Berkshire Hathaway 2012 listed stocks performance
I hope everyone has now read the 2012 annual Berkshire Letter which came out last week.
Among other stufff, Warren Buffet complained a little bit that he didn’t beat the S&P 500 based on the increase in Book Value at Berkshire.
Just for fun, I hacked in Berkshire portfolio.
In a first step I looked at all the disclosed positions above 1 bn USD.
| 2012 perfomance | P/E | P/B | EV/EBIT | EV/EBITDA | Beta | Volume | |
|---|---|---|---|---|---|---|---|
| American Express | 23.57% | 14.7 | 3.8 | 16.1 | 8.9 | 1.05 | 8,715 |
| Coca Cola | 6.51% | 19.6 | 5.3 | 16.6 | 14.0 | 0.72 | 14,500 |
| Conoco Philips | 9.20% | 9.5 | 1.5 | 6.5 | 4.4 | 0.98 | 1,399 |
| Direct TV | 17.31% | 10.8 | #N/A N/A | 9.0 | 6.2 | 0.89 | 1,154 |
| IBM | 4.17% | 13.7 | 12.4 | 11.6 | 9.4 | 0.91 | 13,048 |
| Moody’s | 51.86% | 16.6 | 29.1 | 10.3 | 9.5 | 1.31 | 1,430 |
| Munich Re | 54.71% | 8.1 | 1.0 | #N/A N/A | #N/A N/A | 0.94 | 3,599 |
| Philips 66 | 50.41% | #N/A N/A | 2.0 | 10.8 | 8.5 | 1.16 | 1,097 |
| POSCO | 1.19% | 8.3 | 0.7 | 9.0 | 6.4 | 1.01 | 1,295 |
| Procter & Gamble | 5.18% | 19.4 | 3.2 | 14.4 | 11.9 | 0.64 | 3,563 |
| Sanofi | 34.20% | 20.0 | 1.7 | 13.2 | 6.9 | 0.76 | 2,438 |
| Tesco | -8.20% | 10.8 | 1.7 | 10.4 | 7.2 | 0.72 | 2,268 |
| US Bancorp | 20.96% | 11.9 | 1.9 | #N/A N/A | #N/A N/A | 1.09 | 2,493 |
| Walmart | 16.97% | 14.6 | 3.2 | 10.3 | 7.9 | 0.59 | 3,741 |
| Wells Fargo | 27.37% | 10.7 | 1.3 | #N/A N/A | #N/A N/A | 1.15 | 15,592 |
| Total / Avg | 17.56% | 14.27 | 5.0 | 13.4 | 10.1 | 0.92 | 76,332 |
To add some value, I have added some valuation metrics and aggregated the performance based on year end values. Although this is not the 100% correct way to do this, we can see that the listed stock portfolio outperformed the S&P Total return index (+14.1%) by a margin of almost 3.5%. A very respectable outperformance for a 75 bn USD portfolio. One can also see that the Beta of the portfolio is clearly below 1, so the outperformance really looks like alpha. (EDIT: I do not know which Index Buffet used for his 16%, I took S&P 500 total return performance from Bloomberg).
From simple valuation metrics, the portfolio of course looks quite expensive. P/E of 14.4 is in line with the S&P 500, but it looks like that Berkshire doesn’t consider P/B as a meaningful metric for listed stocks anymore. Also, the average EV/EBIT of 13 and EV/EBITDA of 10 is far above I would be prepared to pay.
In a second step, I added all the stock positions which were disclosed by Berkshire plus anything available on Bloomberg with a value of more than 200 mn USD.
