What Stocks Are in Buffett’s Annual Letter? – Wells Fargo & Co (WFC), The Procter & Gamble Company (PG)

Page 1 of 2

Okay, Okay! Another ‘Warren Buffett buys this, Buffett buys that’ article. I know what you are thinking and yes, my eyes glaze over with boredom too when I come across a piece about Buffett. However bear with me; I’m going to cut to the chase and outline and discuss some of his major common stock holdings as discussed in Berkshire Hathaway Inc. (NYSE: BRK.B)’s recent annual letter. He is well worth picking ideas from because he is a fantastic investor, and unlike the proselytizing clowns you see on television he has an easily identifiable track record.

Wells Fargo & Co (NYSE:WFC)Buffett’s Key Holdings

This is the first time I have looked at this in any depth and was surprised to find a few stocks in common. Tomes of verbiage have been created on the subject of his investing so I can be allowed a few words too. He is definitely a value investor in the sense of finding intrinsic value and being willing to wait for the market to see it so he can realize his gains. As I never tire of pointing out, all thematic, evaluation based or even technical and mechanical based strategies will produce unintentional style or sector biases. In fact, you can see a classic example of this in 1999 where he massively underperforms (as the market piles into technology but he doesn’t) and then he outperforms for the three years when the tech bubble bursts. He then underperforms as the cyclical stuff makes a comeback in 03-04.

With that said, here are Berkshire Hathaway’s holdings (as listed in the letter) that had a market value of more than $1 billion.

These stocks make up 87% of the total common stock holdings. In other words, they will make a significant difference to BRK’s performance.

Delving Deeper

Buffett previously made the case for a recovery in the US housing market, and I think this is a large part of his case for holding Wells Fargo & Co (NYSE:WFC). The bank is making aggressive inroads into the US mortgage market and is set to be a key beneficiary of a recovery in housing and credit quality improvements. One issue that is challenging the banks in 2013 is that net interest margin (NIM) will be pressured as the loan book matures (containing older loans at a higher rate of interest) and as deposits grow the NIM will be pressured on both sides. Indeed, Wells Fargo & Co (NYSE:WFC) did recently report declining NIM. However, as outlined here the key point is that the economy is improving so all those extra deposits are likely to be used to expand Wells Fargo & Co (NYSE:WFC)’s loan book, and credit quality improves with a better economy. Similarly American Express Company (NYSE: AXP) is a play on the US credit cycle.

International Business Machines Corp. (NYSE: IBM) is a stock I bought recently, and I confess that when I bought it I wasn’t convinced I was buying a technology company! There is a write-up of the stock linked here, and what investors should note is that this isn’t an IT stock in the sense that it has a proprietary or disruptive technology that is fighting to create or punctuate a market. On the contrary, IBM is more of a ‘blocking and tackling’ play. The company is cutting costs and focusing on shifting to higher margin work, so the next time someone yaps about its low single digit revenue growth then point out the margin expansion, free cash flow and double digit EPS growth. In a sense it is a classic Buffett play because it is releasing the intrinsic value in its business via these measures.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!