Warren Buffett Gets Into Chicago Bridge & Iron Company N.V. (CBI), Adds More Wells Fargo & Co (WFC)

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Warren Buffett is widely followed in the financial media, and even in mainstream news, as a value investor who has achieved enormous investing success by marrying traditional value analysis to an appreciation for the inherent value of well-known brands. His holding company, Berkshire Hathaway, files quarterly 13Fs with the SEC to disclose many of its long equity positions in U.S. stocks; we regularly track 13Fs as part of our work researching investment strategies (for example, we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year) and so can also see what Buffett has been up to by comparing his most recent filing to what he last reported owning. In this case, we can compare this 13F to his 13F for the fourth quarter of 2012 (see Buffett’s holdings over time). Here are a few stocks that Berkshire was buying in the first quarter of 2013:

Wells Fargo & Co (NYSE:WFC). In the fourth quarter of 2012, Wells Fargo & Co (NYSE:WFC) overtook long-timer Buffett favorite Coca-Cola (NYSE:KO) to become Berkshire Hathaway’s largest holding by market value; Berkshire kept buying early in this year, and owned about 460 million shares at the end of March. At a price-to-book ratio of 1.4, Wells Fargo & Co (NYSE:WFC) actually trades at a premium to the book value of its equity, rare among megabanks in the current environment. It does feature earnings multiples in line with its peers, however, as the bank has been able to monetize these assets quite well. Wells Fargo & Co (NYSE:WFC) had made our list of the most popular financial stocks among hedge funds in the fourth quarter of 2012 (find more financial stocks hedge funds loved).

Warren Buffett Coca-Cola Company (KO)

Chicago Bridge & Iron Company N.V.
(NYSE:CBI). The largest “new pick” in Buffett’s portfolio- although, in fact, many of Berkshire’s new investments are currently being made by Buffett’s designated successors- was $6.2 billion market cap engineering and construction services company Chicago Bridge & Iron Company N.V.(NYSE:CBI). The holding company disclosed ownership of 6.5 million shares in the 13F; on the news of Berkshire’s buy, the stock rose 3% in after hours trading. Chicago Bridge & Iron Company N.V.(NYSE:CBI) carries a beta of 1.9, signifying considerable dependence on the broader economy. While the company’s earnings fell in the first quarter of 2013 versus a year earlier, this was entirely due to acquisition related items; when adding those back, pretax income rose 48%. Wall Street analysts are quite bullish, going by the forward earnings multiple of 11 and the five-year PEG ratio of 0.6. SAC Capital Advisors, managed by billionaire Steve Cohen, had owned 2.7 million shares of the stock at the end of December (research more stocks SAC owned).
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