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Market Update

Berkshire Continues to Shift Cash Elsewhere

Berkshire continued to sell legacy holdings in the fourth quarter to free up capital for investments in other names, most notably this week's acquisition of Heinz.

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 Berkshire Hathaway's (BRK.A) (BRK.B) fourth-quarter 13-F filing, which details the firm's equity holdings, continued to show evidence of the primary theme we've believed would drive portfolio movements over the near term. Ever since Berkshire appointed Ted Weschler and Todd Combs as investment managers, the firm has been fairly active about selling legacy positions as part of an ongoing process to raise capital for the two managers to invest.

The biggest sale during the period involved 28.8 million shares of  Kraft Foods Group (KRFT), which, by our estimates raised around $1.1 billion for the firm. At a little more than $75 million at the end of last year, Kraft is now one of the smallest holdings in Berkshire's equity portfolio, and we'd be surprised if the shares remained there much longer. As for the other sales during the period, Berkshire sold off another 165,000 shares of  Johnson & Johnson (JNJ), whittling its stake in the health-care firm down to less than $23 million at the end of the year. Much like with Kraft, we expect Johnson & Johnson to continue to be a source of cash for the managers at Berkshire. The only other sale during the fourth quarter involved Lee Enterprise (LEE), which is now the smallest holding in Berkshire's equity portfolio.

Looking at the purchases during the quarter, Warren Buffett committed another $585 million to  Wells Fargo (WFC), which is now Berkshire's largest holding (at 20% of the total equity portfolio).  DaVita HealthCare Partners (DVA),  General Motors (GM), and  DirecTV (DTV) all saw more than $200 million in additional capital allocated to them during the period, with DaVita and DirecTV both firmly placed as top 10 holdings at Berkshire at the end of the year. As for the other purchases during the quarter, the firm increased its stakes in  International Business Machines (IBM),  Wal-Mart Stores (WMT), Liberty Media (LMCAV),  Precision Castparts (PCP), and  National Oilwell Varco (NOV), but the buys were relatively small compared with Berkshire's holdings in these stocks. Although there was a more meaningful purchase of Wabco Holdings (WBC), and new money purchases of  Archer-Daniels Midland (ADM) and  VeriSign (VRSN), these transactions paled in comparison with the company's $12.2 billion investment in  H.J. Heinz (HNZ) announced Thursday.

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Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.