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Berkshire Hathaway’s International Holdings: Tesco, POSCO, Munich Re, SNY

Vera Yuan

Vera Yuan

75 followers
In the much-discussed shareholder letter of Berkshire Hathaway (BRK.A)(BRK.B), Warren Buffett released the list of the largest stock holdings that Berkshire owned on Dec. 31, 2012. 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 Dec. 31, 2011, so that you can easily see the changes in the number of shares. Berkshire did not purchase more shares of Munich Re, POSCO and Sanofi, yet it bought many shares of Tesco PLC during 2012, an almost 45% increase in shares from Dec. 31, 2011.

International Symbol US Symbol Company # of Shares on 12/31/2012 # of Shares on 12/31/2011 Costs ($Mil) Market Value ($Mil) % of the Company Profit (%)
XTER:MUV2 Munich Re 20,060,390 20,060,390 2990 3599 11.3 20.37
XKRX:058430 NYSE:PKX POSCO 3,947,555 3,947,555 768 1295 5.1 68.62
XPAR:SAN NYSE:SNY Sanofi 25,848,838 25,848,838 2073 2438 2 17.61
LSE:TSCO OTCPK:TSCDY Tesco Plc 415,510,889 291,577,428 2350 2268 5.2 -3.49


Here are some details of these individual companies.

Munich Re (XTER:MUV2)

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. But Buffett has been a shareholder in Munich Re since at least 2008. Buffett maintained his investment of 20,060,390 shares of Munich Re from Dec. 31, 2011 to Dec. 31, 2012. As reported in Warren Buffett’s Letters to Berkshire Shareholders, Berkshire now 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 at Dec. 31, 2011, was about 18% lower than about what Berkshire has paid. In 2012, the stock went up a lot, which ended up gaining 20.37% of profit. So if you want to buy this stock, you may pay a higher price than what Buffett paid.

POSCO (XKRX:058430) (NYSE:PKX)

Warren Buffett bought into POSCO, the largest steel maker 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 69.4% profit as of Dec. 31, 2011.

Sanofi-Aventis (XPAR:SAN) (NYSE:SNY)

Warren Buffett did not buy more France pharmaceutical giant Sanofi-Aventis in 2012. Berkshire’s cost is about 10% higher than the current market price at Dec. 31, 2011. Similar to Munich Re, which made Buffett lose money at first, ends up gaining him 17.61%. So if you want to buy the stocks of Sanofi-Aventis, you will be paying more 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 (LSE:TSCO) (OTCPK:TSCDY)

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 (WMT) and Home Depot (HD). Berkshire increased its holding of the company from 3.6% on Dec. 31, 2011 to 5.2% on Dec. 31, 2012. At the end of 2011, it had around 291 million shares, and now it has gone up to 415 million shares.

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 Buffett had a loss of 3.49% as of Dec. 31, 2012. You can buy this stock at a 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?

For the U.S. holdings of Berkshire Hathaway, please go to http://www.gurufocus.com/holdings.php?GuruName=Warren+Buffett&tab=top. If you are not a Premium Member of GuruFocus, get a Free Trial to gain full access to the research and newsletters on GuruFocus.


Rating: 3.0/5 (9 votes)

Comments

James909
James909 premium member - 1 year ago
Tesco is closing it's fresh and easy stores in the US and pulling out, it was an expensive mistake for them. They've just posted their first drop in earnings in 19 years.
sean barry
Sean barry premium member - 1 year ago
How does one find what the dividend is on the Tesco ADR??
gurufocus
Gurufocus premium member - 1 year ago
shane1800
Shane1800 - 6 months ago

How about BYD Auto, Warren purchased shares.

Please leave your comment:


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