(GuruFocus, July 14, 2009) It is widely known that Bruce Berkowitz admires Warren Buffett. As of 1Q09, Berkowitz still owns 12 Class A shares of Berkshire Hathaway. That is a far cry from 3Q07, when he owned 10,414 shares of BRK-A, and 49,976 shares of BRK-B. Combined, he had $1.67 billion invested in Buffett’s company, a substantial amount for Berkowitz’s Fairholme Fund.
Berkowitz was asked why he sold down Berkshire position during the Oct15, 2008 Fairholme Fund conference call, and he offered his explanation:
And during the November 25, 2008 conference call, he was asked about his outlook towards Berkshire after it came down so dramatically:
To sum up: Berkowitz’s desire to do better than Berkshire Hathaway because of his relatively smaller portfolio size is the reason he sold the Berkshire stock and not buying back.
But there is finite number of stocks, finite number of good investment ideas that both investment Gurus will be put their money in. GuruFocus has a function called “Aggregate Portfolio” which allows one to select any number of Investment Gurus and find their portfolio overlaps. I ran the function on Buffett and Berkowitz and here is the list of companies the system spit out:
1. The Coca-Cola Company (KO, Financial)
KO is the world's largest beverage company and is the leading producer and marketer of soft drinks. The CocaCola Company has a market cap of $113.55 billion; its shares were traded at around $49.05 with a P/E ratio of 15.7 and P/S ratio of 3.6. The dividend yield of The CocaCola Company stocks is 3.3%. The CocaCola Company had an annual average earning growth of 5.3% over the past 10 years. GuruFocus rated The CocaCola Company the business predictability rank of 2-star.
Buffett owns 200,000,000 shares as of 03/31/2009, which accounts for 21.51% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 12,900 shares, which accounts for 0.01% of the $5.52 billion portfolio of Fairholme Capital Managment. So Berkowitz keeps some KO shares in his portfolio so he can keep an eye on the stock.
2. American Express Company (AXP, Financial)
AXP is primarily engaged in international banking services throughout the world. American Express Company has a market cap of $28.63 billion; its shares were traded at around $24.52 with a P/E ratio of 13.4 and P/S ratio of 1. The dividend yield of American Express Company stocks is 2.9%. American Express Company had an annual average earning growth of 1.3% over the past 10 years.
Warren Buffett owns 151,610,700 shares as of 03/31/2009, which accounts for 5.06% of the $40.87 billion portfolio of Berkshire Hathaway.
Bruce Berkowitz owns 23,813,050 shares as of 03/31/2009, an increase of 75.92% from the previous quarter. This position accounts for 5.88% of the $5.52 billion portfolio of Fairholme Capital Management.
This is a stock both of them holds a substantial position in.
3. WellPoint Inc. (WLP, Financial)
WellPoint Inc. is the largest publicly traded commercial health benefits company in terms of membership in the United States. WellPoint Inc. has a market cap of $24.13 billion; its shares were traded at around $49.78 with a P/E ratio of 8.3 and P/S ratio of 0.4. WellPoint Inc. had an annual average earning growth of 20.8% over the past 5 years.
Buffett owns 4,777,300 shares as of 03/31/2009, which accounts for 0.44% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 10,061,624 shares as of 03/31/2009, which accounts for 6.92% of the $5.52 billion portfolio of Fairholme Capital Management.
4. UnitedHealth Group Inc.(UNH, Financial)
UNH is another health management company, a competitor of Wellpoint. UNH has a market cap of $29.75 billion; its shares were traded at around $25.01 with a P/E ratio of 8.4 and P/S ratio of 0.4. The dividend yield of UnitedHealth Group Inc. stocks is 0.1%. UnitedHealth Group Inc. had an annual average earning growth of 30.4% over the past 10 years. GuruFocus rated UnitedHealth Group Inc. the business predictability rank of 5-star.
