Wells Fargo, American Express, Goldman Sachs, U.S.Bancorp, Burlington Northern Santa Fe Corp, Union Pacific Corp Move Ahead of Berkshire Hathaway

1. People who invest in Warren Buffett’s stocks instead of investing in Berkshire Hathaway (BRK-A), (BRK-B) stock outright would have better returns since the bear market bottomed more than three months ago.


2. Berkshire Hathaway Inc.’s stock advanced 19 percent since U.S. equity indexes reached their lows on March 9. The increase lags behind 15 of the company’s top 20 stock holdings. A $1 million investment mimicking Berkshire’s portfolio would have produced a $682,300 profit through yesterday, compared with a $185,900 gain for the same-sized investment in Berkshire shares.


3. Berkshire is the top shareholder in Wells Fargo, the fourth-largest U.S. bank by assets, and American Express, the biggest credit-card company by purchases. Wells Fargo & Co. (WFC, Financial) and American Express Co. (AXP, Financial) more than double from their March lows after losing over half their value in the 12 months prior. The company is the biggest owner of Goldman Sachs Group Inc., (GS, Financial) which has surged 93 percent since March 9, and the third-leading investor in U.S. Bancorp, (USB, Financial)which has climbed 74 percent.


4. A rally in railroad stocks has also lifted Berkshire’s investment portfolio. The company owns 23 percent of Burlington Northern Santa Fe Corp., which has gained 43 percent since March 9, and is among the top 10 holders of Union Pacific Corp. shares, up 50 percent.


5. On the other hand, companies Berkshire owns outright, meanwhile, had declining sales amid the global recession, and the firm’s losses from derivative positions on corporate and municipal debt may not reverse as quickly as those tied to stock markets.


6. The decline in world stock markets at the start of the year contributed to Berkshire’s worst loss in at least two decades in the first quarter. The company wrote down derivatives tied to corporate-debt indexes and took a charge on ConocoPhillips shares purchased when oil prices were near their peak.


7. Berkshire last year cut jobs at units including Clayton Homes Inc., which builds manufactured housing, and brickmaker Acme Building Brands. The U.S. unemployment rate in May climbed to 9.4 percent, the highest since 1983.


8. Buffett said earlier this year that the economic slump depressed revenue at Berkshire’s jewelry businesses and operations related to real estate. Profit at its retail operations, a category that includes furniture and candy stores as well as jewelry, fell by half in the first quarter to $16 million before taxes, the seventh straight decline.


9. Berkshire has a smaller number of derivatives tied to municipal bonds or debt issued by corporations. Berkshire, which collected $3.4 billion in premiums on the derivatives related to corporate debt as of the end of last year, paid $1.13 billion to buyers of the contracts this year through May 8.


10. The company may be forced to pay out more as state and local budget deficits lead public institutions to default, said Charles Ortel, managing director of New York-based Newport Value Partners, who advises clients to sell Berkshire shares short.


11. Berkshire’s liability on derivatives at its finance and financial products operations widened to $15.4 billion as of March 31, from $14.6 billion three months earlier. Whitney Tilson thinks that some of those liabilities, on derivatives tied to four of the world’s stock markets, may have reversed in the second quarter as the indexes recovered.


12. “ Berkshire is cheaper today relative to its intrinsic value than it was on March 9, when its stock portfolio was in the tank and its index puts were marked to market,” Tilson said. “The intrinsic value of Berkshire, when you just factor in those two things, is easily up well over $10,000 a share and the stock really hasn’t moved that much.”