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Market Update

DIRECTV Stands Out Among Berkshire's 4Q Stock Purchases

Berkshire Hathaway's 13-F filing also reveals big buys of IBM and Wells Fargo in the quarter.

A quick glance at  Berkshire Hathaway's (BRK.A) (BRK.B) 13-F filing for the fourth quarter of 2011 revealed more than a handful of moves by the insurer during the quarter, with some of the transactions actually bearing the mark of incoming manager Ted Weschler. The first transaction of note was Berkshire's purchase of another 22.3 million shares of  Wells Fargo (WFC),which brings the firm's stake in the bank up to 383.7 million shares (worth $10.6 billion at the end of the fourth quarter). After touting Wells Fargo in his annual review to shareholders last year as a major holding that could see a meaningful increase in its divided, Warren Buffett put his money where his mouth was and snatched up another 41.1 million shares of the bank last year, increasing Berkshire's holdings in the firm by 12%. About the only other transactions we can ascribe to the Oracle of Omaha were the purchase of 6.6 million additional shares of  International Business Machines (IBM) (which we already knew about last quarter), and the sale of 8.4 million shares of  Johnson & Johnson (JNJ) and 2.7 million shares of  Kraft Foods (KFT).

While the purchase of another 16.1 million shares of The  DIRECTV Group  looks like a Buffett move, given that the stock position was worth more than $870 million at the end of the fourth quarter, it is more likely a combined purchase from Berkshire's two new hires--Todd Combs and Ted Weschler (who had DIRECTV listed as the second largest holding in his Peninsula Capital fund at the end of third quarter 2011). We assume that it was a combined purchase because Berkshire was already building a stake in the firm in the third quarter, and Weschler's hiring wasn't announced until mid-September). Looking at the rest of Weschler's holding at the end of the September quarter, it looks like he was also the driving force behind Berkshire's new money purchases of 2.7 million shares of  DaVita (DVA) and 1.7 million shares of Liberty Media , as both firms were top five holdings in his fund. What's interesting to note, though, is the absence of W.R. Grace & Company  form the portfolio, given that it was Weschler's top holding at the end of the third quarter (accounting for close to one third of his total stock portfolio).

As for the remaining transactions, which we assume were handled by Todd Combs, Berkshire picked up another 573,000 shares of  Visa (V) to go with the 2.3 million shares that had been picked up with new money during the third quarter. Combs also picked up another 1.4 million shares of  CVS Caremark (CVS) in the fourth quarter, adding to the 5.7 million shares stake that he had initiated in the previous quarter. The same sort of activity occurred with  General Dynamics (GD) and  Intel (INTC), both of which were new money purchases during the third quarter. In the case of General Dynamics, Combs added 813,000 shares to a 3.1 million share stake. With Intel, it was the addition of 2.2 million shares that brought Berkshire's stake in the semiconductor firm to 11.5 million shares at the end of the fourth quarter. We also assume that Todd Combs sold of the remaining 422,000 shares of  ExxonMobil (XOM), which was originally purchased in the third quarter of 2009, and was never a meaningful position in the portfolio.

With regards to the only other transaction in the filing, the addition of 1.3 million shares of  Verisk Analytics (VRSK), we don't believe that it was a purchase. Verisk is essentially a technology company that provides insurance companies with data and software that they need to run their business. Prior to its initial public offering in October 2009, Verisk had been funded by a number of large insurance companies--including Berkshire--that received shares in the company as it went public. With restrictions placed on the Class B shares the insurers received as part of the IPO, Berkshire has held approximately 7.1 million shares of Verisk's Class B common stock since that time. With half of these shares automatically converting to Class A common stock in early April of last year, and the remainder converting in early October, it was the conversion rather than an outright purchase of Verisk that is responsible for the change in Berkshire's 13-F filing.

Stay tuned as we intend to publish a much deeper look at Berkshire's holdings as part of our Ultimate Stock-Pickers content. 

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Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.