This article looks into the fourth quarter big buys of Warren Buffett’s Berkshire Hathaway. Mr. Buffett needs no introduction, and every move he makes is considered with the highest regard. In the fourth quarter, Berkshire Hathaway had $75.3 billion assets under management. Its big buys were Wells Fargo & Company (NYSE:WFC), DaVita HealthCare Partners Inc (NYSE:DVA), General Motors Company (NYSE:GM), WABCO Holdings Inc. (NYSE:WBC), and Archer Daniels Midland Company (NYSE:ADM). In search for really good investment insights, I have analyzed these companies briefly from a fundamental perspective.
Sources: finviz.com, nasdaq.com, and whalewisdom.com; as of Feb. 14, 2013
The fund manager bought 17.308 million more shares of Wells Fargo in the fourth quarter; these additional shares are worth around $590 million. The bank is Berkshire Hathaway's top stock, with a share equivalent to 19.96% of its total portfolio. WFC is destined for greatness; it has consistently exceeded consensus estimates in earnings for the last four consecutive quarters. This is attributed to consistent positive revenue growth and impressive profit margins of over 20 percent. Investors can therefore sit back and relax, for their dividend income is safe and growing at WFC. The company has doubled its dividend payments in the past couple of years. For instance, in 2010 the annualized payment was a mere 20 cents per share; it went up in 2011 to 48 cents, then to 88 in 2012. Also, if you think that the current surge in the stock price is about to peak, consider that WFC’s valuation is still at a healthy level with a P/E ratio of 10.48 and a PEG at a pretty level of 1.17. Furthermore, earnings are estimated to grow at an average rate of 8.9 percent in the next five years.
Berkshire Hathaway increased its stake in the health services company DaVita by 33 percent in the latest quarter. The holding was equivalent to 2 percent of the fund manager's portfolio. Although DVA managed to surpass earnings estimates in the previous quarters, it has failed to do so in the latest quarter (ending in September 2012.) Meanwhile, the company has maintained its profit margin of 7 to 8 percent. Recently, it has been impressively growing its revenues at a double-digit rate. As of September 2012, its profit margin was 11.67%, way higher than it was in the same period in 2011 at 6.56%. In the next 5 years, earnings at DaVita are expected to grow by over 13 percent annually.
Berkshire Hathaway also bought 10 million additional shares of General Motors common stock in the fourth quarter, bringing the total holding to 25 million shares worth over $720 million. This does not come as a surprise, as the company has remarkably exceeded consensus estimates within the last 3 consecutive quarters. In fact, the surprise rate in the quarter ending in Sept. 2012 was an impressive 52%. The motor company's profit margin is at a stable rate of 3 percent, while revenue has recently grown at a positive rate of 2.33%. GM’s growth prospects are encouraging, with earnings estimated to grow by an average rate of about 12 percent in the next 5 years.