Over the weekend, The Chicago Tribune reported that Lou Simpson, the man who manages GEICO’s investment portfolio for Berkshire Hathaway (BRK.B), is retiring. Simpson, 73, is the only person at Berkshire Hathaway other than Warren Buffett who picks stocks. Buffett makes all investment decisions for Berkshire’s other insurance companies. Buffet does not, however, buy or sell stocks in GEICO’s portfolio. Only Simpson does that. In December, that will change. Simpson will retire. And Buffett will take over GEICO’s portfolio.
In honor of Lou Simpson’s retirement, I thought a series of articles on the man and his investments would be appropriate. Let’s start with the most obvious question.
What Stocks Does Lou Simpson Own?
Lou Simpson manages GEICO’s more than $4 billion stock portfolio. Like other money managers, Simpson reports his investments in U.S. stocks to the SEC. However, because the media is more interested in Buffett’s buys and sell than Simpson’s, and because GEICO’s holdings are reported in the same SEC report as Berkshire’s, media reports confuse Simpson’s buys and sells with Buffett’s. There is no reason for that. The SEC report includes a key that explains which stocks are held in GEICO’s portfolio and which stocks are not.
Here is GEICO’s stock portfolio:
|Wells Fargo (NYSE:WFC)||12.34%|
|Republic Services (NYSE:RSG)||7.53%|
|Johnson & Johnson (NYSE:JNJ)||6.09%|
|Iron Mountain (IRM)||3.94%|
|Becton Dickinson (BDX)||3.05%|
|Home Depot (HD)||1.77%|
|Bank of America (BAC)||1.47%|
|US Bancorp (USB)||1.33%|
|M&T Bank (MTB)||1.12%|
Foreign stocks are not included in the SEC report. Note that I say “foreign stocks” and not foreign companies. The above list does include foreign companies if the stocks are U.S. based (for example: GEICO owns ADRs in Nestle, so Nestle is listed here).
GEICO owns Tesco. Buffett does too. However, Tesco is not listed here, because I don’t know the size of GEICO’s Tesco position. Overall, GEICO’s foreign holdings must not be big, because the Tribune article says Simpson “manages a $4 billion portfolio” and the 22 positions listed above have a total market value of $4.39 billion.
Therefore, the stocks and percentages you see listed here are close to what Lou Simpson sees himself when he looks at GEICO’s portfolio, with the exception of Tesco. Because both Buffett and Simpson bought Tesco separately and Berkshire’s Tesco shares are not listed in the SEC report, I am unable to break out GEICO’s investment in Tesco.
What Stocks Does Warren Buffett Own?
When you see a list of Berkshire Hathaway’s stock portfolio, every stock on that list that isn’t also on this list was bought by Buffett instead of Simpson. There are two exceptions to this rule. One, both Simpson and Buffett own foreign stocks. Those aren’t listed in SEC reports. So they aren’t listed here. Examples include Tesco and Posco (PKX).
The second exception is stocks that both Simpson and Buffett bought. In other words, stocks that are owned by Berkshire Hathaway both inside and outside of GEICO.
What Stocks Do Both Warren Buffett and Lou Simpson Own?
Warren Buffett and Lou Simpson sometimes buy the same stocks separately. Each man makes his decision independently. Simpson does not tell Buffett what he is buying ahead of time.
Buffett and Simpson both own ConocoPhillips, Johnson & Johnson, Moody’s, M&T Bank, US Bancorp, Wal-Mart, and Wells Fargo.
Sometimes, the relative weights in their portfolios are different. Simpson owns very little Wal-Mart. Buffett owns a lot. Other times, the position weights are similar. For example, both Simpson and Buffett have bet big on Wells Fargo. Wells is one of the top positions for each man.
Simpson’s biggest position is Nike. Despite media reports, Buffett has never bought any shares of Nike.
Likewise, it is often said that Warren Buffett and Bill Gates both own shares of Republic Services. Technically, yes, Buffett “owns” shares of Republic Services, because GEICO owns shares of Republic, Berkshire owns GEICO, and Buffett owns Berkshire, so for SEC purposes Buffett owns shares of Republic Services.
However, those shares were bought by Simpson for GEICO’s portfolio. Warren Buffett did not buy Republic Services. Lou Simpson, portfolio manager for GEICO, a subsidiary of Berkshire Hathaway, bought shares of Republic Services. Of course, that makes for a much less exciting headline than “Buffett Buys Trash.”
Where Can You Find GEICO’s Stock Portfolio?
|Company||# of Shares||Ticker||Last Price||Market Value|
|Johnson & Johnson||4,548,000||JNJ||$58.74||$267,149,520|
|Bank of America||5,000,000||BAC||$12.87||$64,350,000|
You can also read the primary source, Berkshire’s 13F, for yourself. Any line that includes the numbers 9, 10, and 11 in Column 7 was bought by Lou Simpson. Any line that does not include the numbers 9, 10, and 11 in Column 7 was bought by Warren Buffett.
This is the first article in Geoff Gannon’s ongoing series on Lou Simpson’s retirement. Come back tomorrow for another article on Lou Simpson.