By Noah Buhayar - Feb 15, 2012 5:58 AM GMT+0700
Berkshire Hathaway Inc. (BRK/A) boosted its stake in DirecTV and added holdings of Liberty Media Corp. and DaVita Inc. after billionaire Warren Buffett hired stock picker Ted Weschler to help manage investments.
Weschler oversaw investments in all three firms while running Peninsula Capital Advisors LLC, the hedge fund he wound down after agreeing to join Omaha, Nebraska-based Berkshire.
Buffett, 81, hired Todd Combs and Weschler to help him pick stocks as he bets the safest and most profitable way to invest is by buying whole companies or their equity. The billionaire investor drew down Berkshire’s cash hoard last year to buy engine-additives maker Lubrizol Corp., a preferred stake in Bank of America Corp. (BAC) and common shares of International Business Machines Corp. (IBM), leaving his firm with about $34.8 billion in cash at the end of September.
“He would like to get that down to closer to $20 billion,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, in an interview before the filing was released. “Berkshire itself is generating free cash flow of about a billion a month,” which may fund stock picks, he said.
Buffett has said he’ll focus on managing Berkshire’s largest stockholdings, such as a stake in Wells Fargo & Co. (WFC), and count on Combs and Weschler to make smaller investments. Combs, 41, who joined Buffett’s firm in 2010, last year added holdings in companies such as MasterCard Inc. (MA), the world’s second-biggest payments network, Intel Corp., and Dollar General Corp. Berkshire said in September that Weschler, 50, would join the company this year.
Exxon Mobil
Berkshire reported no holding of Exxon Mobil Corp., the world’s largest energy company, compared with about 420,000 shares of the company at the end of September.
Berkshire had 1.7 million shares of Liberty Media and 2.7 million shares of dialysis-facility owner DaVita. Liberty Media closed at $85.59 in New York trading today, and DaVita at $84.75. The filing was released after 4 p.m. in New York.
The stake in DirecTV climbed to 20.3 million shares from about 4.2 million at the end of September. DirecTV closed at $45.85 today.
According to a separate filing, Berkshire held about 410 million shares, or 7.7 percent, of San Francisco-based Wells Fargo. Buffett reported a stake of about 359 million shares of the lender at the end of 2010, according to his annual report to shareholders for that year.
‘First Class’
Wells Fargo, the largest U.S. home lender, posted record fourth-quarter profit of $4.11 billion last month and beat analysts’ estimates as mortgage financing improved.
Berkshire’s filings are monitored by analysts and investors for insight into Buffett’s strategy. The firm seeks to “increase its ownership of first-class businesses” with a preference for buying them outright, Buffett said in an article posted on Fortune magazine’s website last week. When a company can’t be purchased, Berkshire seeks to buy equity stakes, he said.
Buffett contrasted this approach with investments in gold or U.S. Treasuries. Bonds are subject to inflation risk which can erode value over the long run, while making money from gold relies on an expanding pool of “fearful” buyers, he wrote. Investments in companies face fewer limitations, he said.
“Over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined,” Buffett wrote. “More important, it will be by far the safest.”
The Standard & Poor’s 500 Index climbed 11 percent in the fourth quarter and 7.4 percent since the end of last year. Berkshire increased its pace of investing in the third quarter of last year when stock markets plunged following S&P’s decision to cut the U.S. top credit rating.
To contact the reporter on this story: Noah Buhayar in New York at Nbuhayar@bloomberg.net
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net
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