"Tracking Warren Buffett’s Berkshire Hathaway Portfolio – Q1 2014 Update"
"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 05/15/2014. Please visit our  article series for an idea on how his holdings have progressed over the years and  highlighting the moves during Q4 2013.During Q1 2014, Berkshire Hathaway’s (BRK.A) (BRK.B) US long stock portfolio increased marginally from $104.84B to $105.77B.  The majority of the existing positions were left untouched although there were some incremental purchases and a few sells. Buffett continues to hold a very concentrated portfolio. The top-five positions account for 65.89% of the portfolio. The largest position remained the same as last quarter - Wells Fargo & Company at a whopping 21.73% of the US long portfolio - Buffett broke a pattern of consistent buying in Wells Fargo in Q3 2013 but this quarter saw marginal buying.  () are a treasure trove of information and are a very good option for anyone starting out on individual investing.New stakes:Verizon Communications (VZ): VZ is a small 0.50% of the US long portfolio position established this quarter at prices between $46 and $49.30. The stock currently trades at $49.07. As the stake is very small, the activity does not indicate a clear bias.Stake Disposals:None.Stake Increases:Wells Fargo & Co. (WFC):  WFC is Buffett’s largest stake at 21.73% of the US long portfolio well ahead of Coca Cola (KO) which is at 14.62%. The position was being incrementally increased every quarter but last two quarters saw no buying at all and this quarter saw a very minor increase. ~5M shares were purchased in Q2 2013 at prices between $36.27 and $41.56. That purchase was far less compared to Q1 2013 when over 18M shares were purchased at prices between $34.66 and $38.20. The stock currently trades at $49.08. Buffett is very bullish on WFC and his cost-basis is at around $24.55.DaVita Inc. (DVA):  DVA is a 2.45% of the US long portfolio position that was aggressively built-up over several quarters: the stake was doubled in Q1 2012, increased by over 50% in Q2 2012, and by an additional 24% in Q4 2012. In Q1 2013, the position was increased by another 10% at prices between $54 and $62. Since then, the position was kept relatively steady although Q3 2013 saw minor buying. The original position was purchased in Q4 2011 at prices between $30.32 and $38.40. The large stake increase in Q1 2012 and Q2 2012 happened at prices between $37.90 and $49.10. Last quarter saw a ~16% stake increase at prices between $55 and $64 and this quarter saw a ~3% increase at prices between $62.74 and $69.81. The stock currently trades at around $67.53. In May 2013, Berkshire’s Ted Weschler signed an accord with DVA, limiting the open-market stake increase to 25% of the company- the position is currently at 17.6% of the business.International Business Machines (IBM): IBM is Buffett’s fourth largest stake at 12.44% of the portfolio. The position was increased marginally in Q1 2013 and had since been kept steady. The original stake was purchased in Q3 2011 at prices between $157.54 and $185.21. Since then, the position size has gone up by around 19% through periodic purchases. This quarter saw minor buying and the stock currently trades at $187. Berkshire’s cost-basis on IBM is at around $171. Buffett is very bullish on IBM and controls 6.3% of the business. For investors attempting to follow Buffett, IBM is a very good option to consider.US Bancorp (USB): USB, a 3.24% 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. Q1 2013 saw a marginal increase in the position and the following quarter saw more activity as ~17M shares were purchased at prices between $32.27 and $36.15. Q3 2013 saw a marginal increase at prices between $35 and $38 and last two quarters were more of the same - marginal increase at prices between $36 and $41.50. Berkshire’s cost-basis on USB is around $31.23 and the stock is trading well above that price at $40.89. Buffett controls 4.4% of the business.Verisign Inc. (VRSN): VRSN was purchased in Q4 2012 at prices between $34.15 and $49.48. The position was more than doubled in Q1 2013 to a 0.45% position at prices between $38 and $48. In Q2 2013, the stake was again increased by one-third at prices between $44.39 and $49.27. This quarter saw a ~6% increase at prices between $51.68 and $62.61. It currently trades at $48.26. The current position is at around 9% of the business.Wal-Mart Stores (WMT):  WMT is a stake first purchased in 2005. It has since been built up to a 4.19% position. It is a top-five position as of this quarter as it edged out the 4.02% Procter & Gamble stake. The position was increased by 4% in Q1 2013 at prices between $68 and $75 and had since been kept relatively steady. This quarter