Last week, five of the 10 biggest stocks in Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) portfolio reported their third-quarter earnings, and investors are clamoring to know how he's feeling this week.
At the end of the second quarter, Berkshire Hathaway had a little more than $75 billion dollars invested in its 10 biggest stock holdings, which are broken out in the chart below:
So far we've seen Wells Fargo & Co (NYSE:WFC), The Coca-Cola Company (NYSE:KO), International Business Machines Corp. (NYSE:IBM), American Express Company (NYSE:AXP), and U.S. Bancorp (NYSE:USB), which represented $62 billion of his portfolio, all report earnings -- and while four of those companies had strong results, one of them dragged down the whole ship. Yet Warren Buffet's opinion on that company may surprise you.
Wells Fargo Wells Fargo reported earnings on Friday, Oct. 11, and the stock shot down almost 2.5% after the news was reported -- even though the company reported its 10th straight quarter of record net income. While its income fell in large part to dwindling mortgage refinancings, it still saw strong growth in its other business lines. It also improved its ever-important return on equity (which is what Buffett holds, after all!) from 13.4% to 14.1% over the past year. Despite the early dip, Wells Fargo's stock has rebounded nicely, and this bank looks poised to continue its strong performance -- which likely makes Buffett very happy.
Coca Cola Thanks in large part to currency changes and one-time charges, Coke saw its revenue and net income drop in the third quarter. But if you exclude those, it actually saw its income grow by 8% and revenue grow by 4% in the quarter. While the company has still seen difficulty in its soft drink sales, it has seen strong growth in its tea business. Coke didn't blow its earnings out of the bottle, but it still had another solid quarter.
Warren Buffet once said about Coca-Cola, "I'm the kind of guy who likes to bet on sure things. No business has ever failed with happy customers ... and you're selling happiness." And while the packaging may be different from soda to tea, Coke is still selling happiness abundantly.
IBM In November 2011, when Buffett disclosed his position in IBM on CNBC, he said about the management at IBM that "they treat their stock with reverence, which I find is unusual among big companies. Or they really -- they are thinking about the shareholder."
While IBM reported higher net income, as a result of weakening sales in China, IBM's revenue took a turn for the worse, and the stock plummeted as a result, falling almost 6%. So, is Warren Buffett now reevaluating his position in this tech giant?