According to its most recent regulatory filings, Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) owned just over $270 billion of stocks in its giant equity portfolio at the end of March 2020.
Almost 40% of this portfolio, or $108 billion, was invested in one position, Apple Inc. (AAPL, Financial). The top five holdings accounted for around $190 billion, or 70% of the total. It is these positions that tend to attract the most attention when the media covers Buffett's portfolio.
However, I like to spend more time looking at the smaller holdings in the portfolio. By focusing on these under-the-radar equities, I think there's a chance I might find something the rest of the market is missing.
Now I should note here that any current position worth less than $1 billion is unlikely to have been initiated by the Oracle of Omaha himself. He has previously declared that positions of $1 billion or less in size are more likely to have been initiated by one of Berkshire's portfolio managers, Todd Combs and Ted Weschler.
Therefore, we must be careful not to conclude that just because a holding is in Berkshire's portfolio, Buffett likes it. It could be the case that he has had no input whatsoever concerning the position.
Berkshire's smaller holdings
There was one smaller position Berkshire added in the first quarter of this year, and that was Aon Plc (AON, Financial). The conglomerate acquired 4.1 million shares, spending just under $1 billion.
Aon is the second small insurance sector business the firm has added over the past 12 months. It acquired a large stake in Marsh & McLennan (MMC, Financial) in the third quarter of 2020 and has since increased the size of that position from 3.4 million shares to 5.3 million shares.
Earlier this year, I speculated that Berkshire might be interested in acquiring Marsh because it exhibited all of the qualities the group usually looks for in an acquisition. It is a cash generative insurance brokerage, risk management and reinsurance service business. These are all sectors Berkshire knows well.
I think the same could hold true of Aon. The insurance company is right in Berkshire's sweet spot. I wouldn't be surprised if the two parties decided to work together in some way.
Financial services and biotech
Looking down the list of the smaller investments in Berkshire's portfolio at the end of March, a couple of other names stick out. One of those is StoneCo Ltd. (STNE, Financial).
Berkshire invested in this Brazilian financial services company at the time of its initial public offering in 2018. At the time, the deal attracted a lot of attention. Buffett has always said he would avoid IPOs, especially technology IPOs.
As it turns out, this was an incredibly shrewd decision by whichever investment manager decided to pull the trigger. Berkshire paid around $18.44 for 14.2 million shares in the company in the fourth quarter of 2018. Today it's trading for nearly $63. Based on this impressive performance, it's no surprise Berkshire decided to top slice the holding, reducing its stake by 25% in the first quarter.
The final holding I want to highlight in this article is biotech company Biogen Inc. (BIIB, Financial). At the end of March 2021, Berkshire owned 643,000 shares in this enterprise, a holding worth just $180 million.
It's unclear to me why Berkshire holds this investment. It's entirely out of the company's circle of competence. The firm specializes in the discovery, development and delivery of therapies for the treatment of neurological diseases. That's an entirely different world to the insurance and financial sectors the conglomerate is used to dealing with. My best guess is that perhaps the position was initiated to take advantage of an expected approval for a drug the pipeline. Since the group acquired the stock in the fourth quarter of 2019, it has gone nowhere.
Disclosure: The author owns no share mentioned.
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