Buffett owns 4,500,000 shares as of 03/31/2009, a decrease of 28.57% of from the previous quarter. This position accounts for 0.23% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 13,158,010 shares as of 03/31/2009, a decrease of 27.83% of from the previous quarter. This position accounts for 4.99% of the $5.52 billion portfolio of Fairholme Capital Management.
Here is the case both Gurus sold shares of the same company.
5. Wesco Financial Corp. (WSC, Financial)
WSC is engaged in three principal businesses through wholly owned subsidiaries: the insurance business through Wesco-Financial Insurance Company and The Kansas Bankers Surety Company; and the steel service center business through Precision Steel Warehouse Inc. and the furniture rental center through CORT Business Services Corporation. This is the company chaired by Warren Buffett’s long time partner Charlie Munger. Wesco Financial Corp has a market cap of $2.15 billion; its shares were traded at around $302 with a P/E ratio of 28 and P/S ratio of 2.7. The dividend yield of Wesco Financial Corp stocks is 0.5%. Wesco Financial Corp had an annual average earning growth of 2.8% over the past 10 years.
Buffett owns 5,703,087 shares as of 03/31/2009, which accounts for 3.85% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 980 shares as of 03/31/2009, which accounts for less than 0.01% of the $5.52 billion portfolio of Fairholme Capital Management.
This is another case Berkowitz keeping enough of number of shares to remind himself of.
Conclusion
Using the Aggregated Guru Portfolio can generate some interesting investment ideas. Here we demonstrated the tool to identify the stocks owned by both Buffett and Berkowitz. GuruFocus premium users can use it on any number of Gurus they find interesting. The tool is for premium members only, if you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
To some degree, Berkowitz practices investing with Warren Buffett as well as investing in Warren Buffett, namely, buying same stock as Warren Buffett does while owning Berkshire Hathaway stocks. Among the five stocks he shares with Warren Buffett, AXP, WLP, and UNH are substantial investment but KO and WSC are insignificant. When the price is right, one should not be surprised Berkowitz moves in those stocks as well.
Identifying the stocks owned by Both Buffett and Berkowitz is just one way to generate investment ideas. Users should conduct own research before committing to these stocks. If you are looking for more detailed research from GuruFocus, you may want to check out the two newsletters that we are publishing:
Berkowitz was asked why he sold down Berkshire position during the Oct15, 2008 Fairholme Fund conference call, and he offered his explanation:
Joe Mara: In the past eight to 10 months, the fund has reduced its position in energy, as well as Berkshire. And built a pretty significant holding in healthcare and large cap pharmaceuticals which is quite a turnaround. A lot of questions on that. Can you speak to that?
Bruce Berkowitz: Well, let’s start with Berkshire Hathaway. We have tremendous respect for Warren Buffett but we have to listen to the man who believes that he’s going to do a couple of points better than the S&P 500 and given its size, I would not disagree with that comment. He also has companies that are subject to the same problems that today’s economy are presenting, home companies you know (wall boards), (paint), retailing, subject to the catastrophe around Houston, Galveston, his equity portfolios marked – that will be marked to the market, significant contract on puts on the S&P. I mean Berkshire Hathaway traditionally has suffered with most companies during the difficult period. But in the past, it has gone up much faster than the S&P during a turnaround.
So we felt that given our size we should still have the ability to do better than a couple of points in the S&P and given Warren Buffett’s comments and given the private companies owned by Berkshire Hathaway and given its public holdings, and given the recent events in the stock market, that it was a time to dramatically lighten the load, and that’s what we’ve been doing. So that was Berkshire Hathaway.
And during the November 25, 2008 conference call, he was asked about his outlook towards Berkshire after it came down so dramatically:
Greg Powell: My question is given the downslide in Berkshire pricing, has your outlook towards the stock changed? Have you added it to your portfolio? And what do you see as the intrinsic value band for the stock?
