Buffett Raises Berkshire’s Wal-Mart Stake, Adds Exxon, Nestle
Nov. 17 (Bloomberg) -- Warren Buffett’sBerkshire Hathaway Inc. took stakes in Exxon Mobil Corp. and Nestle SA, betting on the world’s biggest oil and food companies.
Berkshire held about 1.28 million Exxon shares and 3.4 million American depositary receipts of Nestle at the end of the third quarter, the Omaha, Nebraska-based company said in a regulatory filing yesterday. The stake in Irving, Texas-based Exxon would be worth about $95 million, based on yesterday’s stock price, while the Nestle holding would be valued at $161.5 million. Berkshire also raised its stake in Wal-Mart Stores Inc., the largest retailer.
“Berkshire is increasingly looking for companies that are world-leading brands,” said Tom Russo, partner at Gardner Russo & Gardner, which holds shares in Berkshire and Vevey, Switzerland-based Nestle.
Buffett is drawing down Berkshire’s cash hoard to invest in some of the world’s biggest firms as credit markets improve. The $2.23 billion spent on stocks in the three months ended Sept. 30 is the most in a year and allowed Berkshire to add a stake in insurer Travelers Cos. and increase its holding of Wells Fargo & Co. Buffett agreed this month to take over Burlington Northern Santa Fe Corp., the No. 1 U.S. railroad, for $26 billion.
“They are all very unique and strong franchises,” said Mohnish Pabrai, founder of Irvine, California- based Pabrai Investment Funds, which owns shares in Berkshire and San Francisco-based Wells Fargo. “The equity bets are tending to be ones which can be held for a very long period of time.”
Stocks Rally
Berkshire, whose U.S. stock portfolio was valued at $56.5 billion at the end of the third quarter, is benefiting from the biggest rally in the Dow Jones Industrial Average since 1933. The addition of Exxon and New York-based Travelers gives Berkshire equity stakes in 11 of the Dow’s 30 companies.
The 113-year-old Dow has surged 59 percent since March 9, the steepest run-up over the same number of days since 1933, according to data compiled by Bloomberg. Travelers, which was added to the Dow this year, has gained 58 percent over that period, while Exxon is up 15 percent to give the firm a market value of about $353 billion.
“Exxon has probably the lowest cost structure in the industry, which I know is attractive to Buffett,” said Philip Weiss, a senior analyst at Argus Research Corp. “No matter where oil prices go, Exxon always fares better.”
Stock picks by Buffett, the second-richest American, are watched by mutual funds and individuals looking for clues about his investment strategy. Berkshire’s biggest stockholding is an investment in Coca-Cola Co. worth about $10.7 billion. The firm’s holding in Walmart rose 90 percent in the third quarter and is valued at about $2 billion.
Long-Term Advantage
“Buffett buying more indicates that Walmart has a long- term competitive business advantage,” David Katz, who oversees $1.2 billion, including Walmart shares, at Matrix Asset Advisors in New York, said by telephone. “This fits exactly into what Warren Buffett likes: growth businesses where you’re not paying a lot.”
Walmart, based in Bentonville, Arkansas, increased profit 3.2 percent in the quarter that ended Oct. 31 by reducing inventories 4.1 percent and boosting revenue 1.1 percent to $99.4 billion. It is accelerating efforts to curb expenses amid falling food prices and the worst U.S. unemployment rate in 26 years, Chief Executive Officer Mike Duke told analysts Nov. 12.
“A terrible market or a terrible economy is your friend,” Buffett said at a forum in New York last week, when asked whether the stock market rally was unwarranted, given the recession. “It’s a terrible mistake to look at what’s going on in the economy today and decide whether to buy or sell stocks.”
Wells Fargo
Berkshire, already the largest shareholder in Wells Fargo, increased holdings of the bank by 3.6 percent to 313.4 million shares in the third quarter. The biggest-U.S. home lender has more than tripled from lows in March. Buffett has said he told students that month that if he had to put all his net worth into one stock, Wells Fargo “would be the stock.”
Berkshire continued to cut its holdings in No. 2 U.S. oil refiner ConocoPhillips, trimming its stake about 11 percent in the three months ended Sept. 30. A decline in the value of the stake contributed to Berkshire’s worst quarterly loss in at least two decades in the first three months of 2009. Buffett called the investment a “major mistake” after building the shares with oil prices near their peak last year.
Berkshire showed no stake in Eaton Corp., the Cleveland- based maker of circuit breakers and fuel pumps. Buffett’s company held 2 million shares three months earlier. The firm cut holdings of NRG Energy Inc., the second-largest power producer in Texas, by 17 percent to 6 million.
WellPoint, SunTrust
Berkshire reduced its stake in WellPoint Inc., the largest U.S. health insurer by membership, by 3 percent to 3.39 million shares. The stake in Atlanta-based SunTrust Banks Inc. was cut by 3.9 percent in the three months to 3.07 million shares.
Berkshire disclosed a stake of 3.63 million shares in trash hauler Republic Services Inc.Will Flower, a spokesman for Phoenix-based Republic, said the investment was “a good fit” with Berkshire’s strategy. Exxon spokesman Rob Young, Wal-Mart’s John Simley, Travelers spokesman Shane Boyd and Eaton’s Hilary Spittle declined to comment.
The filing omits information about some transactions because Buffett is permitted to keep them confidential for now. The U.S. Securities and Exchange Commission sometimes allows companies to withhold data from the public to limit copycat investing while a firm is building or cutting a position.
Berkshire disclosed that it had a stake in Exxon as of June 30, a holding not announced in the second-quarter report. Buffett’s reported portfolio doesn’t list stocks he’s not required to disclose, including non-U.S. holdings.
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