Warren Buffett's 2010 Portfolio

By Ryan C. Fuhrmann | January 12, 2011 AAA
Warren Buffett's 2010 Portfolio

The official results won't be out until March, which is when Warren Buffett's Berkshire Hathaway releases its annual report to shareholders, but it is possible to get an early gauge on how its investment portfolio performed during 2010. Each quarter, the company must file Form 13F with the Securities & Exchange Commission (SEC) that details its largest holdings. The last one was filed as of September 30, 2010, but given Warren Buffett is a buy-and-hold investor, most of the holdings were likely still held as of year-end. The portfolio's value at this time was just under $50 billion but likely rose sharply as the market rallied strongly to end out the calendar year. (We look at the Sage of Omaha's methodology for evaluating value stocks. To learn more, read Warren Buffett: How He Does It.)

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The largest positions as of the third quarter consisted of many Blue Chip firms and quite a few that are part of the Dow Jones Industrial Average (DJIA). Coca Cola (NYSE:KO) was the largest holding while Procter & Gamble (NYSE:PG), American Express (NYSE:AXP) and Wells Fargo (NYSE:WFC) also represented sizeable positions. Coca Cola posted impressive performance, rising more than 15% for the year to best the S&P500, which returned about 12% during the year, including dividends. American Express and P&G lagged the market with single digit returns, while Wells Fargo looks to have about matched the market for the year.

Other positions of note include DJIA components Wal-Mart (NYSE:WMT), Johnson &Johnson (NYSE:JNJ) and Kraft (NYSE:KFT). Kraft about matched the market with a double-digit return while Wal-Mart was about flat and J&J posted a slightly negative return for the full year. Rounding out the top 10 holdings, U.S. Bancorp (NYSE:USB) and Wesco Financial (NYSE:WSC) also closely tracked the market while ConocoPhillips (NYSE:COP) was a standout and rose close to 30% for the entire year. Another holding that showed up during the third quarter was Bank of New York Mellon (NYSE:BK). The bank had a strong end to the year and rose about 20% during the fourth quarter, though the market also had a strong run and rose by about the same amount.

There could have been an above-average amount of changes during the fourth quarter because of the retirement of Lou Simpson at Geico Insurance, which Berkshire owns. The investments in the Geico portfolio are disclosed along with the overall Berkshire holdings and could have been modified.

Another unique item is that Berkshire had been selling off investments to fund the purchase of railroad firm Burlington Northern Santa Fe. This resulted in third quarter reductions of smaller holdings including Moody's (NYSE:MCO), Nike (NYSE:NKE), Fiserv (Nasdaq:FISV) and Ingersoll-Rand (NYSE:IR). A final item of note is that Berkshire is planning on acquiring the rest of Wesco Financial it does not own, which means the firm will cease to be part of the investment portfolio and will instead be folded into Berkshire's stable of operating companies. (They don't call him "The Oracle" for nothing. Learn how Buffett comes up with his winning picks. See Think Like Warren Buffett.)

A New Investment Manager
At the end of the third quarter, Berkshire announced it hired Todd Combs to help run part of its portfolio. It's unclear how much capital will be allocated to Mr. Combs in the coming years, but details have been found about the portfolio he was managing prior to going over to Berkshire. His focus was firmly on financial stocks and an overlapping position with Berkshire included U.S. Bancorp. Other holdings included MasterCard, State Street (a rival to Bank of New York Mellon) and Progressive (a rival to Geico), in addition to a number of insurance firms.

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The Bottom Line
As time has gone on, Berkshire's investment portfolio has given way to its growing base of operating companies that are mostly or entirely owned by Berkshire. The operating companies include Geico, many other insurance brands and businesses, regulated utilities including MidAmerican Energy Holdings, and a wide array of manufacturing, service and retailing operations.

As such, the overall performance of Berkshire tends to be driven by the operating companies in combination with its investment portfolio. The investment portfolio is still worth tracking and represents an easy way for investors to pick and choose among investments they would also like to hold. The 2010 performance figures due in March will lend insight into how Berkshire did overall, which it measures in terms of growth in book value. The investment portfolio results will also be known at that time, and by the looks of it the portfolio performed more or less in line with the overall stock market for all of 2010. (The Oracle of Omaha can move over - there's a new investor in town. Check out Why Warren Buffett Envies You.)

For the latest financial news, check out Water Cooler Finance: Conflicting Job Reports And A Facebook IPO.

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