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Market Update

Berkshire Makes Few Portfolio Moves in Second Quarter

Berkshire sells Kraft shares; buys include Wells Fargo, Dollar General, and MasterCard

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A quick glance at  Berkshire Hathaway's (BRK.A) (BRK.B) 13-F filing for the second quarter of 2011 revealed only a handful of moves by the insurer during the quarter. The first transaction of note was the sale of 5.8 million shares of  Kraft Foods (KFT). Based on an average closing price of $34 per share, the Kraft transaction likely generated close to $200 million (which we assume was directed by Warren Buffett, given the size of the sale). Never completely warming to the Cadbury acquisition that Kraft engineered in 2010, and with the stock up more than 10% through the first two quarters of 2011, Buffett may have decided to take some money off the table. It's worth noting that this isn't the first time that Buffett has sold Kraft shares (selling more than 31 million shares in the first and second quarter of 2010), that Berkshire still held close to 100 million shares of Kraft at the end of the second quarter, and that the more recent sales occurred before Kraft's announcement this month that it was splitting itself into two separate companies. Buffett went on the record earlier this month to note that he expects to stay invested in Kraft longer term, so we don't view this sale as the start of a winding-down process for the position.

The quarter's second meaningful transaction, which also has Buffett written all over it, was the purchase of 9.7 million shares of  Wells Fargo (WFC) for what we assume was something in the neighborhood of $275 million (based on an average closing price of $28 per share). In all likelihood, Buffett used the cash from the Kraft sale to fund this purchase, even though he had more than $5 billion come in from  Goldman Sachs (GS) in early April, as the investment bank paid off the 10% cumulative perpetual preferred stock it had sold to Berkshire at the height of the financial crisis. In all likelihood, Buffett reserved that cash for the two transactions he expected to complete this year--the purchase of the non-controlling interests in Wesco Financial (which required a $543 million cash outlay), and the acquisition of  Lubrizol (LZ) (for approximately $9 billion, which is expected to close before the end of the year).

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Greggory Warren, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.