Berkshire Hathaway's Third Quarter 2022 Portfolio Moves – Forbes

Warren Buffett (L), CEO of Berkshire Hathaway, and vice chairman Charlie Munger attend the 2019 … [+] annual shareholders meeting in Omaha, Nebraska, May 3, 2019. (Photo by Johannes EISELE / AFP) (Photo credit should read JOHANNES EISELE/AFP via Getty Images)
Berkshire Hathaway’s (BRK/A, BRK/B) first-quarter 13F was filed on November 14. This filing gives us a quarterly opportunity to observe what two of the greatest investors, Warren Buffett and Charlie Munger, and their team are doing within Berkshire’s publicly traded equity portfolio. Berkshire has a large stable of wholly-owned entities, so this is just a slice of their investments. As summarized here, Berkshire’s third-quarter earnings report provided more information about the operating companies.
Berkshire’s $296 billion very concentrated investment portfolio consists of 49 companies, two stocks more than last quarter. Despite investing $3.7 billion more into its stock portfolio, the value fell from $300 billion at the end of the second quarter due to the over 5% decline in the S&P 500. The top 5 holdings account for over 74% of the total portfolio. The top five holdings, in order of the size of holding, are Apple AAPL (AAPL), Bank of America BAC (BAC), Chevron CVX (CVX CVX ), Coca-Cola KO (KO), and American Express AXP (AXP). Apple has grown to almost 42% of its portfolio at the end of the third quarter. Due to these significant holdings plus Occidental Petroleum OXY (OXY) and Kraft Heinz (KHC), the portfolio is significantly overweight technology, energy, consumer staples, and financials relative to the S&P 500. This portfolio includes no industrials, real estate companies, or utilities, but Berkshire’s wholly-owned entities include a large railroad, Burlington Northern Santa Fe, and multiple regulated utilities and pipelines.
Berkshire’s Holdings By Sector
Because the 13F does not include international stocks, Berkshire Hathaway announced the acquisition of about 5% of five Japanese trading companies at the end of August 2020. These holdings are not part of this analysis: Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. Ltd., and Sumitomo Corp. Buffett indicated that these were intended to be long-term holdings, and Berkshire may increase its stake to 9.9%.
This analysis looks at the Berkshire portfolio across a host of measures, including 12-month forward estimated: price-to-earnings (P/E), price-to-sales (P/S), return-on-equity (ROE), enterprise value-to-earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), price-to-book (P/B), dividend yield, current debt-to-EBITDA, current free cash flow yield, current operating margin, and long-term earnings-per-share growth consensus estimates.
Berkshire’s Stock Portfolio Valuation
Overall, the portfolio analysis reflects a cheaper valuation than the S&P 500 while having better profitability as measured by return on equity and operating margin with lower debt levels. The long-term (next 3 to 5 years) consensus earnings-per-share growth rate is expected to be slightly higher than the S&P 500. Buffett’s penchant for preferring high-quality companies that generate significant cash flows is clear from the better profitability metrics combined with a superior free cash flow yield.
There were three new purchases after no new stocks were added in the second quarter. Small stakes were taken in Louisiana-Pacific (LPX) and Jefferies Financial (JEF). While we can’t be sure, the size of these new stakes is small enough that Ted Weschler or Todd Combs likely purchased them. On the other hand, the recent purchase of over $4 billion of Taiwan Semiconductor (TSM) has the fingerprints of Buffett and Munger on it as it is now the tenth largest holding in the publicly traded portfolio.
Store Capital (STOR) was eliminated from the portfolio in the second quarter. Berkshire had been reducing its holdings in the company in the first and second quarters.
Berkshire reduced its holdings of Activision Blizzard (ATVI), Kroger (KR), U.S. Bancorp (USB), Bank of New York Mellon (BK), and General Motors (GM). The Kroger, General Motors, and U.S. Bancorp positions were also reduced in the previous quarter. Interestingly, Berkshire had just increased its position in GM in the first quarter. Buffett discussed the increase in the Activision holding earlier in the year at the Berkshire annual meeting and noted that it was a merger arbitrage opportunity, betting that Microsoft would complete the acquisition. Microsoft (MSFT) announced a deal to buy Activision for $95.00 per share in cash on January 18, 2022. Despite selling roughly $600 million worth, Activision remains Berkshire’s ninth-largest holding.
Berkshire added to its holdings of Chevron (CVX), Occidental Petroleum (OXY), Paramount Global (PARA), Celanese (CE), and RH (RH). Every stock with increased holdings had more shares purchased in the second quarter, except RH. The RH stake was raised in the first quarter, and the stock hit a 52-week low at the end of the second quarter. Berkshire remains the largest holder of Paramount Global B stock, with almost 15% of the shares. The Chevron holding has been expanded for five straight quarters, and the purchases have been significant enough to vault it to Berkshire’s third-largest publicly traded holding. The additional shares of Occidental purchased were the largest of the stocks bought in the quarter and known before this filing. Berkshire revealed a greater than 10% stake in Occidental earlier in the year and must disclose any transactions in the stock. Berkshire now controls more than 20% of the outstanding shares in Occidental. A deeper analysis of the probable reasons behind the Occidental purchase can be found here.
Berkshire added $3.7 billion in net stock purchases to its publicly traded portfolio in the second quarter. Notably, a large portion of the investments was made in two energy companies, Occidental and Chevron, which comprise 12% of the portfolio. Despite the continued stock declines in the third quarter, Berkshire’s pace of net purchases remained relatively unchanged. Buffett’s statement at this year’s annual meeting still resonates, “Berkshire has not been good at timing. It’s been reasonably good at figuring out when it’s getting something good for the money. If anything, they sometimes want it to stay cheap so they can generally buy more if they like it.” Buffett continued the theme from last quarter as every stock with increased holdings this quarter was either a new addition this year or had additional shares purchased in the first two quarters. It is also notable that Buffett’s new top-ten position in Taiwan Semiconductor hit a low in late October, so it will be interesting to see if the buying continues in the fourth quarter.
Disclosure: Glenview Trust currently holds Berkshire Hathaway and many other stocks mentioned in this article within its recommended investment strategies. I am a long-time shareholder of Berkshire Hathaway and worked for Salomon Brothers when Warren Buffett became Chairman and CEO.

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