Note to Readers: The following article is an excerpt from the introduction to The Rational Walk’s analysis of Berkshire Hathaway’s 13-F filing listing positions held as of December 31, 2010. The full report, which includes a much “deeper dive” into Berkshire’s portfolio, is available for purchase and also provided as a subscription benefit for members of The Rational Walk’s Berkshire Hathaway Corner.
Berkshire Hathaway’s equity portfolio underwent significant changes during the fourth quarter of 2010 due to Lou Simpson’s retirement from GEICO. Although most media reports attribute Berkshire Hathaway’s portfolio moves exclusively to Warren Buffett, a significant portfolio has long been managed by Mr. Simpson.
According to Warren Buffett’s 2004 letter to shareholders, Lou Simpson delivered average annual gains of 20.3 percent from 1980 to 2004 compared to average annual gains of 13.5 percent for the S&P 500. During the 25 year timeframe, Mr. Simpson posted only three annual losses and underperformed the S&P 500 only six times. Mr. Buffett appropriately stated that Lou Simpson is “a cinch to be inducted into the investment hall of fame.”
Although Mr. Buffett has been effusive in his praise for Lou Simpson’s stock picking acumen, he has not always agreed with specific stock picks in the past. In his 2004 letter to shareholders, Mr. Buffett noted that he typically learns of Mr. Simpson’s transactions ten days after the end of each month. Although noting that Mr. Simpson is “usually right”, sometimes Mr. Buffett “silently disagrees” with his decisions.
During the fourth quarter, eight positions held in GEICO’s portfolio were liquidated. These positions had a combined market value of nearly $1.2 billion as of September 30, 2010. While many of the media reports stating that “Buffett has sold” the stocks in this list are technically true, it does not necessarily follow that he is bearish on these companies since he never initiated the positions to begin with. Warren Buffett and Charlie Munger have often spoken about “not backing into decisions” and perhaps these liquidations represent an example of this philosophy.
In addition to liquidating the eight GEICO holdings, Berkshire also reduced positions in Moody’s and Bank of New York. Mr. Buffett has been reducing Berkshire’s position in Moody’s for several quarters with the most recent reduction reported in late October in a Form 4 filing. The position in Bank of New York was reduced by 10 percent and is a relatively small position for Berkshire with a market value of $54 million as of December 31, 2010.
Berkshire added 6,215,080 shares of Wells Fargo which is ranked as the portfolio’s #2 holding. Mr. Buffett has long been bullish on Wells Fargo and numerous Berkshire subsidiaries hold shares in the bank. In the eight page report we provide comprehensive information and analysis regarding Berkshire’s portfolio as of December 31, 2010.
For More Information …
The Rational Walk’s eight page analysis of Berkshire Hathaway’s 13-F report includes details regarding each of Berkshire Hathaway’s subsidiaries holding equity securities, a consolidated summary of positions held as of December 31, a comparison of the consolidated portfolio at September 31, 2010 and December 31, 2010, and a drill-down listing positions held by Berkshire reporting subsidiaries. We also address the question of whether Warren Buffett’s personal portfolio is reflected in Berkshire Hathaway’s 13-F filing and whether any conclusions can be made regarding Mr. Buffett’s views on the current valuation of securities within the portfolio.
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Disclosure: Long Berkshire Hathaway