The Oracle Speaks

warren-buffettEach quarter, Wall Street breathlessly awaits Warren Buffett and Berkshire Hathaway’s 13F filing which highlights the company’s largest holdings. By strictest definition a 13F is a quarterly filing that investment institutional investment managers with over $100M must file showing their recent holdings purchased or sold. Mr. Buffett’s 13Fs have always been scrutinized by investors as insights into where investments could be headed since he is regarded by many to be the greatest living investor. We’ll discuss Berkshire Hathaway’s latest filing, but let’s make sure we know what a 13F isn’t. It isn’t a timely roadmap to investment direction as the information is often 6 weeks old. It also doesn’t show original cost basis of the investment if it’s sold or what the price was when sold. However, since Mr. Buffett is considered the ultimate “buy and hold” value investor, the filings tend to show BRK/A’s conviction with any holding they may be selling and give you insights to stocks they may think are valued correctly.1

So what does this past quarter’s 13F show regarding BRK/A? Well it shows they are committed heavily to 4 particular stocks. 58% of their current $107.6B are in concentrated in Wells Fargo ($25B), Coca-Cola ($17B), American Express ($14B), and IBM ($13B).2 So what does this mean? Well let’s look at the numbers.

First, how well has BRK/A done year to date? As a value investing company, BRK/A’s Profit-to-Earnings (PE Ratio) is 17.5 which is roughly the PE of the S&P 500 today. Year to date, BRK/A is up 16.7%. Wells Fargo currently has a PE of 12.75 which compared to the S&P 500 would be value and is up 14% YTD. Coca-Cola PE has a PE of 22 and is up only 2.6%. American Express has the S&P average of 17.65 and is up only .11%. Finally, IBM has a PE well below the S&P average while being up only 3.65%.

The Top Ten listed in the latest 13F shows huge holdings by BRK/A is rounded out by their ownership in Walmart, Proctor & Gamble, Exxon Mobile, US Bancorp, Moody’s and Goldman Sachs. So what should our takeaway be? It shows that some of the stocks that even Warren Buffett buys in this market that are not considered true values. It also shows that they are buying name-brand stocks that you and I have a lot of information about.

Mr. Buffett rightly owns the moniker “Oracle of Omaha”. He was wealthy and smart enough to make significant investments in downtrodden AIG and Citigroup when they were gasping for life in 2009. He made some outstanding calls on certain sectors like railway trafficking over the years. However, I would not be designing my portfolio solely around what BRK/A is purchasing or selling.

Remember, they are value and “Buy and Hold” firm. They have the time and money to allow certain investments to gestate. I will continue to enjoy their filings if for nothing else is great radio fodder, I but don’t see a lot of brilliance or oracle behavior in most of these filings. It’s simply good, solid investing…something we all should be doing.

 

 

1 “Warren Buffett Stocks: A Menu for Long-Term Investments?” Dan Burrows. Feb 18, 2014. InvestorPlace.com http://investorplace.com/2014/02/warren-Buffettt-stocks/#.VAX0fhR0zcs
2 “10 most dominant Warren Buffett Stocks.” Jon C. Ogg and Chris Lange August 25, 2014. USA Today.com http://www.usatoday.com/story/money/markets/2014/08/23/24-7-wall-st-warren-Buffettt-stocks/14446557/

 

 

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