Category Archives: WARREN BUFFET

Why Buffett’s Largest Holdings Should Be in Your Portfolio – Seeking Alpha

Why Buffett’s Largest Holdings Should Be in Your Portfolio – Seeking Alpha

Call it luck, skill or a combination of the two, but it’s hard to deny the investing success of Warren Buffett. With investors consistently looking for stock advice, why not follow the lead of one of the most profitable pickers. The Oracle of Omaha has proven himself time and time again having ousted the S&P 500 by an average of 10.8% over each of the last 45 years. Listed below are 9 of Buffett’s largest holdings which represent over 76% of Berkshire Hathaway’s total investment portfolio.
Shares
Ticker
Company
% Ownership
Market Value
% of Portfolio
200,000,000
KO
Coca-Cola
8.6%
$13.1 Billion
21.3%
358,936,125
WFC
Wells Fargo
6.8%
$11.1 Billion
18.0%
151,610,700
AXP
American Express
12.6%
$6.5 Billion
10.6%
72,391,036
PG
Procter & Gamble
2.6%
$4.6 Billion
7.5%
97,214,584
KFT
Kraft Food Inc
5.6%
$3 Billion
4.9%
45,022,563
JNJ
Johnson & Johnson
1.6%
$2.8 Billion
4.6%
78,060,769
USB
U.S. Bancorp
4.1%
$2.1 Billion
3.4%
39,037,142
WMT
Wal-Mart Stores, Inc
1.1%
$2.1 Billion
3.4%
29,109,637
COP
ConocoPhillips
2.0%
$1.9 Billion
3.1%
Coca-Cola (KO) has proven to be one of Buffett’s greatest value plays. Since Berkshire’s initial cost basis of $1.3 Billion, the 200 million share position in KO has increased in value to over $13 Billion. Hidden within this “dividend champion”, having increased payouts for straight 49 years, is the power of increasing yield on cost. Buffett now enjoys a yield on cost of 29%! With a 9.5% 5-year dividend growth rate look for your current yield on cost to double within 10 years. Beyond the long and stable increases in dividend payouts, KO also enjoys a strong moat and looks for growth opportunities in emerging markets. Recognizing the declining demand for soda, Coca-Cola has established itself with over 3,300 beverage options. Recently KO hit its 52-week high. It might not be a bargain, but it certainly could still be a buy.
Wells Fargo (WFC) had a long and stable history of increasing dividends… until 2009. But the recession has made way and confidence is way up. In Buffett’s annual letter he predicted WFC would increase dividends substantially, as the Fed would recognize the banking giant’s financial strength and lift its “across the board” dividend freeze. True to prediction form, WFC issued a special dividend of $.07 in addition to the quarterly payout of $.05 in March. Still a far cry from the pre-recession $.34 a quarter, but management confidence and a meager 9% payout ratio suggest more increases are in the future.
With over 150 million shares, Buffett owns 12.6% of the credit card giantAmerican Express (AXP). AXP is not listed on the dividend champion, contender or challenger list; but that’s not to say that its dividend payout hasn’t been consistent. American Express has paid the same $.18 dividend for the last 13 quarters and before that has shown steady increases since 1977. Its 21% payout ratio suggest future dividend growth is obtainable, although some feel that AXP needs to gain card members to compete with Visa (V), MasterCard (MA) and Discover (DFS). Relief might be on its way as current debit card legislation threatens to push more people towards credit cards.
