Buffett's Berkshire Buys Only 1 New Stock

BOSTON (TheStreet) -- Warren Buffett's Berkshire Hathaway (BRK.B) made only two trades in the first quarter: initiating a small stake in credit-card company MasterCard (MA) and trimming its big stake in oil company ConocoPhillips (COP).

It's the second quarter in a row of little activity for the investment company run by the man dubbed the Oracle of Omaha for the trading prowess that helped him build an estimated net worth of $50 billion over half a century. In the first quarter, former hedge fund manager Todd Combs started working at Berkshire, managing part of the portfolio, as the 80-year-old billionaire selects a succession team.

Berkshire Hathaway's 26-stock investment portfolio was valued at $53.6 billion as of March 31, up $1 billion, or 2%, from the end of 2010, according to a Securities and Exchange Commission report that the hedge fund filed late Monday. Buffett isn't required to publish foreign holdings. The benchmark S&P 500 Index rose 5.4% in the first quarter.
Warren Buffett

Buffett's attention was diverted from trading to more pressing matters in the first quarter, including the resignation of a top executive, David Sokol, who many viewed as the most likely candidate to succeed him at Berkshire Hathaway.

Sokol resigned March 30 after it was disclosed that he had traded in shares of oil-additives maker Lubrizol while considering it as a potential takeover candidate for Berkshire. The Lubrizol deal, valued at $9 billion, is expected to close in the second half of the year.

>>View Warren Buffett's Portfolio 

Berkshire Hathaway also settled a dispute with the Securities and Exchange Commission in the period over stock valuations that resulted in the firm having to take a $506 million write-down on the value of some of its shares of Wells Fargo ( WFC) and Kraft Foods ( KFT).

Hedge funds that manage more than $100 million are required to disclose their equity holdings, options and convertible debt on a Form 13F filed to the SEC within 45 days of the end of a quarter. Funds aren't required to report short positions betting on declines.

Buffett, who is both chairman and chief executive officer of Berkshire Hathaway, and his top lieutenant, Charlie Munger, 87, may be telegraphing that they're ready for a change after the weak first quarter the company posted and the dormant investment portfolio.

Berkshire had net income of $1.51 billion in the first quarter, more than a 50% decline from the same period a year earlier.

The company also completed the acquisition of the remaining 20% of the shares of Wesco Financial during the quarter to make it a wholly owned unit. The transaction was valued at $548 million.

Shares of Berkshire Hathaway are down 0.6% this year through May 13, and up a mere 3% over the past 12 months, while the S&P 500 is up 7.1% this year and 18% over the past 12 months.

Berkshire Hathaway pared its big ConocoPhillips stake by 8 million shares, which left it with 29 million shares at quarter-end. Its investment in the integrated oil company rose by $342 million in the quarter.

Coca-Cola ( KO), Berkshire's largest holding at a quarter of the portfolio, returned 4.4% this year to May 13, although it's up 31% over the past 12 months. Coca-Cola is the world's largest nonalcoholic beverage company.

The big winner for the fund in the quarter was Ingersoll-Rand ( IR), a manufacturer of a wide range of capital goods. Its shares appreciated by $777 million. Berkshire owns 636 million shares.

Berkshire Hathaway's wholly owned businesses include insurance firms GEICO, GenRE, BHRG and BHPG, the Burlington Northern Santa Fe railroad, utilities and energy firms, and manufacturing, service and retailing units.

Berkshire Hathaway's largest individual investor at the end of 2010 was the Bill and Melinda Gates Foundation, which owned 3.8% of the company's outstanding shares. That stake made up 47% of the foundation's assets. Gates is better known as the founder and chairman of software giant Microsoft ( MSFT).


Berkshire Hathaway's only buy during the first quarter was MasterCard, which is up 25% this year and 21% over the past 12 months. Its value in the fund was $54 million at the end of the first quarter, and it made up 0.1% of the portfolio. Combs, the newly arrived investment manager, specialized in financial holdings, and he may have selected that stock.

MasterCard manages a group of global payment card brands, including MasterCard, Maestro and Cirrus, which it licenses to financial institutions that issue cards to their customers. The firm acts as the payment processor by facilitating the authorization, clearing and settlement of transactions on its proprietary networks.

MasterCard's profit jumped 24% to $562 million from $455 million a year earlier. Revenue rose 15% to $1.5 billion. MasterCard's larger rival, Visa ( V), also reported a 24% profit increase, to $881 million, as well as the same percentage increase in revenue, to $2.25 billion. Visa's shares are up 14% this year, though, trailing MasterCard's 25% gain.

Berkshire's filing with the SEC said "confidential information has been omitted" and "filed separately with the Commission," suggesting the company may be building up a new stake and is keeping it under wraps, as is allowed by the regulator. The current quarter's filing, due mid-August, may reveal that company.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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