. The stock currently trades at ~$270 compared to Berkshire’s cost-basis of ~$178. There was a ~10% selling in Q4 2017 and that was followed with a ~3% trimming this quarter.United Continental Holdings (UAL): A minutely small 0.18% UAL position as of Q3 2016 saw a huge ~540% increase in Q4 2016 at prices between $52.50 and $76. It currently goes for $68.03. The stake is at ~1% of the portfolio. There was marginal selling this quarter.Note: Berkshire controls ~9% of UAL.Liberty Global PLC (LBTYA) (LBTYK): The position was established in Q4 2013 at prices between $37.50 and $44.50 (adjusted for the 03/2014 stock-split) and increased significantly in the following two quarters at prices between $38.50 and $46. The three quarters thru Q1 2016 had also seen a combined ~30% increase at prices between $30 and $50. Q2 2016 saw a ~17% further increase at prices between $27 and $39. The stock is now at $29.08 and the stake is at 0.42% of the 13F portfolio. There was a ~7% trimming this quarter.Sanofi (SNY): The minutely small 0.08% of the portfolio stake in SNY saw marginal trimming this quarter.Note: Per last year’s , Berkshire had a $1.7B position in Sanofi - so in addition to the very small ADR stake listed in the 13F report, Berkshire held Sanofi securities listed in Euronext Paris. This year’s  does not show this as a top holding as it probably dropped off the top-fifteen.Verisk Analytics (VRSK): The minutely small 0.02% VRSK stake was reduced by ~80% this quarter.Kept Steady:Bank of America (BAC): Berkshire established this large (top three) 10.78% of the portfolio position through the exercise of Bank of America warrants. The warrants had a strike price of $7.14 compared to the current price of $31.22. The cost to exercise was $5B and it was funded using the $5B in 6% preferred stock they held.Note: Berkshire’s ownership stake in Bank of America is ~6.5%.Kraft Heinz Co. (KHC): KHC is currently the fourth-largest 13F stock position at 10.74% of the portfolio. Kraft Heinz started trading in July 2015 with Berkshire owning just over 325M shares (~27% of the business). The stake came about as a result of two transactions with 3G capital as partner: a ~$4B net investment in 2013 for half of Heinz and a ~$5B investment for the acquisition of Kraft Foods Group in early 2015. Berkshire’s cost-basis on KHC is below $30 per share compared to the current price of $59.04.Note: In February, it was announced that Warren Buffett  from Kraft Heinz board this year as he decreases his travel commitments.American Express (AXP) and Coca Cola (KO):  These two very large stakes were kept steady during the last ~4 years. Buffett has said these positions will be held “permanently”. Berkshire’s cost-basis on AXP and KO are at around $8.49 and $3.25 respectively and the ownership stakes are at ~17.6% and ~9.4% respectively.Moody’s Inc. (MCO):  MCO is a 2.11% of the 13F portfolio stake. It is a very long-term position and Buffett’s cost basis is $10.05.  The stock currently trades at ~$171. Berkshire controls ~13% of the business.Goldman Sachs (GS): GS is a 1.46% of the 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. Q3 2015 saw a ~13% reduction at prices between $172 and $213. It currently trades at ~$242.Southwest Airlines (LUV): LUV is a 1.44% portfolio stake purchased in Q4 2016 at prices between $38.50 and $51 and increased by ~10% in the following quarter at prices between $49.50 and $59. The stock is now at $51.70.Note: Berkshire owns ~8% of LUV.DaVita Inc. (DVA):  DVA is a 1.35% of the 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 $66.29 compared to Berkshire’s overall cost-basis of ~$45 per share.Note 1: Berkshire’s ownership stake in DaVita is ~22%. In May 2013, Berkshire’s Ted Weschler signed an accord with DVA, limiting open-market purchases to 25% of the company.American Airlines (AAL): AAL stake was first purchased in Q3 2016. The position is now at 1.27% of the portfolio. The original purchase was at prices between $28 and $39 and doubled in Q4 2016 at prices between $36.50 and $50. The stock is now at $43.19. There was a ~2% trimming last quarter.Note: Berkshire controls 9.6% of AAL.Liberty SiriusXM Group (LSXMA) (LSXMK): The tracking stock was acquired as a result of Liberty Media’s recapitalization in April 2016. Shareholders received 1 share of Liberty SiriusXM Group, 0.25 shares of Liberty Media Group and 0.1 shares of Liberty Braves Group for each share held. Berkshire held 30M shares of Liberty Media for which he received the same amount of Liberty SiriusXM Group shares. There was a ~40% stake increase in Q2 2017 at a cost-basis of ~$40 per share. The stock is now at $44.56.Note: LSXMA/LSXMK is trading at a significant NAV-discount to the parent’s (SIRI) valuation. For investors attempting to follow Buffett, LSXMA/LSXMK is a good option to consider for further research.General Motors (GM):  GM is a ~1% of the 13F portfolio position that was first purchased in Q1 2012 at prices between $21 and $30. The position size increased six-times (10M shares to 60M shares) by Q3 2017. Last quarter saw a reduction: ~17% selling at prices between $40.50 and $46.50. The stock currently trades at $36.94. Overall, Berkshire’s cost-basis on GM is $30.16.