saw a 17% stake increase at prices between $72.66 and $78.91. The stock currently trades at around $77. Berkshire’s overall cost-basis on the position is at around $54.Liberty Global PLC (LBTYA): LBTYA was a minute 0.25% position established last quarter at prices between $37.50 and $44.50 (adjusted for the 03/2014 stock-split) and increased significantly to a 0.57% position this quarter at prices between $40.37 and $46. The stock currently trades at $43.83.Stake Decreases:DIRECTV (DTV):  DTV is a 2.49% position first purchased in Q3 2011. The bulk of the current position was purchased in Q4 2011 at prices between $40.60 and $47.87. It was increased by around 10% in Q1 2013 at prices between $48 and $57 after having been increased by around 15% in Q4 2012 at prices between $48.17 and $53.24. The position was kept steady in Q2 2013 and saw a minor 2% stake reduction in Q3 2013 at prices between $57.50 and $65.25. This quarter saw a ~5.5% stake reduction at prices between $68 and $80. The stock currently trades at around $86.18. Buffett controls 6.8% of the business. AT&T (T) today confirmed that they will buy DTV in a $95 per share cash-and-stock deal ($28.50 per share cash). Berkshire’s cost-basis is at around $45.General Motors (GM):  GM is a 0.98% of the US long portfolio position that was first purchased in Q1 2012. The stake was increased by 60% in Q2 2013 at prices between $27.53 and $35.03 and had since been kept steady.  This quarter saw a 25% stake reduction at prices between $34 and $41. The stock currently trades at $34. The large stake reduction indicates a bearish bias.Phillips 66 (PSX):  The 2% of the US long portfolio PSX stake as of last quarter was reduced to a 0.71% stake this quarter at prices between $70.67 and $80.35. The stock currently trades at $81.86. Berkshire’s cost-basis on PSX is at around $32.Kept Steady:American Express (AXP), Coca Cola (KO), and Procter & Gamble (PG):  These are very large stakes that were kept steady during the last six quarters. Buffett is very bullish on all of these businesses. Berkshire’s cost-basis on AXP, KO, and PG are at around $8.49, $3.25, and $6.40 respectively.Note: Buffett has said that he will hold his big-four (or five including BAC) permanently. So, do not use the “bullish” wording with these.Goldman Sachs (GS): GS is 1.96% of the US long portfolio stake established last quarter. 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 $156. Buffett probably chose a cashless conversion whereby the majority of the position was liquidated to realize cash that funded the 12.63M share purchase at the strike price of $115.Bank of New York Mellon Corp (BK):  BK is a 0.63% of the US stock portfolio stake that was increased marginally in Q3 2013 at prices between $28 and $32.21. The position was increased by 30% in Q2 2013 as well at prices between $26.70 and $30.55. Q1 2013 saw a minor 4% stake reduction at prices between $26 and $29. The bulk of the position was purchased in Q2 2012 at prices between $19.51 and $24.67. The stock currently trades at $34.Exxon Mobil (XOM): XOM is a 3.80% of the US long portfolio stake. The position was first purchased in Q2 2013 but Buffett avoided disclosing it until last quarter by making use of the “”. The original stake was a 3.09% of the US long portfolio position established at prices between $86 and $93. In Q3 2013, the position was increased by ~28% at prices between $86.42 and $95.20. Last quarter saw a marginal stake increase. The stock currently trades at $101. The relatively large stake build-up indicates a clear bullish bias. For investors attempting to follow Buffett, XOM is a good option to consider.Chicago Bridge & Iron (CBI): CBI is a 0.79% of the US long portfolio position that was increased by 47% in Q2 2013 at prices between $50.92 and $63.75 and has since been kept steady. The original position was purchased in Q1 2013 at prices between $46 and $62. The stock currently trades well outside those ranges at $76.75.  Berkshire controls 8.9% of the business.National Oilwell Varco Inc. (NOV):  NOV is a 0.65% of the US long portfolio stake that was increased by ~19% in Q2 2013 at prices between $64.14 and $71.57 and has since been kept steady. The position was established in Q2 2012 at prices between $60 and $80.67. The stock currently trades at $81.63.Moody’s Inc. (MCO):  MCO is a 1.85% of the US long portfolio stake that was decreased by 14% in Q2 2013 at prices between $52.23 and $68.62. It was kept steady in Q3 2013 but was marginally decreased last quarter. The stock currently trades at $81.37. Buffett’s cost basis is just over $10 and so he is sitting on large long-term capital gains on this position. The stock returned around 48% in 2013 and Berkshire controls 11.5% of the