Bruce Berkowitz Yes, I was heading in that direction until (Andrew Barry) had the nerve to write that article in Barron’s. So the answer is no. And I’m still in the camp that there are many ways to skin a cat. Would I think about buying Berkshire Hathaway at the lows that hit? Yes. Would it be a good investment? Absolutely. Is Berkshire Hathaway a great company? Yes. So maybe I should have, but one of the definitions of a Bear Market is that there are more great ideas than money out there. And that’s what we’re facing today. There is just so many ways in my opinion way to make significant money over the next decade or two that their choices are you know I remember reading in Buffett’s biography and I think it was (Roger Loenstein) or maybe Buffett in one of Warren Buffett’s annual reports, he felt like an oversexed guy in a harem, or whatever analogies he’s used. That’s where we are. Or that’s where we were a couple of days ago and where we still are. And it’s going to take time. I mean people are in – a lot of investors are just in chock. I mean people who have leveraged their lifestyles have paid the price.
People are coming you know people coming out of denial. They’re coming out of their anger. They’ve had to take actions. There have been forced liquidations. Pricing has been you know the last trade – the most desperate of last trades can set off a whole knew round of problems. But to get back to your initial question, (Greg), Berkshire Hathaway is a great company the price that it hit last week was a good buy, and we didn’t buy it. We were too focused on other events. There are only 24 hours in the day, and there’s only so much money that we have. We want to make sure that we’re always liquid. And we want to make sure that we can always meet the desires of our shareholders. And at the same time, we want to do better than Warren Buffett’s promise of a few points of performance over the S&P 500. Even though, as I said before, there’s nothing wrong with that whatsoever over the long periods of time.
To sum up: Berkowitz’s desire to do better than Berkshire Hathaway because of his relatively smaller portfolio size is the reason he sold the Berkshire stock and not buying back.
But there is finite number of stocks, finite number of good investment ideas that both investment Gurus will be put their money in. GuruFocus has a function called “Aggregate Portfolio” which allows one to select any number of Investment Gurus and find their portfolio overlaps. I ran the function on Buffett and Berkowitz and here is the list of companies the system spit out:
| Symbol | Price | Guru Buying Last 1Q09 | Guru Selling Last 1Q09 | P/E | Yield (%) | Market Cap ($Mil) |
|---|---|---|---|---|---|---|
| KO | $49.05 | 0 | 0 | 15.7 | 3.3 | 113551 |
| AXP | $24.52 | Berkowitz | 0 | 13.4 | 2.9 | 28630.1 |
| WLP | $49.78 | 0 | Berkowitz | 8.3 | 0 | 24125.4 |
| UNH | $25.01 | 0 | Berkowitz, Buffett | 8.4 | 0.1 | 29749.6 |
| WSC | $304.9 | 0 | 0 | 28.3 | 0.5 | 2170.9 |
1. The Coca-Cola Company (KO, Financial)
KO is the world's largest beverage company and is the leading producer and marketer of soft drinks. The CocaCola Company has a market cap of $113.55 billion; its shares were traded at around $49.05 with a P/E ratio of 15.7 and P/S ratio of 3.6. The dividend yield of The CocaCola Company stocks is 3.3%. The CocaCola Company had an annual average earning growth of 5.3% over the past 10 years. GuruFocus rated The CocaCola Company the business predictability rank of 2-star.
Buffett owns 200,000,000 shares as of 03/31/2009, which accounts for 21.51% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 12,900 shares, which accounts for 0.01% of the $5.52 billion portfolio of Fairholme Capital Managment. So Berkowitz keeps some KO shares in his portfolio so he can keep an eye on the stock.
2. American Express Company (AXP, Financial)
AXP is primarily engaged in international banking services throughout the world. American Express Company has a market cap of $28.63 billion; its shares were traded at around $24.52 with a P/E ratio of 13.4 and P/S ratio of 1. The dividend yield of American Express Company stocks is 2.9%. American Express Company had an annual average earning growth of 1.3% over the past 10 years.
Warren Buffett owns 151,610,700 shares as of 03/31/2009, which accounts for 5.06% of the $40.87 billion portfolio of Berkshire Hathaway.
