Berkshire Continues to Shift Cash Elsewhere

Saturday, February 16, 2013

Berkshire Continues to Shift Cash Elsewhere

Morningstar

Berkshire continued to sell legacy holdings in the fourth quarter to free up capital for investments in other names, most notably this week's acquisition of Heinz.

Omaha, Feb.16, stock tips .- Berkshire Hathaway's (BRK.A) (BRK.B) fourth-quarter 13-F filing, which details the firm's equity holdings, continued to show evidence of the primary theme we've believed would drive portfolio movements over the near term. Ever since Berkshire appointed Ted Weschler and Todd Combs as investment managers, the firm has been fairly active about selling legacy positions as part of an ongoing process to raise capital for the two managers to invest.

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Greggory Warren, CFA, is a senior stock analyst with Morningstar.

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The biggest sale during the period involved 28.8 million shares of

Kraft Foods Group(KRFT), which, by our estimates raised around $1.1 billion for the firm. At a little more than $75 million at the end of last year, Kraft is now one of the smallest holdings in Berkshire's equity portfolio, and we'd be surprised if the shares remained there much longer. As for the other sales during the period, Berkshire sold off another 165,000 shares of

Johnson & Johnson (JNJ), whittling its stake in the health-care firm down to less than $23 million at the end of the year. Much like with Kraft, we expect Johnson & Johnson to continue to be a source of cash for the managers at Berkshire. The only other sale during the fourth quarter involved Lee Enterprise (LEE), which is now the smallest holding in Berkshire's equity portfolio.

Looking at the purchases during the quarter, Warren Buffett committed another $585 million to

Wells Fargo (WFC), which is now Berkshire's largest holding (at 20% of the total equity portfolio).

DaVita HealthCare Partners (DVA),

General Motors (GM), and

DirecTV (DTV) all saw more than $200 million in additional capital allocated to them during the period, with DaVita and DirecTV both firmly placed as top 10 holdings at Berkshire at the end of the year. As for the other purchases during the quarter, the firm increased its stakes in

International Business Machines (IBM),

Wal-Mart Stores (WMT), Liberty Media (LMCAV),

Precision Castparts(PCP), and

National Oilwell Varco (NOV), but the buys were relatively small compared with Berkshire's holdings in these stocks. Although there was a more meaningful purchase of Wabco Holdings (WBC), and new money purchases of

Archer-Daniels Midland (ADM) and

VeriSign (VRSN), these transactions paled in comparison with the company's $12.2 billion investment in

H.J. Heinz (HNZ) announced Thursday. ...

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Benjamin Graham Was A Crappy Hedge Fund Manager

Jack Bogle, the outspoken godfather of index funds and passive investing strategies, didn't approve of a recent Wall Street Journal article defending hedge funds.

In particular, he took issue with the author's reference to Benjamin Graham, the legendary Columbia finance professor who literally wrote the book on Security Analysis and mentored Warren Buffett.

Bogle wrote a letter to the editor. Here's an excerpt: Citing Benjamin Graham as the first "hedged fund" operator is an especially unfortunate example. "The trick," Mr. Rice writes, was Graham's "clever way to make money . . . whether it [the market] continued to rise, or started to fall." ...

Proposal for New Hedge Fund Fee Structure: 1% + 33% of Alpha

By The Big Picture

One of my pet peeves is the way that insiders -- whether corporate CEOs, hedge fund managers, or elected politicos -- capture compensation (or credit) for normal cyclical gains they had little or nothing to do with.

This is the approach favored by the Crony Capitalists — those people pretending to be free market participants, and who merely pretend to be creating value. They are taking credit for structural successes that would have occurred with or without them. What they are actually doing is capturing value, not creating it — and then transferring it from its true owners (shareholders/investors) to themselves.

This is wrong; it is legalized theft.

If you want to see a good example of how CEOs transfer shareholder wealth to themselves, a good place to start is Roger Lowenstein’s 2004 book, Origins of the Crash: The Great Bubble and Its Undoing. The section on CEO compensation is astounding; these guys were essentially getting wildly overcompensated for being CEOs during a bull market. The prime example was the CEO of Heinz, who gave himself (with the tacit approval of his Board of~~Crony~~ Directors) a $90 million bonus. And this was back in the early 1990s, when $90 million was real money.

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www.ritholtz.com

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BMW Pininfarina Gran Lusso Coupé.

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...

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6 Tips to Work From Home Successfully

The future of work is the work itself, not where and when the work takes place. Workplace flexibility programs are already catching on and will soon become standardized as more millennials enter the workplace. All workers, not just millennials,want freedom and flexibility and some are even quitting their jobs to becoming freelancers in order to gain that freedom. oDesk.com has 3.3 million registered freelancers, and Intuit predicts that by 2020, 40% of Americans will be freelancers. When it comes to working from home, 13.4 million people (9.4% of all American workers) work from home at least one day per week compared to just 9.2 million in 1997 according to one Census Bureau.

Today's top Green Energy Good News

Russia is funding research into powering its airplanes with solar energy. The airline industry is being hurt by high fuel prices, and solar-powered planes would not only be cheaper but also would remove a major source of carbon pollution that contributes to global warming.

Texas is set to double its wind energy generation from 60 gigawatts to 120 gigawatts in 2013.

Britain has made substantial investments in wind energy and its technology. British PM David Cameron is touting his country’s green expertise on his trip to India to promote trade with that country. ... Continue.

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