The majority – 99% -- of Warren Buffett (Trades, Portfolio)’s net worth is wrapped up in the company he built, Berkshire Hathaway. He talks far less about the other 1% he invests on the side.
That not insignificant sliver of wealth goes to his personal portfolio. Most of the same rules apply in how he invests that money as Berkshire’s assets, but it has some unique characteristics. First, Buffett restricts portfolio companies to his good ideas that are too small for Berkshire, which has to deploy the billions in its coffers to see worthwhile return on investment.
Second, Buffett has to avoid conflict of interest, or even the appearance of it, between his personal dealings and his shareholders’ interests. Therefore, he allows little to no cross over between the respective holdings, with a few exceptions.
Buffett has described investing for himself as virtually an afterthought to his work at Berkshire, but indicated his holdings are companies that might have qualified for the Berkshire fold if not “sub-sized.”
Since he does not report the portfolio holdings in public filings with the SEC, disclosures from other sources can give a good if incomplete picture of what some of them are.
Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial)
Though not part of the 1% of his wealth he invests independent of Berkshire, Buffett still owns a great deal of his company’s shares. His ownership has also changed over the past decade, but he has not bought or sold a single share.
In 2004, Buffett held 474,998 class-A shares of the company and no class-B shares. Then, in 2006, he started giving his money away. That year, Buffett converted 124,998 Berkshire A-shares to B-shares and in 2007, gave away half a million of them to various charities and foundations, leaving him with 350,000 A-shares.
Buffett continued siphoning his B-shares into good causes annually until 2012, when he began to accelerate the pace. He converted 15,000 A-shares in 2013, 12,600 in 2014, and 139 in 2016, while donating the resulting B-shares. At the end of 2016, he owned 308,261.
Despite the great distribution of his largess, Buffett ended 2015 with a greater percentage of Berkshire’s outstanding A-shares, at 37.99%, than he did in 2006 when he owned 32.95%. His total voting power also remained about the same, at 32.93% in 2015 versus 30.88% in 2008.
In the past decade, the price for one Berkshire A-share rose 130% to $212,710.
Seritage Growth Properties (SRG, Financial)
Buffett disclosed his Seritage Growth Properties buy in an insider filing Nov. 30. He purchased an 8% stake with 2 million shares at a price around $36.50, for a total estimated cost of $73 million. With a market cap of $1.58 billion, Seritage falls far below the several billion-dollar size threshold Buffett has said is necessary to be a fit for Berkshire.
Seritage is a REIT that in June 2015 spun off from Sears Holdings (SHLD, Financial), run by guru investor Edward Lampert (Trades, Portfolio) and favored by Buffett-quoting value investor of Fairholme Fund (Trades, Portfolio) Bruce Berkowitz (Trades, Portfolio), who owns 6%. Seritage formed in June 2015 to purchase Sears and K-mart stores and lease the properties back to Sears Holdings, gradually renting out defunct Sears stores to other stores like Ulta (ULTA, Financial), Nordstrom (JWM, Financial) and various restaurants.
Seritage stock gained 26% since going public and 16% this year to $46.60, giving Buffett a 28% return already.
For its first quarter, Seritage announced a continued strategy of converting single-tenant stores into shopping centers at higher rents, charging $32.65 per square foot on average compared to the $6.00 per square foot Sears Holdings paid. Of its portfolio of 266 retail properties totaling roughly 42 million square feet, Seritage had leased 99.4%, composed of 12 non-Sears clients and 254 to Sears stores. Its pipeline contains 28 properties in development.
Seritage had $63 million in total revenue and $14.7 million in net loss in the quarter. It pays a dividend of 25 cents per common share, down from 50 cents in the fourth quarter.
Buffetts exact share portion of Wells Fargo is unclear, though he confirmed his ownership as recently as his April annual meeting and said he bought it “a long, long time ago.”
As Berkshire’s top holding until the first quarter, it is one of Buffett’s few they hold in common, and he discussed it at length at the annual meeting.
“I like Wells Fargo extremely well compared to other securities. It does not have the most upside of our other securities except on a weighted basis,” Buffett said. “We think Wells Fargo is a very well run bank. We didn’t make any decision to buy a single share because of the investment banking business. They have a huge base of very cheap money.”
For the past 10 years, Wells Fargo’s management has produced a higher and more consistent return on equity than competitors Bank of America (BAC, Financial) and Citigroup (C, Financial), though it has declined over the past two years. It also beat out its peers for return on assets, tracing higher than 1% for the past decade except 2008-2010.
Wells Fargo derives most of its long-term value from loans, deposits and capital, and the diversity helped it generate another quarter of mostly positive results in the face of low interest rates and oil prices. The bank had net income of $5.5 billion or 99 cents per share compared to $5.9 billion or $1.04 per share in the first quarter 2015. Net interest income increased to $11.7 billion from $10.99 billion for the same periods. It also had Common Equity Tier 1 capital of 10.6% compared to 10.8%.
Wells Fargo expended $3 billion to share repurchases and dividends in the first quarter, reducing its share count by 16.2 million from the previous quarter. It has a P/B ratio near a three-year low at 1.49, a P/E ratio of 12.5 and P/S ratio of 1.48. Its stock price gained 81% year to date to $51 per share.
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