Berkshire Hathaway recently released its second quarter form 13-F, which details the investment conglomerate’s domestic equity holdings as of the end of June 2009. And in this last quarter, Berkshire has continued to be active by selling positions in some holdings, as well as adding a new name to the portfolio.
It should be noted that in last week’s second quarter earnings report, it appears as though Berkshire has been more active in purchasing fixed income securities—primarily international ones—than equities. That said, it is still instructive to monitor Berkshire’s holdings to try and gauge changes in the conglomerate’s thinking. It should also be mentioned that Berkshire does receive exemptions from the SEC to disclose some of its positions, until the conglomerate is able to build a full position in a particular stock.
New Names and Additions
In the last quarter, Berkshire added shares of medical technology company Becton, Dickinson and Company (BDX), which adds yet another healthcare related business to Berkshire’s equity portfolio. And on this front, Berkshire has continued to build back up its position in another healthcare related company, Johnson & Johnson (JNJ), which it was forced to sell some of late last year in order to raise capital for other investments.
In my opinion, each of these moves is noteworthy, as there seems to have been a subtle move towards healthcare and pharmaceutical companies in Berkshire’s portfolio over the last couple years. It is impossible to know for certain Berkshire’s thinking, but if I were to conjecture, I don’t necessarily think it is a favorable top down view of the healthcare sector on Berkshire’s part. Rather, in my view, it could be that many of those businesses have very strong franchises, and have seen their share prices decline as a result of the political uncertainty regarding healthcare reform.
Eliminations and Subtractions
There was only one complete elimination from the portfolio, which was the shares of Constellation Energy (CEG), which Berkshire received as consideration when Constellation pulled out of a deal to be acquired by Berkshire subsidiary Mid-American Energy. Berkshire has been selling its position in Constellation since the beginning of the year, which also had the effect of posting nice gains in Mid-American’s second quarter earnings.
As for the subtractions, Berkshire continued to sell its position in used car retailer Carmax (KMX) during the second quarter. Carmax’s business likely continues to struggle as new car companies liquidate inventories of new cars with the help of both company and government incentives.
Berkshire also continued to sell some of its stake in UnitedHealthcare (UNH), Wellpoint (WLP), Home Depot (HD), Eaton Corp (ETN), and integrated energy company ConocoPhillips (COP). As for Conoco, Berkshire indicated that it sold even more shares since the end of June. These Conoco sales will likely produce realized losses, which Berkshire can use to shield future gains from taxes.
While not showing up as a sale in the second quarter, Berkshire subsequently has also indicated that it has trimmed its position in bond rating firm Moody’s (MCO), which I don’t think is overly surprising given that the reputation of the bond rating firms is effectively on life support right now. That said, Berkshire still owns about 17% of Moody’s.
Unchanged Positions
The bulk of Berkshire’s equity portfolio was unchanged from the prior quarter. Here is a listing of those names:
• American Express (AXP)
• Bank of America (BAC)
• Burlington Northern (BNI)
• Coke (KO)
• Comcast (CMCSA)
• Comdisco (CDCO)
• Costco (COST)
• Gannett (GCI)
• General Electric (GE)
• GlaxoSmithKline (GSK)
• Ingersoll-Rand (IR)
• Iron Mountain (IRM)
• Kraft Foods (KFT)
• Lowes (LOW)
• M&T Bank (MTB)
• Nalco Holdings (NLC)
• Norfolk Southern (NSC)
• NRG Energy (NRG)
• Procter & Gamble (PG)
• Sanofi Aventis (SNY)
• SunTrust Banks (STI)
• Torchmark (TMI)
• US Bancorp (USB)
• United States Gypsum (USG)
• Union Pacific (UNP)
• UPS (UPS)
• Wabco Holdings (WBC)
• Wal-Mart (WMT)
• Washington Post (WPO)
• Wells Fargo (WFC)
• Wesco (WSC)
You might also be interested to know that this blog was mentioned in a Bloomberg article that I have linked here.
This and That
Also, if you haven’t already done so, please be sure to register before time runs out for the first “Late Summer Buffett Conclave” (www.buffettconclave.com), which is a social and networking event on August 28th in Chicago for folks interested in Berkshire. We already have a great group of attendees, and still have space to fit in a few more "Buffettologists." Disclaimer: Neither Mr. Buffett nor Berkshire Hathaway nor any of its employees are affiliated with this event.
Justin
Copyright © 2009 BuffettInsights
The content contained in this blog represents the opinions of Mr. Fuller. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business. This content is intended solely for the entertainment of the reader, and the author.
