Why is Buffett so keen on gobbling up so much Occidental Petroleum? I dunno. I don’t see an inflation coming in oil worldwide. OXY is off nearly 40% from its high but Warren still adds to his OXY position. Last time I looked, he owned over 40% of its common stock. This is pure courage at work. I expect he’ll go for the whole pie before long, but can OXY make his portfolio sing like Apple?
Portfolio management is rift with nasty surprises. If your entry point in a stock is off base it can cost you 5 to 10% of its price overnight. A company in turmoil, like United Health does drop 3 dozen points, overnight. This, an institutional piece of paper around for decades.
Obviously, not a time for cream puffs, but for ugly surprises. Meanwhile, trillion dollar asset funds do turnover their portfolios quarterly but show no positive numbers. These are odd lotters on a grand scale. Why should investors position their hard earned capital with such jumping operators? Why not just buy an S & P 500 Index Fund for your money and go back to sleep?
You look for a theme in such portfolios, but it doesn’t exist over the past 50 to 100 years. Because these funds are good for business, nobody calls them on the carpet.
Buffett is about as far away from a trader as you can get. I’m sure that when he buys a stock he’s thinking of holding it for 50 years or so. American Express is a good example. They got in trouble after being swindled in Tino De Angelis’s salad oil scheme. Tino sold the oil out of his storage tanks. But this did not impact Amex’s financial stability in a major way. That was the concept. Earnings power remained intact and the stock could still sell at a premium to the market. Which it did.
I did the same analysis at the same time. But, I tired of holding it forever. So I banged it out and went into semiconductors. This was early sixties and tech was booming with the advent of transistors.
Buffett went with his non-durables growthies like Coca-Cola which he's never found a reason to sell out. Keep in mind American Express here is more than half the size of the Apple holding which stands at 28% of assets. Then we see Bank of America, their largest holding at 11.1%. Today, I’d prefer other banks with stronger management like Morgan Guaranty Trust.
Berkshire’s portfolio at $267 billion end of quarter, December. It didn’t trade up a storm with a static ratio of 63%. The portfolio rose some 3% to $796 million. Aside from BRK’s 2 energy positions where he's been an active buyer, Chevron and Occidental Petroleum, fifth in their market holdings, approximately $35 billion at year end. So far performance is nothing special but weighting probably headed higher. I sense OXY is still under accumulation, that Buffett feels comfortable in his asset play.
Coca-Cola and Kraft at 13% of assets are in the non-durables category which Buffett favors. Remember his holdings of newspaper stocks he characterized as toll stations.
I don’t remember the last time Berkshire owned a cyclical industrial company’s stock. No Alcoa, U.S. Steel, General Motors or even General Electric. And yet, I’d considered energy paper as deeply cyclical too.
I don’t get the theme for investment covering Berkshire’s other major positions and wouldn’t consider them as a reason to own Berkshire Hathaway. Kroger, Kraft, Heinz. Moody’s and rest of portfolio around 15% of assets, cover non-industrial properties, but not a reason to own Berkshire.
What it comes down to is Buffett is a good stock picker, a buy and hold operator. He avoided high technology plays early on Probably thought they were expensive and too difficult to understand. Buffett’s dream seems to be the formation and extension of a great property whose assets represent the best the country has to offer. I can see energy properties at least 50% of assets with financials representing earnings leverage attractive as its second major sector.
The investment in Apple shows that a great money manager isn’t afraid to take chances if the risk-gain ratio seems solidly attractive. What you don’t want to do is own a property where there's total risk to the asset base.
The country needs more wise men as sound investors where the public can go along for the ride. No fee attached here.
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