Berkshire Hathaway’s Portfolio Changes in Second Quarter 2013

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Aug 152013
 

According to its SEC Form 13F filing released this morning, Berkshire Hathaway’s largest purchases during the second quarter of 2013 were an initial investment currently valued at $600 million in the Canadian oil and natural gas producer Suncor (SU), a $600 million (current value) addition to its total position of $2.9 billion in US Bancorp (USB), and a $500 million (current value) addition to its total stake of $1.4 billion in General Motors (GM).   Smaller additions were made to previous investments in Chicago Bridge and Iron (CBI), Verisign (VRSN), Bank of New York Mellon (BK), Wells Fargo (WFC),  National Oilwell Varco (NOV), and DaVita (DVA).  The additions to WFC and USB were apparently made by Warren Buffett.  Each of the other  transactions are believed to have been made by Warren Buffett’s new portfolio managers, Todd Combs and Ted Weschler.

Berkshire also noted that confidential information was omitted from the 13F filing.  This probably indicates that Warren Buffett is accumulating a multi-billion dollar position in a large publicly traded company (“commercial or industrial” – SEC Form 10Q filing).  The last time Berkshire requested confidential treatment was in 2011 when it was investing $10 billion in IBM.

Berkshire  also reduced its minor stakes in Kraft (KRFT) and Mondelez (MDLZ), and eliminated its holding in Gannett (GCI).

I am quoted in a Bloomberg article on this topic:

“His portfolio has been moving up nicely,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business who has taken students to meet Buffett in Omaha. His allocation to stocks “not only has been the right strategy until now, it’s very likely to be the right strategy going forward.”

The entire article is available at:

http://www.bloomberg.com/news/2013-08-15/buffett-s-berkshire-discloses-suncor-dish-stakes.html

 

 

 

 

 

 Posted by at 6:31 pm

Why Warren Buffett Is Buying Smaller Newspapers

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Aug 142013
 

 

Within 72 hours, the Boston Globe ($70 million) and the Washington Post ($250 million) were sold for $320 million, each representing a small fraction of its value as recently as 10 years ago.  Meanwhile, during the past year and a half, Warren Buffett’s Berkshire Hathaway has invested a similar sum, $344 million, in purchasing 28 relatively small, local daily newspapers.

As a result of the Internet providing free coverage of both national and international news, newspapers serving large metropolitan areas such as Washington, D.C., and Boston have experienced rapid declines in circulation, advertising and profits. But newspapers serving small communities have been fairly stable financially, because, newspapers — despite the Internet — remain the primary source of local news to these communities about such subjects as high school football, the mayor, or taxes.

Buffett believes that newspapers delivering comprehensive and reliable information to tightly bound communities and having a pay format Internet strategy will remain viable for a long time. At appropriate prices (very low multiple to current earnings), Berkshire Hathaway plans to purchase additional newspapers and expects to earn acceptable rates of return on its investment.

 Posted by at 10:18 am

Jeff Bezos Buys The Washington Post for $250 Million

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Aug 062013
 

Amazon.com CEO Jeff Bezos is buying the Washington Post newspaper for $250 million.  Warren Buffett has described Jeff Bezos as being “the ablest CEO in America.”

The Washington Post Company derived 14% of its revenues in 2012 from newspaper publishing.  The parent company reported a net operating loss of $53.7 million in its newspaper division in 2012, while the corporation posted net income of $131 million.  In 2012, the Washington Post Company derived 55% of its revenues from education, 20% from cable television, and 10% from television broadcasting.

Berkshire Hathaway is the largest outside shareholder of the Washington Post Company with a stake valued at approximately $1 billion (1.7 million shares) representing 24% of the class B (publicly traded) shares.  Warren Buffett had been a director of the Washington Post Company for many years until 2011, and maintains a close personal and professional relationship with Donald Graham, the CEO of the Washington Post Company.

The Washington Post Company will be changing its name in the near future and may use the $250 million it receives from the sale of the newspaper business to accelerate its stock repurchase program or make additional acquisitions.  The company repurchased 4% of its shares during the first half of 2013.

 Posted by at 2:09 am

Berkshire Hathaway’s Earnings for Second Quarter 2013

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Aug 052013
 

After the stock market closed on Friday, August 2, Berkshire Hathaway reported its earnings for the second quarter of 2013.  The highlights are as follows:

(1) Operating earnings increased by 5% over the past 12 months.  Insurance underwriting earnings in the second quarter of 2013 declined by $89 million from the corresponding quarter in 2012, primarily as a result of catastrophic losses of $124 million resulting from floods in Europe.  Operating income from Berkshire’s non-insurance businesses increased by 8% as compared to the second quarter of 2012.

(2) Net income increased by 46% over the past 12 months.  This comparison, however, includes investment gains and accounting for derivatives which are highly variable in any given quarter or year and are “often meaningless” (Press Release – August 2, 2013).

(3) Book value equaled $122,900 per Class A equivalent share as of June 30, 2013, representing an increase of 14.5% over the past 12 months.  Warren Buffett considers book value to be a good, although understated, proxy for intrinsic value.   (At Berkshire Hathaway’s Class A closing price of $176,500 on August 2, its shares are trading at 1.4 times its book value as of June 30, 2013, which is below its historic average since 1985 of 1.6.  Warren Buffett has announced that he would buy back shares in Berkshire when they are trading at less than 1.2 times book value.)

(4) Berkshire’s balance sheet, as of June 30, 2013,  indicated cash and cash equivalents of $35 billion, equity securities equal to $103 billion, and fixed maturity securities valued at $29 billion.

Investing.com has published this blog post:

http://www.investing.com/analysis/berkshire-hathaway:-2q-earnings-report-178463

 Posted by at 9:59 am