Warren Buffett has been busy making some key acquisitions for Berkshire Hathaway Inc. (NYSE: BRK-A) and changing some of its largest investments. Just as he discloses his investment in yet another large company and is finishing the buyout of another, investors can stand to gain a great deal by following Buffett — particularly as he has invested recently. After all, he is still considered by many to be the greatest investor of modern times.
Now that the market has pulled back, and with investors looking for key value stocks, 24/7 Wall St. has evaluated the most dominant investments Buffett and Berkshire Hathaway hold. We did not just focus on the public stocks listed in the quarterly 13F filing with the Securities and Exchange Commission. These portfolio changes include the larger preferred investments, the recent huge acquisition, and also the interest in the Kraft-Heinz deal. Our review will give a better picture of how Buffett’s real-money bets are doing for annual income and long-term gains, rather than just trying to choose 10 different stocks that would under-represent “The Real Berkshire Hathaway Portfolio.”
Also, keep in mind that there was a discrepancy between the Berkshire Hathaway quarterly earnings filing value and the total value listed in the 13F filing of company holdings. The latest filing showed that “confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange.” This means that some the investments made are not public.
These are the most dominant Berkshire Hathaway positions. Because some of these are special calculations and because the true market value may be harder to calculate on some investments, we have listed these solely in alphabetical order. We included only investment in American companies, with the exception of a foreign bond inclusion. In the big four stock holdings, we used the values stated for the June 30 cut-off date with relative value before. In others, the values used were as of the last day of August or the first day of September. Some are also listed just as a cost-basis valuation.
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American Express
> Stake: 151 million common shares
> Value: $11.8 billion
The American Express Co. (NYSE: AXP) holding has not changed from its over 151 million shares for years. The value was listed as $11.8 billion as of June 30, versus $13.3 billion at the end of 2014, after the stock price has been battered. Still, Buffett has held American Express since the 1980s and he does not have to care about the recent sharp price drop as possibly wiping out his entire gain. Even though American Express has an unimpressive dividend yield of about 1.4%, Buffett’s cost basis is so low that his yield is far greater. One thing likely keeping from Buffett from selling the stake is a multi-billion capital gains bill that would have to be paid if he sold.
Bank of America
> Stake: Preferred shares
> Value: $5.0 billion (cost basis)
Bank of America Corp. (NYSE: BAC) is one of Buffett’s top banking stakes, built after he invested $5 billion in preferred shares and warrants in 2011. Pardon this visual image, but Buffett said at the time that he came up with the idea to invest while he was in the bathtub. Berkshire Hathaway owns 50,000 shares of 6% Non-Cumulative Perpetual Preferred Stock in Bank of America with a liquidation value of $100,000 per share and warrants to purchase 700,000,000 shares of common stock. Bank of America may not redeem the preferred shares before May 7, 2019, and the redemption price is $105,000 per share (or $5.25 billion in aggregate). Buffett’s warrants expire in 2021 and are exercisable for an additional aggregate cost of $5 billion ($7.142857 per share) — at this time, Buffett has one serious profit.
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Charter Communications
> Stake: 8.51 million common shares
> Value: $1.4 billion
Charter Communications Inc. (NASDAQ: CHTR) is a stake that is relatively new. Its size has been gradually raised in recent quarters after the initial investment in 2014. Charter shares were at $188 a share less than two weeks ago, and they fell to almost $170 before recovering to above $180 during the pullback. Charter’s merger with Time Warner Cable and Bright House is just adding enhanced value beyond Buffett’s initial intention according to most experts. Berkshire Hathaway owns 7.6% of the outstanding Charter shares, but the NewCo stake will be smaller once the mergers close. If Berkshire wants to own more Charter shares after the merger, it can invest another $1 billion before reaching the 10% stakeholder threshold.