In the much-discussed shareholder letter of Berkshire Hathaway, Warren Buffett released the list of stocks that Berkshire owned on 12/31/2011. If you compare this with the list of stocks in Buffett's portfolio covered by us, you will find that some of the stocks are not in our list. These are the international stocks that Berkshire is not required to report in 13Fs.
The table below is the summary of these stocks. We also list the numbers of shares on 12/31/2010 so that you can easily see the changes in the number of shares.
|Symbol||Company||# of Shares on 12/31/2011||# of Shares on 12/31/2010||Costs ($mil)||Market Value ($Mil)||% of the Company||Profit (%)|
|BYDDY.PK*||BYD Company, Ltd.||225,000,000||232||1182||9.9|
In a recent interview on CNBC, Warren Buffett said that he put €175 million ($232.2 million) into each of eight European stocks on behalf of Berkshire Hathaway at the end of 2011. "I just thought these eight companies were cheap," said Buffett. None of these stocks are included in the table above as these positions are too small for Berkshire to release.
Here are some details of these individual companies.
BYD Company Ltd.
The Chinese electric car company BYD was in the list in for the 2010 annual report. But it dropped out of this list as the position is now too small to be included. BYD stock prices collapsed by more than 60% in 2011. Buffett had a profit of 409% on BYD as of Dec. 31, 2010. Berkshire has given up three-fourths of its gains. Overall Berkshire still doubled its money on its original BYD investment.
BYD Company, the storied Chinese car company, is run by Chuan-Fu Wang. To Charlie Munger, Chuan-Fu Wang is the combination of Thomas Edison and Jack Welch. It was said that Charlie Munger was the one who pushed for Berkshire’s investment in BYD. Buffett's purchase was also well timed to take advantage of the 2008 fallout in China shares. Berkshire owns close to 10% of the company.
Munich Re is a more recent purchase of Berkshire Hathaway. Berkshire invested more than $2.8 billion to get 10.5% of the total company shares by Dec. 31, 2011. The purchase was reported in January 2010. But Buffett has been a shareholder in Munich Re since at least 2008. Buffett further added to his position in Munich Re. Now Berkshire owns 11.3% of the company.
Munich Re Chief Executive Officer Nikolaus von Bomhard told shareholders at the annual meeting in Munich in 2008 that he expected Buffett to remain a shareholder in the company. At the time, Buffett’s stake was below the 3 percent threshold, the lowest that requires disclosure.
We all know Buffett loves insurance. He loves the float that comes with insurance businesses. Berkshire owns General Re, which is the world's third-largest reinsurer. Its Munich Re stake was revealed 11 months after Berkshire injected 3 billion Swiss francs ($2.88 billion) into Swiss Re, after the world's second-largest reinsurer wrote down a large sums of illiquid assets.
Munich Re’s stock price was about 18% lower than about where Berkshire has paid. So if you want to buy this stock, you may pay a lower price than what Buffett paid.
Warren Buffett bought into POSCO, the largest steel marker in Korea, in 2006. Berkshire paid $768 million for about 4 million shares. The share reduction of POSCO has increased the position Berkshire owns to 5.1% of the company. Regarding POSCO, Buffett said, "It's a great company. And great companies get worth more and more all the time." Indeed, Buffett is sitting on 122% of profit with this investment.
In October of 2007, right at the recent peak of the stock market, Buffett visited Korea and said that the Korean market was modestly cheaper than most markets around the world. He said, “…but I am just looking at price earnings ratios, and you have a flourishing economy here with 50 plus million people that seem to be working very hard. So, ah, I would think that the Korean market would do as well over the next 10 years ... not 10 weeks, 10 months ... but 10 years, as most markets, and perhaps a little better.”
More than three years have passed since he spoke, and the Korean stock market experienced an even worse crash than its U.S. counterpart, losing 70% at its bottom. It has since recovered more dramatically and had similar performance to the U.S. market for the three and half years.
Berkshire is sitting on a 69% profit as of Dec. 31, 2011.
Warren Buffett did not buy more France pharmaceutical giant Sanofi-Aventis in 2011. Berkshire’s cost is about 10% higher than the current market price. So if you want to buy the stocks of Sanofi-Aventis, you will be paying less than Warren Buffett has paid. Berkshire spent more than $2 billion for about 2% of the company.
As pointed out by our columnist Alan Schram, “There are six large positions Berkshire owns that are trading at or below what Buffett paid for them (I have been following Berkshire since I attended my first annual meeting in 1993, and that is unusual). Those are ConocoPhillips, Johnson & Johnson, Kraft, Munich RE, US Bank and Sanoffi Aventis (Sanoffi is the largest unrealized loss in percentage terms). So you get a chance to buy shares at or below Berkshire’s cost basis---that has the tendency of working out very well.”
A note here, the numbers of shares reported here is different from what we have in Buffett’s portfolio. Buffett may have bought the shares directly in the European stock market, and Berkshire is not required to report it in 13Fs.
Tesco Plc (TSCDY.PK)
U.S. consumers and investors may not know Tesco, but the UK company is one of the most powerful retailers on the planet. With annual sales of more than $90 billion, it is just behind Walmart (NYSE:WMT) and Homedepot (NYSE:HD). Berkshire paid $1.7 billion for 3.6% of the company. This is the largest international purchase of Berkshire in 2011.
Berkshire first invested in Tesco in 2006, right about the time the retailer announced it was coming to America with Fresh & Easy, acquiring shares then equaling about a 1% ownership stake in the company. Since then Buffett has regularly increased his purchases of Tesco stock, resulting in the 3.6% ownership. Tesco is probably an equivalent of Walmart for Warren Buffett’s international plays. Buffett bought Walmart at the same time as he bought Tesco in 2006, and he added more in the third quarter of 2010, as he was buying more Tesco shares and added more in 2011.
Tesco has been much discussed on GuruFocus as the stock lost 20% since the beginning of the year. Buffett had a gain 6% as of Dec. 31, 2011. Now he is at a loss of about 15%. You can buy this stock at about a 15% lower price than Buffett.
Is Tesco a good investment? It is certainly good enough for Buffett. Is it good enough for you? You can read more about Tesco here:
Tesco Still Sells For Less Than What Buffett Paid
Tesco Plc: an undervalued retailer
Tesco Falls Below Buffett’s Price; Will He Buy More?
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