Procter & Gamble (PG) is an income investor’s best friend having increased its dividend for 54 straight years. Buffett backed into this stock by owning the PG acquired Gillette. Regardless of how he ended up there, his original cost of $460 million has ballooned to a value of over $4.6 Billion today. This consumer goods company shows up with a 3.1% current yield and a sustainable 53% payout ratio. For such a stable company the 11% ten year dividend growth rate is more than inviting.
Kraft Food Inc (KFT) might not be on Buffett’s good-guy list, but it is in his portfolio. Much like AXP, KFT has made steady, albeit currently stagnant, increases in dividend payouts. Stuck on $.29 for the last 11 quarters, KFT does come in with an above average yield of 3.7%. Buffett has lost on this investment to date, but a 49% payout ratio leaves room to make amends with increased cash distributions. After all, Warren could have dropped this position long ago.
Johnson & Johnson (JNJ) is the type of stock you turn to if love long dividend histories and Buffett picks but decided to pass on the slightly lengthier increase records of beverage giant KO and consumer staple PG. This pharmaceutical powerhouse has increased its dividend payout for 48 straight years and looks to do it again this April. The 3.6% current yield is more than ample given the 5 year dividend growth approaching 11%. JNJ has taken blows from quality control and recalls as of late, but for the bold it might be a chance to buy in at the same price as Warren.
U.S. Bancorp (USB) is another investment Buffett is losing on to date. But don’t be afraid to copy in the commentary from WFC, as it’s pretty much the same story. USB had a strong history of paying and increasing dividends from 1987 until 2009. The mandatory freeze dropped their quarterly dividend to $.05 a share. When approved by the Fed, this bank holding company more than doubled their dividend to $.125. Still well below the pre-recession level of $.425, the 12% payout ratio leaves plenty of room for future growth. Early prediction, Buffett’s year to year yield on cost makes a healthy jump.
Wal-Mart Stores, Inc (WMT) is a member of the “dividend champion” list having increased its payout for 37 straight years. Trading with a yield in the low 2 percentages just a month ago, a recent dividend increase has lead to much more acceptable 2.8% current yield. Future growth looks promising as this superstore has seen dividend growth near 18% for the last 10 years. Even if you’re not a huge Buffett fan (and still reading this far) you can take stake in the fact that Bill Gates is an investor as well.
ConocoPhillips (COP) earns a spot on the “dividend contender” list having increased dividends for 11 straight years. Oil is big in the news right now, and even if you think it’s a temporary spike, future demand is likely to stay. Moreover COP has operations in natural gas and oil sands. The move from “contender” to “champion” might take a while (say 14 years) but the 35% payout ratio suggest sustainability. In the meantime the near 13% 5-year growth rate in dividends will help your yield on cost expand.
Perhaps it’s a reflection of the current economic recovery, but these 9 stocks look poised for strong futures. Of course if you really want to invest like Buffett, you could simply take a stake in his company Berkshire Hathaway (BRK.A). Those without the capital for a $125,000 share, can always move to the next tier BRK.B pegged at 1/1500th of an A share, although without the voting rights. Some might complain about the lack of dividends, but others might conclude that Berkshire’s reinvestment is like having Buffett as your personal advisor. Invest like Buffett or with Buffett, history says you’re a winner either way.
Disclosure: I am long KO.

