Another big name added to Berkshire portfolio: Exxon Mobil

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Posted: Saturday, May 3, 2014 12:00 am | Updated: 1:52 am, Tue May 20, 2014.

The market value of Berkshire Hathaway's stock investments rose 34 percent in 2013, up from a 14 percent gain in 2012, as the company's portfolio of blue-chip investments anchored by familiar names such as Coca-Cola Co. and American Express Co. remained little altered from previous years.

The performance of the stock portfolio outpaced that of the Standard & Poor's 500 last year, with the benchmark index gaining 32 percent for 2013.

Two stocks fell from the list of largest holdings, those of South Korean steelmaker POSCO and oil producer ConocoPhillips. There were two additions, including New York-based investment bank Goldman Sachs Group, whose shares were acquired by dint of options issued in conjunction with a large Berkshire cash infusion made during the 2008 banking crisis.

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The other newcomer that is sure to be a conversation starter for the thousands of people in town for this year's annual meeting in Omaha today: oil giant Exxon Mobil Corp. Berkshire owned 41 million shares at year's end, bought at a cost of $3.7 billion; the stake is now worth about $4.2 billion. Analysts say it is likely that Berkshire bought most of the Exxon stake in 2013's third quarter, when prices hovered around $85 a share. They are now at about $100 a share.

The purchase of shares in the world's most profitable company, said University of Maryland business professor and Berkshire shareholder David Kass, illustrates the stock-picking method that has made Berkshire Chairman and Chief Executive Warren Buffett a legend in the field. Kass, like many who follow Buffett's stock picks, believes the Oracle of Omaha has a mental list of companies he admires and whose shares he would like to own, if only they were a little cheaper or if their underlying economics changed a little for the better.

“Warren Buffett closely follows hundreds of stocks over many years by carefully reading their annual reports along with other financial reports,” said Kass, a regular annual meeting attendee who brings business school students along. “He is very patient, and when circumstances change, such as an attractive price and an improved outlook for earnings over a five-year time frame or longer, he is ready to make a sizable investment.”

Berkshire last year also made sizable investments by adding to existing holdings:

>> 27.3 million additional shares of San Francisco-based Wells Fargo & Co., the nation's fourth-largest bank. With a total of 483.47 million shares, Wells Fargo is Berkshire's largest equity holding, a stake with a market value of about $24 billion, more than double what it has cost.

>> An additional 18 million shares of U.S. Bancorp, the Minneapolis-based bank that is the 10th-largest in the country. Berkshire now owns 96.1 million shares, worth $3.9 billion, or about 30 percent more than they cost to purchase.

>> Walmart Stores Inc., another Buffett favorite for many years, also attracted investment in an additional 1.9 million shares, for a total stake of 56.8 million shares worth about $4.4 billion, or about 50 percent more than it has cost to amass.

There were also four stock holdings that still rank among the largest in the portfolio that Berkshire pared during 2013:

>> DirecTV shares, an investment made by deputy stock pickers Ted Weschler and Todd Combs, were reduced by 760,000 shares to 22.2 million. The stake cost $1 billion and is now worth about 70 percent more, or $1.7 billion.

>> There were 3.7 million fewer shares of Moody's Corp., the New York-based firm supplying credit ratings and financial research. Berkshire now lists 24.7 million shares, worth about $1.9 billion, or an increase of more than sevenfold over the $248 million they have cost.

>> Shares of Sanofi, a French drugmaker, were pared by 3.6 million shares, to 22.1 million. The stake is worth about $2.4 billion, or 41 percent more than its purchase price.

>> The biggest reduction came among the shares of Tesco PLC, the U.K.'s largest supermarket chain, and the world's second-largest retailer after Walmart. Berkshire last year shed 114.5 million shares of Tesco. The stake of 301 million shares was worth about $1.6 billion at the end of 2013, or slightly less than what it cost.

Another new entrant on the list of top holdings, New York-based investment bank Goldman Sachs, is also one likely to remain unchanged for years. Buffett is a longtime admirer of the company; the shares were amassed as a result of Buffett investing $5 billion with Goldman in 2008, as the nation's banks teetered on insolvency.

In addition to earning 10 percent interest on the $5 billion, Berkshire got the right to buy common shares in the future at a set price. The 13 million shares of Goldman now owned by Berkshire cost $750 million and are now worth about $2 billion.

Berkshire has a similar agreement with Bank of America. The company has the right to buy 700 million shares of the Charlotte, N.C.-based bank for $5 billion before September 2021. Those purchase rights were worth about $11 billion at year's end.

“We are likely to purchase the shares just before expiration of our option,” Buffett wrote in his annual letter to shareholders. “In the meantime, it is important for you to realize that Bank of America is, in effect, our fifth-largest equity investment and one we value highly.”

Top Berkshire holdings

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Shares Company %Owned Cost Market value
151.6 million American Express 14.2 $1.3 billion $13.8 billion
400 million Coca-Cola 9.1 $1.3 billion $16.5 billion
22.2 million DirecTV 4.2 $1 billion $1.7 billion
41.1 million Exxon Mobil 0.9 $3.7 billion $4.2 billion
13 million Goldman Sachs 2.8 $750 million $2 billion
68.1 million IBM 6.3 $11.7 billion $12.8 billion
24.7 million Moody's 11.5 $248 million $1.9 billion
20 million Munich Re 11.2 $2.9 billion $4.4 billion
20.6 million Phillips 66 3.4 $660 million $1.6 billion
52.5 million Procter & Gamble 1.9 $336 million $4.3 billion
22.1 million Sanofi 1.7 $1.7 billion $2.4 billion
301 million Tesco PLC 3.7 $1.7 billion $1.6 billion
96.1 million U.S. Bancorp 5.3 $3 billion $3.9 billion
56.8 million Walmart Stores 1.8 $2.9 billion $4.4 billion
483.5 million Wells Fargo 9.2 $11.8 billion $24 billion

Source: Berkshire Hathaway 2013 annual report

Share figures rounded as of Dec. 31. Excludes shares held in Berkshire subsidiary pension funds. Cost reflects actual purchase price and tax basis and is not reflective of GAAP adjustments.

The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.

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