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 ~12% stake increase at prices between $30 and $33. The stock currently trades at $41.43. Buffett controls around 31% of the business and his cost-basis is ~$19.Note: In March, USG board rejected a $42 per share cash offer by Germany’s Knauf.  Partly in response, Berkshire Hathaway disclosed in a regulatory filing last month that they would vote against USG directors in the upcoming annual meeting. Earlier this month, USG agreed to open sale talks with Knauf.Verisign Inc. (VRSN): VRSN was first purchased in Q4 2012 at prices between $34 and $49.50. The position was more than doubled in Q1 2013 at prices between $38 and $48. The following quarter saw a one-third increase at prices between $44 and $49. Q1 & Q2 2014 also saw a combined ~17% increase at prices between $47 and $63. The stock currently trades at $127 and the position is at 0.81% of the portfolio (~10% of the business).Sirius XM Holdings (SIRI): The 0.39% SIRI stake was purchased in Q4 2016 at prices between $4.08 and $4.61. Q2 2017 saw selling: ~20% reduction at prices between $4.70 and $5.50. The stock is currently at $6.87.Axalta Coating Systems (AXTA): AXTA is a small 0.37% of the portfolio stake established in Q2 2015 at prices between $28 and $36 and increased by ~16% the following quarter at prices between $24.50 and $33.50. The stock currently trades at $31.30. Berkshire owns ~9.8% of the business.Synchrony Financial (SYF): SYF is a 0.37% of the portfolio position purchased in Q2 2017 at prices between $26.50 and $34.50 and increased by ~20% the following quarter at prices between $28.50 and $31.25. The stock is now at $34.21.Note: Synchrony is the private label credit-card business spinoff from GE that started trading in August 2014 at ~$23 per share. It has seen recent super-investor interest: Baupost Group has a ~10% portfolio stake.Restaurant Brands International (QSR): QSR is a 0.25% of the 13F portfolio position established in Q4 2014 at prices between $35 and $42. The stock currently trades well above that range at $56.31. It started trading in December 2014 following a merger/rename transaction between Tim Hortons and Burger King Worldwide.Note: Berkshire’s stake in the business is ~4.2%.Store Capital (STOR): The 0.25% STOR stake was established in Q2 2017 in a private placement transaction at $20.25 per share. The stock is now at $25.52.Costco Wholesale (COST), Johnson & Johnson (JNJ), Liberty LiLAC Group (LILA) (LILAK), Mondelez International (MDLZ), M&T Bank (MTB), MasterCard Inc. (MA), Procter & Gamble (PG), Torchmark Corporation (TMK), United Parcel Service (UPS), Verizon Communications (VZ), Visa Inc. (V), and Wal-Mart Stores (WMT): These are very small positions (less than ~0.5% of the portfolio each) kept steady this quarter.Note 1: Since November 2015, Warren Buffett is known to own ~8% of Seritage Growth Properties (SRG) at a cost-basis of $36.50 in his personal portfolio. It currently trades at $37.40. SRG is an REIT spinoff from Sears (SHLD) that started trading in July 2015.Note 2: Berkshire Hathaway also has a 225M share position in BYD Company at a cost-basis of ~$1 per share (~$2 per share in terms of ADRs – BYDDY).  The ADR currently trades at $13.68.The spreadsheet below highlights changes to Berkshire Hathaway’s 13F stock holdings in Q1 2018:2/27/2017 - OFB Post - Berkshire Hathaway 2017 Annual Letter & Report - NotesThe Book Value (BV) of Berkshire Hathaway per  is $211,750 per BRK.A share or $141.17 per BRK.B share compared to $172,108 per BRK.A share or $114.74 per BRK.B share in the last AR. The stock ended the year at $295,755 or 140% of BV - the premium over book value has remained relatively steady over the last year as that percentage was at 142% ($244,102 share price) EOY 2016. Buffett’s repurchase criterion is 120% of BV or $254,100. The premium to book value remained somewhat steady as the stock rose ~21% over the last year compared to book value growth of ~23%. Net earnings are at $27,326 per BRK.A share. Excluding one-time gain due to tax changes, the earnings are $9,659 per BRK.A share for a ttm-PE of ~31. This is compared to a ttm-PE of ~17 last year and ~13 the year before.Historical Book Value (BV) and Market Value Growth:Book Value CAGR 1965-2017 is at 19.1% and for 2016 it is 23%.Market Value CAGR 1965-2016 is at 20.9% vs 9.9% for S&P 500. For 2017, it is ~21% which is around the same as the performance of the S&P 500 index.Earnings per Share (EPS):Excluding one-time tax gain, earnings at $9,659 for 207 vs $14,645 in 2016 vs $14,656 in 2015 vs $12,092 in 2014 vs $11,850 in 2013 and $8,977 in 2012 per BRK.A share.  One-third decrease compared to marginal YOY increase last year and 21% YOY increase the year before. Roughly a third of Berkshire earnings are realized gains (after tax) historically. For 2017, that figure was $1.4B.Intrinsic Business Value: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.Co-Managers:2017: they now manage $25B. Teva Pharmaceuticals positon is a purchase by one of them.2016: Together, they now manage $21B. Apple & American Airlines were first established by one of them.2015: Precision Castparts acquisition partly credited to Todd Combs. In their investment management roles, Todd Combs and Ted Weschler are each managing $9B each.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!2013: Todd Combs and Ted Weschler invested $7B each and they outperformed Buffett in 2013.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 (security ownership of Berkshire’s insurance subsidiaries).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.Use of leverage:Buffett dedicated a section basically discouraging investors from using leverage.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 (IV). 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:A huge increase in the Apple position and the drop in the large stake in International Business Machines are the main changes.Bank of America is new in this year’s list as their warrants at strike $7.14 were exercised.Bank of New York Mellon, BYD Company, and General Motors came into the list as their market values have made them one of the top investments in Berkshire’s portfolio. Sanofi, United Continental Holdings and USG Corporation slipped out of the list for the same reason. International Business Machines on the other hand was sold out.Below is a comparison of Berkshire Hathaway's asset distribution in the "Insurance and Other" area for the last three years:The equity exposure is at ~54%. Debt holdings have dropped from ~21% in 2012 to just ~7% in 2017.  Berkshire has been on record consistently to state the relative valuation edge for equities compared to bonds in the current low-interest rate environment. Cash on the other hand has gone up from 24% to 34%. It is probable that Berkshire would look to allocate some of that cash this year.() are a treasure trove of information and are a very good option for anyone starting out on individual investing.Regulatory Filings thru 2/15/2018: 13G and 13G/As – 2/14 – STOR – 18.6M shares – 9.8% of business, BK – 60.82M shares – 5.9% of business, Liberty Media – 31.09M shares – 13.9% of business, 14.86M shares – 14.5% of business, AAL – 46M shares – 9.6% of business, IBM – ~2M shares – less than 0.1% of business, DAL – 53.1M shares – 7.4% of business, WFC – 484.6M shares – 9.8% of business, USB - 105M shares – 6.3% of business, UAL – 28.2M shares – 9.5% of business, WBC – 0, LUV – 47.7M shares – 8% of business,2/13/2018 -   – Phillips 66 bought back 35M shares from Berkshire @ $93.725 per share to bring Berkshire’s ownership stake below 10% - 45.7M shares will remain – 466.5M shares outstanding.11/17/2017 – Dataroma note regarding BAC stake – “A Dataroma user was kind enough to point out that the discrepancy between the 700 million BAC warrants and the reported 679 million BAC shares at qtr-end, is likely due to 21 million shares of BAC being held by a Berkshire subsidiary, New England Asset Management, which is reported separately. It's not clear why this allocation is not included in Berkshire's 13-F filing. Nevertheless, it now appears that Berkshire did not in fact reduce its BAC stake during the quarter.”11/16/2017 – someone asked about when Berkshire bought AXP & KO – I replied saying AXP in 1995 & KO in 1987. Buffett had earlier bought AXP during the salad oil crisis in the 60s and had turned a huge profit a few years later. Might reference this from the next update…"