Warren Buffett: Closet Dividend Investor – Seeking Alpha

Warren Buffett: Closet Dividend Investor – Seeking Alpha

Warren Buffett’s latest annual letter to Berkshire Hathaway (BRK.A) shareholders was published on Feb 26. The major theme of this letter was how to value Berkshire Hathaway as a company. Given the diverse nature of the company’s operations, this is no small task. Another important item that the Oracle of Omaha discussed was the dividend stream that flows to Berkshire on a regular basis.
In a previous article I outlined several reasons why Buffett is a dividend investor. While his investment style in the 1950s – 1970s was simply to purchase stocks trading at a discount to their fair values, it evolved into purchasing entire businesses or equity stakes in them. The common characteristic of these businesses was that they had strong competitive advantages, high returns on equity and as a result were generating excess cash flows. Buffett then used these excess cashflows to invest in other businesses, thus further compounding his capital base. Another characteristic common to Buffett’s stock investments is that most of them pay a dividend as evidenced by the largest positions for Berkshire Hathaway (BRK.A), below, click to enlarge:





In addition to that, Berkshire is expected to earn fat dividends from itsinvestments in preferred stocks in General Electric (GE) and Goldman Sachs (GS) as well.

For the foreign based shares listed above I converted the amount of shares Berkshire Held at Dec 31, 2010 to the respective number of ADRs traded on US exchanges. For any currency translations I used the exchange rate as of Dec 31 as well.
Of particular importance are Buffett’s investments in Coca-Cola (KO), Procter & Gamble (PG) and The Washington Post (WPO), which was not listed above.
Buffett’s cost basis in Coca-Cola (KO) is $1.3 billion. At the current distributions rate he is essentially generating a yield on cost of 29%. This means that every three years he gets his initial investment back in the form of dividends alone. The majority of his position in the company was initiated between 1988 and 1989. Check my analysis of Coca-Cola (KO).
In Buffett’s words:
Other companies we hold are likely to increase their dividends as well. Coca-Cola paid us $88 million in 1995, the year after we finished purchasing the stock. Every year since, Coke has increased its dividend. In 2011, we will almost certainly receive $376 million from Coke, up $24 million from last year. Within ten years, I would expect that $376 million to double. By the end of that period, I wouldn’t be surprised to see our share of Coke’s annual earnings exceed 100% of what we paid for the investment. Time is the friend of the wonderful business.
Buffett’s cost basis in Procter & Gamble (PG) is $464 million. He is generating a yield on cost of over 31% for his shareholders on this investment. The original investment in 1989 was made in Gillette preferred stock, which was converted into common stock in 1991. In 2005 Procter & Gamble (PG) acquired Gillette, which is how Buffett ended up with Procter & Gamble (PG) stock in the process. Check my analysisof Procter & Gamble.
Buffett’s basis in Washington Post (WPO) is $6.15/share. With a current dividend of $9.40, Berkshire’s yield on cost is 153%. The Oracle of Omaha began acquiring stock in the prominent newspaper group in 1973.
The lesson to be learned from these investments is to purchase great businesses at fair prices. These businesses should have a strong competitive advantage, pricing power and generate excess returns without requiring a lot of capital to grow.
Full Disclosure: Long PG, KO, JNJ, KFT, WMT

Warren Buffett’s Berkshire Hathaway Holdings – Seeking Alpha

Below we highlight the holdings of Warren Buffett’s Berkshire Hathaway at the end of 2010 from the company’s recently released 13F. Using these positions, the portfolio is up 2.58% so far in 2011, which is 300 basis points below the S&P 500’s year-to-date change of 5.60% (through 2/15). Coca-Cola (KO) has no doubt hurt Buffett’s returns this year. KO is not only Berkshire’s biggest holding at 23.4%, but it’s also the worst performing holding YTD with a decline of 3.92%. Wells Fargo (WFC) — Berkshire’s second biggest holding — has picked up the slack, however, with a YTD gain of 8.68%. American Express (AXP) is Berkshire’s third biggest holding at 13% of the portfolio.
Buffett’s best holding year-to-date has been General Electric (GE) with a gain of more than 17%. When was the last time General Electric led any portfolio? Moody’s (MCO), Exxon (XOM), and Gannett (GCI) are the only other names in the portfolio that are up more than 10% year to date.
(Click charts to expand)
We also ran Berkshire’s holdings through our custom trading range screen which makes it easy to quickly see where the stocks are trading at the moment. The stocks are sorted by their size in Berkshire’s portfolio from biggest to smallest. While most stocks in the portfolio are overbought, it’s easy to see that some of the bigger names in the portfolio are the ones that have been weak.
Finally, we put together a sector breakdown of Berkshire’s portfolio. As shown, Financials make up a whopping 45.1% of the portfolio, while Consumer Staples make up 43.1%. As shown, Buffett’s sector weightings are just a wee bit different from the S&P 500’s sector weightings. He’s the most underweight the Technology sector since he has no exposure to it even though it’s the biggest sector in the S&P 500 at 19%. Buffett has said numerous times in the past that he doesn’t invest in what he doesn’t understand, and that is one reason he gives for not investing in the Technology sector. In this case, he’s putting his money where his mouth is.

Berkshire Hathaway Holdings – CNBC

Berkshire Hathaway Holdings – CNBC

These are the publicly-traded U.S. stocks owned by Warren Buffett’s holding company Berkshire Hathaway or its subsidiaries, as reported to the Securities and Exchange Commission in filings made available to the public.

There are times when Berkshire asks for, and receives, the SEC’s permission to temporarily withhold data on some stock holdings.

Click on a header to sort by that column. Clicking twice will reverse the order of the sort. The stake column shows the percentage of each company’s outstanding shares that are held by Berkshire Hathaway.

Holdings are as of December 31, 2010 as reported in Berkshire Hathaway’s 13-F SEC filing on February 14, 2011.

Market Price quotes are in real-time during U.S. market hours.

CNBC.com provides extensive coverage of Warren Buffett and his investments in the Warren Buffett Watch blog.

Comments? Email us at buffettwatch@cnbc.com

Warren Buffett’s Berkshire Hathaway Eliminates Stakes in 8 Stocks – CNBC

Warren Buffett’s Berkshire Hathaway Eliminates Stakes in 8 Stocks – CNBC

Warren Buffett’s Berkshire Hathaway Eliminates Stakes in 8 Stocks

Published: Monday, 14 Feb 2011 | 5:53 PM ET    By: Alex rippen
Executive Producer


Warren Buffett’s Berkshire Hathaway was doing some selling in last year’s fourth quarter.

