The 38 Stocks in the Buffett Portfolio

Periodically, we review the stock holdings of  Berkshire Hathaway (BRK.B), the investment conglomerate run by Warren Buffett, one of the all-time great investors. Each quarter, Berkshire files form 13-F, which discloses its consolidated equity investments, with the SEC. Berkshire's latest 13-F disclosed 36 stock positions as of March 31, and we add two foreign investments we know of, for a total of 38. Berkshire now owns three more stocks than it did at the end of 2005, and nine more than it did at the end of 2004. We note that Berkshire doesn't have to disclose its foreign investments because it owns the local shares, not the U.S. ADRs.

New Additions
At Berkshire Hathaway's annual meeting on May 6, Buffett said that if he were starting his investment partnership over again, he would be investing in securities around the world, and would focus on smaller companies. While Berkshire's large size--the investment conglomerate has more than $30 billion in cash--constrains Buffett's ability to deploy cash into smaller stocks, we think that Berkshire's recent purchases of  ConocoPhillips (COP),  General Electric (GE), and  United Parcel Service (UPS) indicate a preference for companies with global operations.

We also understand that Berkshire recently acquired a stake in U.K.-based retailer Tesco PLC. These public investments coincide with Berkshire's proposed acquisition of Israel-based Iscar Metalworking Companies for $4 billion. Taken together, we estimate that Berkshire has added almost $6 billion of "nondollar" assets to its holdings over the last few months. We aren't overly surprised by this, given Buffett's continued belief that large U.S. trade deficits will eventually cause the dollar to weaken.

In addition to these new investments, Berkshire increased its stake in  Wells Fargo  (WFC), buying a hefty 7.5 million more shares over the first three months of the year. We estimate that Berkshire's average purchase price for the additional Wells Fargo shares was about $61 per share. Berkshire also modestly increased its stakes in  American Standard Companies  and Comdisco Holdings .

Eliminations and Reductions
While Buffett typically employs a buy-and-hold approach, Berkshire does occasionally sell or reduce the size of certain positions. For example, Berkshire recently liquidated its position in Mueller Industries (MLI) for what we suspect was a tidy profit, given that Mueller's share price increased by about 30% over the first three months of the year.

Moreover, we note that Berkshire began to divest its stake in Ameriprise Financial (AMP), which it had acquired when longtime holding  American Express (AXP) spun off the unit last September. We had suspected that Berkshire would start selling its Ameriprise stake, as the unit's middling results had long been a drag on American Express' overall returns. To date, Berkshire has sold only about $6.4 million Ameriprise shares--about 0.50% of its position--but we think that the investment conglomerate may continue to trim its Ameriprise stake over time.

Berkshire also reduced its stake in  H&R Block (HRB),  Home Depot (HD),  Iron Mountain (IRM),  Lexmark ,  Sealed Air (SEE), and  ServiceMaster . At this point, none of these sales appears to be significant.

5-Star Stocks
As of May 20, 2005, seven of Berkshire's stocks boasted 5-star Morningstar Ratings for stocks; we think these stocks are excellent candidates for further research:  Anheuser Busch (BUD),  Gannett (GCI),  Nike (NKE), Sealed Air,  Tyco ,  Wal-Mart (WMT), and  Washington Post (WPO). What's more, we think that investors currently have a rare opportunity to buy a couple of these stocks at a price about equal to the price that Berkshire paid. Last year, we inferred that Berkshire's average price for Anheuser-Busch was probably slightly greater than $45 per share. Interestingly, Anheuser-Busch's price is currently changing hands at about the same price. In addition, we estimate that Berkshire probably paid about $26 per share for its Tyco shares, and the price is presently around the same level.

The Complete Holdings
Here's the complete list of Berkshire's holdings, ranked from the largest position to the smallest, save for international investments Tesco and Kingfisher, for which we are uncertain of the weightings. We continue to note that despite having 38 names in the portfolio, Berkshire's holdings are very concentrated. Eight stocks account for 80% of the portfolio: American Express, Anheuser-Busch,  Coca-Cola (KO),  Moody's (MCO),  Procter & Gamble (PG), Washington Post, Wells Fargo, and  Wesco .

We've also listed each company's economic moat--our assessment of the firm's competitive advantages--as well as the current Morningstar Rating for stocks, which is based on the difference between the stock's current price and our fair value estimate. We encourage readers to become Premium Members of Morningstar.com to get a more in-depth analysis of each company.

If you'd like to track and analyze these stocks, click here to create a watch list. Then simply click "Continue," name your watch list, and click "Done." (If this link does not work, please register with Morningstar.com--registration is free--or sign in if you're already a member, and try again.) This will allow you to save and monitor these holdings within our Portfolio Manager.

1.  Coca-Cola (KO): Wide Moat, 5 Stars
2.  American Express (AXP): Wide Moat, 3 Stars
3.  Wells Fargo (WFC): Wide Moat, 4 Stars
4.  Procter & Gamble  (PG): Wide Moat, 3 Stars
5.  Moody's (MCO): Wide Moat, 4 Stars
6.  Wesco Financial  : Narrow Moat, 4 Stars
7.  Anheuser-Busch (BUD): Wide Moat, 5 Stars
8.  Washington Post (WPO): Wide Moat, 5 Stars
9.  ConocoPhillips (COP): Narrow Moat, 3 Stars
10. Ameriprise Financial (AMP): Not rated
11.  Wal-Mart (WMT): Wide Moat, 5 Stars
12.  M&T Bank  (MTB): Narrow Moat, 3 Stars
13. USG Corporation : Not rated
14.  American Standard  : Narrow Moat, 2 Stars
15.  First Data : Wide Moat, 3 Stars
16.  H&R Block (HRB): Wide Moat, 4 Stars
17.  Comcast  (CMCSA): Wide Moat, 3 Stars
18.  Costco  (COST): Narrow Moat, 3 Stars
19.  General Electric (GE): Wide Moat, 3 Stars
20.  Tyco International : Narrow Moat, 5 Stars
21.  SunTrust Banks : Narrow Moat, 3 Stars
22.  Nike  (NKE): Narrow Moat, 5 Stars
23.  Gannett (GCI): Narrow Moat, 5 Stars
24.  Gap (GPS): Narrow Moat, 4 Stars
25.  Home Depot (HD): Wide Moat, 4 Stars
26.  Torchmark (TMK): Narrow Moat, 3 Stars
27.  Iron Mountain  (IRM): Wide Moat, 3 Stars
28.  Lexmark International  : Narrow Moat, 3 Stars
29.  United Parcel Service (UPS): Wide Moat, 4 Stars
30.  Outback Steakhouse : No Moat, 4 Stars
31.  PetroChina  : Narrow Moat, 2 Stars
32.  ServiceMaster : Narrow Moat, 3 Stars
33.  Sealed Air  (SEE): Narrow Moat, 5 Stars
34.  Pier 1 Imports  : No Moat, 4 Stars
35.  Lowe's Companies (LOW): Wide Moat, 3 Stars
36. Comdisco Holdings : Not rated
37. Tesco PLC: Not rated
38. Kingfisher (KGFHY): Not rated