Bruce Berkowitz owns 23,813,050 shares as of 03/31/2009, an increase of 75.92% from the previous quarter. This position accounts for 5.88% of the $5.52 billion portfolio of Fairholme Capital Management.
This is a stock both of them holds a substantial position in.
3. WellPoint Inc. (WLP, Financial)
WellPoint Inc. is the largest publicly traded commercial health benefits company in terms of membership in the United States. WellPoint Inc. has a market cap of $24.13 billion; its shares were traded at around $49.78 with a P/E ratio of 8.3 and P/S ratio of 0.4. WellPoint Inc. had an annual average earning growth of 20.8% over the past 5 years.
Buffett owns 4,777,300 shares as of 03/31/2009, which accounts for 0.44% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 10,061,624 shares as of 03/31/2009, which accounts for 6.92% of the $5.52 billion portfolio of Fairholme Capital Management.
4. UnitedHealth Group Inc.(UNH, Financial)
UNH is another health management company, a competitor of Wellpoint. UNH has a market cap of $29.75 billion; its shares were traded at around $25.01 with a P/E ratio of 8.4 and P/S ratio of 0.4. The dividend yield of UnitedHealth Group Inc. stocks is 0.1%. UnitedHealth Group Inc. had an annual average earning growth of 30.4% over the past 10 years. GuruFocus rated UnitedHealth Group Inc. the business predictability rank of 5-star.
Buffett owns 4,500,000 shares as of 03/31/2009, a decrease of 28.57% of from the previous quarter. This position accounts for 0.23% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 13,158,010 shares as of 03/31/2009, a decrease of 27.83% of from the previous quarter. This position accounts for 4.99% of the $5.52 billion portfolio of Fairholme Capital Management.
Here is the case both Gurus sold shares of the same company.
5. Wesco Financial Corp. (WSC, Financial)
WSC is engaged in three principal businesses through wholly owned subsidiaries: the insurance business through Wesco-Financial Insurance Company and The Kansas Bankers Surety Company; and the steel service center business through Precision Steel Warehouse Inc. and the furniture rental center through CORT Business Services Corporation. This is the company chaired by Warren Buffett’s long time partner Charlie Munger. Wesco Financial Corp has a market cap of $2.15 billion; its shares were traded at around $302 with a P/E ratio of 28 and P/S ratio of 2.7. The dividend yield of Wesco Financial Corp stocks is 0.5%. Wesco Financial Corp had an annual average earning growth of 2.8% over the past 10 years.
Buffett owns 5,703,087 shares as of 03/31/2009, which accounts for 3.85% of the $40.87 billion portfolio of Berkshire Hathaway. Berkowitz owns 980 shares as of 03/31/2009, which accounts for less than 0.01% of the $5.52 billion portfolio of Fairholme Capital Management.
This is another case Berkowitz keeping enough of number of shares to remind himself of.
Conclusion
Using the Aggregated Guru Portfolio can generate some interesting investment ideas. Here we demonstrated the tool to identify the stocks owned by both Buffett and Berkowitz. GuruFocus premium users can use it on any number of Gurus they find interesting. The tool is for premium members only, if you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
To some degree, Berkowitz practices investing with Warren Buffett as well as investing in Warren Buffett, namely, buying same stock as Warren Buffett does while owning Berkshire Hathaway stocks. Among the five stocks he shares with Warren Buffett, AXP, WLP, and UNH are substantial investment but KO and WSC are insignificant. When the price is right, one should not be surprised Berkowitz moves in those stocks as well.
Identifying the stocks owned by Both Buffett and Berkowitz is just one way to generate investment ideas. Users should conduct own research before committing to these stocks. If you are looking for more detailed research from GuruFocus, you may want to check out the two newsletters that we are publishing:
1. Ben Graham Net Current Asset BargainsBoth are based on time tested value investing principles. Click here for details
2. Buffett Munger Best Bargains