Its quarterly portfolio filing with the SEC shows that as of December 31, Berkshire had no holdings for eight stocks that had been listed in its Q3 portfolio filing.
Based on the fact that the eliminated positions were worth less than $300 million or so, my guess is that some or all of them had been managed by Lou Simpson, the GEICO stockpicker who retired at the end of last year.

Lou Simpson
Lou Simpson

While GEICO is a Berkshire subsidiary, Simpson operated independently of Buffett.

In his 2004 letter to shareholders, Buffett wrote, “Customarily (Simpson’s) purchases are in the $200-$300 million range and are in companies that are smaller than the ones I focus on.”
We do know, because Buffett told us in April of 2009, that Simpson was responsible for Berkshire’s Bank of America stake.
The stocks eliminated in this latest filing are:
Total current value of the eliminated stakes is about $1.3 billion. (Perhaps contributing a portion of the $2 billion to $3 billion expected to be managedby Berkshire newcomer Todd Combs.)
Berkshire’s holdings of Wells Fargo [WFC 33.87 0.11 (+0.33%) ] increased by 2 percent to 342.6 million shares. At today’s closing price, that stake would be worth $11.6 billion.
There are decreases for holdings of two stocks:
Thanks the stock market’s gains in the fourth quarter, the market value of Berkshire’s reported stock portfolio increased to $52.6 billion as of December 31, compared to $48.6 billion as of September 30, 2010.

Current Berkshire stock prices:

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Email comments to buffettwatch@cnbc.com
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What Would Young Buffett Buy?

Everyone wants to invest like Warren Buffett. He is the 3rd richest man in the world and the namesake for this site. He has made a fortune over the past 50 years with his shrewd investment strategy. Buffett has always been a value investor looking for strong companies selling at a discount. Buffett’s top holdings are Coca Cola, Wells Fargo, American Express, Proctor & Gamble, and Kraft. Have you noticed a trend?
The top 10 stocks in Warren Buffett’s portfolio are all large cap stocks. These are all blue chip companies with excellent free cash flows and solid dividends. Why does Buffett have so many large cap companies? Billionaire Buffett has to buy large cap stocks because it would be impractical for Buffett to have a portfolio of small cap stocks. With a $48 billion dollar portfolio, Buffett would have to buy millions of smaller companies to make effective use of his capital.
The interesting thing is that young Warren Buffet was a different investor. Young Buffett invested heavily in small and mid sized companies. His purchase of Sanborn Maps in 1960 is a good example of this. Buffett’s partnership placed 35% of the partnerships funds in this one investment. He saw a great opportunity and invested heavily in it. He did the same thing when his company purchased See’s Candy in 1972.
Let’s take a look at how a young Warren Buffett built his fortune.
1. Invest heavily in your best idea.
Let’s be clear, I am not suggesting that you put 100% of your money in any one investment. You should however be willing to invest 20 to 30% of your money in your best ideas. Too many people overly diversify. They allocate the same amount of money to their best ideas as to their worst one. Buffett protégé Monish Pabrai discusses the importance of making big bets infrequently in his book The Dhandho Investor. I may buy a bunch of different stocks for my personal portfolio but I put most of my money in my best ideas.
2. Invest in stocks whose best growth potential is ahead of them.
Young Warren Buffett was not the billionaire that he is today so sometimes he would have to sell a position to enter another one. Buffett would sell a stock with 20% upside potential for a stock with 50% upside potential. You have to be willing to give up a good opportunity for a great one. That’s why I am not a big fan of loading up on companies with huge market caps. A company with a market cap of $200 to $300 billion will have a difficult time doubling in value compared to a company with a market cap of $1 billion dollars. Buffett bought companies like Coca Cola and Gillette doing their heydays.
3. Invest in companies that are off the map.
An investor’s biggest advantage is in being able to invest in opportunities that others don’t know about. Buffett never invests in the “hot sectors”. Stay away from the must buys that you see on CNBC and other business channels. The best time to buy a stock is when it is out of favor. Financial experts and market strategists hate financials right now so that tells me that financials are the place to invest.
Well, I hope that you find this information useful in helping you shape your investment strategy.
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