business.ConocoPhillips (COP):  COP is a long-term position that has been in the portfolio since 2006. Berkshire’s cost-basis on COP is around $50.53. The position was reduced by 44% in Q3 2013 at prices between $60.50 and $71 and another ~18% last quarter at prices between $69 and $74.31. The stock currently trades at $78 and the remaining stake is at 0.74% of the US long portfolio.Liberty Media Capital (LMCA): LMCA was a petite 0.35% stake first purchased in Q4 2011. It was increased by ~75% in Q1 2012 and roughly doubled the next quarter. The position now represents around 0.66% of the portfolio. The stock currently trades at around $124. On May 8, 2014, LMCA announced a plan to spin off its cable assets.M&T Bank (MTB), Viacom (VIAB), and Graham Holdings (GHC) previously Washington Post:  These small positions were kept steady in the last five quarters. Berkshire is bullish on these positions although the stakes are low on a relative basis. Berkshire owns 27.8% of the shares outstanding in GHC.USG Corporation (USG):  USG is a very long-term holding and there was a significant 21.39M share stake increase last quarter 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. The stock currently trades at $29.89. Buffett controls around one-third of the business.The portfolio also has very small (less than 0.5% of the US long portfolio) stakes in the following businesses: Costco Wholesale (COST), Deere & Company (DE), MasterCard Inc. (MA), Precision Castparts (PCP), Torchmark (TMK), and Visa Inc. (V), Johnson & Johnson (JNJ), Lee Enterprises (LEE), Media General (MEG), United Parcel Service (UPS), Verisk Analytics (VRSK), Wabco Holding (WBC), General Electric (GE), Suncor Energy (SU), Starz (STRZA), Sanofi Aventis (SNY), Kraft Foods Group Inc. (KRFT), and Mondelez International (MDLZ). Although these stakes are small, Berkshire’s ownership of the businesses is significant in the following cases: they control 6.6% of Wabco and 2.2% of Starz. Also, per the annual report, Berkshire has a $1.75B position in Sanofi - so in addition to the 13F securities listed in the spreadsheet, Berkshire also owns Sanofi securities listed in Euronext Paris.The spreadsheet below highlights changes to Berkshire Hathaway’s US stock holdings in Q1 2014:OFB Post - Berkshire Hathaway 2013 Annual Report NotesThe Book Value (BV) of Berkshire Hathaway per  is $134,973 per BRK.A share or $89.98 per BRK.B share. The stock currently trades at $115.78 or 128.67% of BV. Buffett’s repurchase criteria is 120% of BV or $107.98. The premium to book value has narrowed as the stock has not moved in the last nine months - also in January, the stock traded near Buffett's repurchase criteria. Net earnings at $11,850 per BRK.A share for a ttm-PE of 14.66. It is down from 16.93 this time last year.Historical BV Growth: 18.2% vs 32.4% for S&P500 with dividends. CAGR 1965-2013 at 19.7% vs 9.8% for S&P500.Earnings: $11,850 in 2013 vs $8,977 in 2012 and $6,215 in 2011 per BRK.A share.  32% YOY increase compared to 44% last year. The stunning increases in the last two years were due to the impressive cash generation of its operating entities. It was also helped by realized investment gains of $2.64B in 2013 and $1.35B in 2012. In 2011, they had $316M in losses.  PE is 14.66 including investment gains - at this time last year, PE was at 16.93.  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 13.6% to $129,253. This is compared to a 19.3% CAGR since 1970 and 6.6% in the 2000-2010 time period, andPre-tax earnings from businesses other than insurance and investments increased 12.8% to $9,116 per share. This is compared to a 20.6% CAGR since 1970 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.Co-Managers: Todd Combs and Ted Weschler invest $7B each and they outperformed Buffett.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 or reportable earnings for the same acquisition cost, andLook-through earnings realistically portray yearly gain from operations.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:ConocoPhillips (COP) and POSCO are not in the list as they no longer are among his largest investments - not because they have been completely sold out - see our  for details on the current holdings in COP.Below is a comparison of Berkshire Hathaway's asset distribution in the "Insurance & Other" area for the last five years:The equity exposure at almost 58% is the largest in the last five years. So, it is apparent that Buffett is not that concerned about valuation of his holdings despite the rapid increase.() are a treasure trove of information and are a very good option for anyone starting out on individual investing. To learn more about how to profit from a strategy of cloning super-investors, check out our book ."