Buffett's Berkshire Discloses Stake in NRG Energy

By Josh P. Hamilton and Erik Holm
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Aug. 15 (Bloomberg) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. took a stake in NRG Energy Inc., the second-biggest power producer in Texas, where electricity prices surged 24 percent from a year earlier.

Berkshire had 3.24 million NRG shares as of June 30, the Omaha, Nebraska-based company said yesterday in a regulatory filing disclosing equity investments at the end of the second quarter. Buffett slashed by 61 percent its holding of Anheuser- Busch Cos. before the brewer agreed to be purchased by InBev NV.

Ranked the world's richest man by Forbes magazine, Buffett built Berkshire by investing in out-of-favor securities and buying businesses whose prospects and management he deemed superior. NRG is an unregulated power company, able to charge whatever the market will bear as environmental concerns keep new plants from being built and demand continues to grow.

``It would be logical for him to increase his utility and energy holdings and NRG would fit in nicely,'' said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which oversees $800 million, including Berkshire shares. ``There's exponentially increasing demand for energy.''

Buffett, 77, also added to stakes in refrigeration-equipment maker Ingersoll-Rand Co. and Sanofi-Aventis SA, France's largest drugmaker.

The purchases disclosed yesterday may have cost Buffett about $260 million all told if he bought the shares at their highest second-quarter prices. Berkshire said last week that it spent $3.98 billion on equities in the period, leaving more than $3.5 billion unaccounted for in yesterday's filing.

Confidential Treatment

Outsiders lack full details on the portfolio because Buffett often receives U.S. Securities and Exchange Commission approval to delay disclosure to avert copycat investing. The filing says some information was submitted confidentially, including details on a stake in ConocoPhillips, the No. 2 U.S. refiner. Yesterday's document only lists equities traded on U.S. exchanges.

``I wouldn't be at all surprised if he's gone international, given his trip to Europe in May,'' said Gerald Martin, a finance professor at American University in Washington who has studied Buffett's investing history.

Buffett made a four-day trip to Germany, Switzerland, Spain and Italy to drum up potential buyouts.

``He's not only looking for 100 percent acquisitions, he's also looking at 5, 20, 30 percent,'' said Uto Baader, chairman of brokerge Baader Wertpapierhandelsbank AG, after attending an invitation-only meeting with Buffett in Frankfurt.

France, Korea

Buffett disclosed in March of last year that Berkshire held a 4 percent stake in South Korea's Posco, Asia's third-largest steelmaker. He also has bought French shares of Sanofi and a stake in Britain's Tesco Plc.

Mimicking Buffett's stock trades when publicly revealed would have delivered annual returns of about 25 percent for more than three decades, double the return of the S&P 500, according to a study co-written by Martin in 2007. ``He's probably earned the title of greatest investor of all-time,'' Martin said. ``I would expect he went confidential to get out of Conoco.''

Berkshire had 17.5 million shares of ConocoPhillips as of March 31. The Houston-based company's stock peaked near the end of the second quarter, and dropped 17 percent since then, as oil fell about 23 percent from a record of more than $145 a barrel. Becky Johnson, spokeswoman for ConocoPhillips, didn't return a call.

Berkshire reported record earnings last year as Buffett booked a $3.5 billion profit cashing out of a $500 million investment in oil producer PetroChina Co.

NRG Gains

NRG, based in Princeton, New Jersey, declined 19 percent this year through yesterday. The stock gained $1.64, or 4.7 percent, to $36.86 at 9:33 a.m. in New York Stock Exchange composite trading.

``I would suspect he's looking at this move that we've seen in energy and he's thinking assets are worth a whole lot more than what the market is currently valuing them at,'' said Gordon Howald, an analyst with Calyon Securities in New York who has a ``buy'' rating on NRG shares. NRG spokesman David Knox declined to comment.

Berkshire, previously the No. 2 investor in St. Louis-based Anheuser-Busch, reduced its stake to 13.8 million shares before the maker of Budweiser beer agreed on July 14 to be bought for $52 billion. The brewer rejected an earlier offer in June. Anheuser-Busch shares rose 31 percent in the second quarter, and 9.5 percent more from June 30 through yesterday.

Stock Slump

Berkshire increased its holding of American depositary receipts in Sanofi-Aventis by 8.8 percent to 3.9 million. The ADRs gained 40 cents, or 1.1 percent, to $36.42. Ingersoll-Rand advanced 66 cents, or 1.7 percent, to $40.06.

Berkshire shares had their worst first half since 1990 and are down 18 percent this year through yesterday. Berkshire has posted three consecutive profit declines on slumping returns from insurance, the company's biggest business. The company rose $1,400, or 1.2 percent, to $117,600.

Berkshire invested $5.51 billion on stocks in the first six months of the year compared with purchases of $11.5 billion a year earlier, according to a regulatory filing. The slower pace of purchases may signal that Buffett expects further market declines after saying in June he believes the U.S. is experiencing ``stagflation,'' a slowing economy with rising inflation.

Berkshire's U.S. stocks listed on the filing were worth $57.9 billion on June 30. The largest holdings are Coca-Cola Co., the world's biggest soft-drink maker, and Wells Fargo & Co., the No. 1 bank on the U.S. West Coast.

To contact the reporterson this story: Josh P. Hamilton in New York at jphamilton@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net.