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Commentary

Sale of Energy Stocks the Biggest Highlight in Berkshire's 4Q Equity Portfolio

Warren Buffett’s Berkshire Hathaway had a shift in strategy in the fourth quarter as it unloaded most of its energy holdings to buy more of Deere and IBM.

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Wide-moat  Berkshire Hathaway's (BRK.A) (BRK.B) fourth-quarter 13-F filing highlighted a shift in strategy as the firm unloaded most of its Energy holdings and funneled most of the capital raised into  Deere (DE) and  International Business Machines (IBM). The company's 13-F equity holdings, which do not include foreign investments held abroad, were valued at $110 billion at the end of the December quarter, with the top five holdings-- Wells Fargo (WFC) (23%),  Coke (KO) (15%),  American Express (AXP) (13%), IBM (11%), and  Wal-Mart (WMT) (5%)--accounting for more than two thirds of the portfolio.

Likely spurred on by the collapse in oil prices, the insurer eliminated its stakes in  ExxonMobil (XOM), and  ConocoPhillips (COP) (and sold off a fifth of its holdings in National Oilwell Varco) during the fourth quarter, picking up more than $3.5 billion in proceeds from the sales. Berkshire also reduced its stake in  Bank of New York Mellon (BK) (picked up in the third quarter of 2010) and eliminated its  Express Scripts (ESRX) holdings (bought during the third quarter of 2014), picking up another $100 million (by our estimates).

The insurer used most of the proceeds to add to its stakes in Deere and IBM. The firm's holdings in Deere, which had been excluded from its third-quarter 13-F filing (as Berkshire was likely adding significantly to its stake and received permission to withhold its actions), accounted for close to 2% of Berkshire's holdings at the end of last year, making it a $2 billion plus holding. The company also added more than $1 billion to its stake in IBM.

The rest of the cash that was raised was used to fund fairly meaningful additions to its holdings in  Precision Castparts (PCP),  Charter Communications (CHTR),  Suncor Energy (SU),  Visa (V),  MasterCard (MA), and  Viacom (VIA); as well as smaller additions to  Phillips 66 (PSX),  Directv (DTV),  Liberty Global (LBTYA),  DaVita (DVA), and  General Motors (GM). Berkshire also reported 8.4 million shares of  Restaurant Brands International (QSR), acquired from its wholly owned subsidiary National Indemnity Company during December.

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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.