| 2012 perfomance | P/E | P/B | EV/EBIT | EV/EBITDA | Beta | Volume | |
|---|---|---|---|---|---|---|---|
| American Express | 23.57% | 14.7 | 3.78 | 16.05 | 8.88 | 1.05 | 8,715 |
| Coca Cola | 6.51% | 19.6 | 5.33 | 16.55 | 13.98 | 0.72 | 14,500 |
| Conoco Philips | 9.20% | 9.5 | 1.47 | 6.54 | 4.38 | 0.98 | 1,399 |
| Direct TV | 17.31% | 10.8 | #N/A N/A | 9.03 | 6.16 | 0.89 | 1,154 |
| IBM | 4.17% | 13.7 | 12.41 | 11.56 | 9.41 | 0.91 | 13,048 |
| Moody’s | 51.86% | 16.6 | 29.11 | 10.29 | 9.48 | 1.31 | 1,430 |
| Munich Re | 54.71% | 8.1 | 0.96 | #N/A N/A | #N/A N/A | 0.94 | 3,599 |
| Philips 66 | 50.41% | #N/A N/A | 1.98 | 10.82 | 8.52 | 1.16 | 1,097 |
| POSCO | 1.19% | 8.3 | 0.70 | 8.96 | 6.36 | 1.01 | 1,295 |
| Procter & Gamble | 5.18% | 19.4 | 3.21 | 14.44 | 11.88 | 0.64 | 3,563 |
| Sanofi | 34.20% | 20.0 | 1.74 | 13.22 | 6.88 | 0.76 | 2,438 |
| Tesco | -8.20% | 10.8 | 1.74 | 10.40 | 7.15 | 0.72 | 2,268 |
| US Bancorp | 20.96% | 11.9 | 1.86 | #N/A N/A | #N/A N/A | 1.09 | 2,493 |
| Walmart | 16.97% | 14.6 | 3.21 | 10.27 | 7.86 | 0.59 | 3,741 |
| Wells Fargo | 27.37% | 10.7 | 1.33 | #N/A N/A | #N/A N/A | 1.15 | 15,592 |
| Davita | 45.80% | 19.4 | 3.33 | 14.95 | 11.94 | 0.80 | 1,830 |
| Swiss Re | 49.31% | 6.8 | 0.92 | #N/A N/A | #N/A N/A | 1.15 | 909 |
| Washington Post | 1.20% | 17.6 | 1.16 | 9.27 | 4.52 | 0.81 | 704 |
| General Motors | 37.40% | 9.3 | 1.47 | #N/A N/A | 1.31 | 1.19 | 697 |
| M&T Bank | 31.99% | 13.7 | 1.43 | #N/A N/A | #N/A N/A | 1.07 | 558 |
| BonY Mellon | 30.69% | 12.2 | 0.92 | #N/A N/A | #N/A N/A | 1.28 | 544 |
| Costco | 26.15% | 24.8 | 3.50 | 13.49 | 10.21 | 0.75 | 444 |
| USG | 166.24% | #N/A N/A | 502.76 | 48.17 | 18.47 | 2.14 | 472 |
| Viacom | 16.92% | 14.5 | 4.21 | 9.25 | 8.70 | 1.16 | 459 |
| Precision Castparts | 12.83% | 20.3 | 2.92 | 15.23 | 13.93 | 0.92 | 374 |
| Mondelez | 6.24% | 12.7 | 1.58 | 9.46 | 7.81 | 0.62 | 366 |
| National Oilwell | -0.76% | 11.5 | 1.43 | 8.19 | 6.96 | 1.51 | 357 |
| Deere | 11.80% | 11.2 | 4.67 | 8.22 | 6.75 | 1.14 | 355 |
| Wabco | 43.46% | 14.4 | 6.48 | 12.46 | 10.07 | 1.72 | 281 |
| General Dynamics | 6.04% | 10.6 | 2.10 | 30.15 | 17.28 | 0.97 | 262 |
| Visa | 47.56% | 24.6 | 4.68 | 18.01 | 17.09 | 0.98 | 250 |
| Torchmark | 18.82% | 11.2 | 1.25 | #N/A N/A | #N/A N/A | 0.97 | 245 |
| Mastercard | 29.89% | 23.9 | 9.38 | 14.04 | 13.27 | 1.00 | 214 |
| Total / Avg | 19.57% | 14.4 | 7.6 | 13.6 | 10.1 | 0.94 | 85,653 |
A few observations here:
I do not understand, why DaVita was not included in the shareholder’s letter with a market value of 1.8 bn. Maybe they have forgotten this position ?
Secondly, including those additional ~10 bn of stocks increases the total performance of the total portfolio by an incredible 2%.
In a third step, I calculated the performance of what I would call the “Non Buffet” Portfolio, taking Direct TV from the annual letter and eliminating Swiss Re and Washington Post from the < 1bn list.
| 2012 perfomance | P/E | P/B | EV/EBIT | EV/EBITDA | Beta | Volume | |
|---|---|---|---|---|---|---|---|
| Direct TV | 17.31% | 10.8 | #N/A N/A | 9.03 | 6.16 | 0.89 | 1,154 |
| Davita | 45.80% | 19.4 | 3.33 | 14.95 | 11.94 | 0.80 | 1,830 |
| General Motors | 37.40% | 9.3 | 1.47 | #N/A N/A | 1.31 | 1.19 | 697 |
| M&T Bank | 31.99% | 13.7 | 1.43 | #N/A N/A | #N/A N/A | 1.07 | 558 |
| BonY Mellon | 30.69% | 12.2 | 0.92 | #N/A N/A | #N/A N/A | 1.28 | 544 |
| Costco | 26.15% | 24.8 | 3.50 | 13.49 | 10.21 | 0.75 | 444 |
| USG | 166.24% | #N/A N/A | 502.76 | 48.17 | 18.47 | 2.14 | 472 |
| Viacom | 16.92% | 14.5 | 4.21 | 9.25 | 8.70 | 1.16 | 459 |
| Precision Castparts | 12.83% | 20.3 | 2.92 | 15.23 | 13.93 | 0.92 | 374 |
| Mondelez | 6.24% | 12.7 | 1.58 | 9.46 | 7.81 | 0.62 | 366 |
| National Oilwell | -0.76% | 11.5 | 1.43 | 8.19 | 6.96 | 1.51 | 357 |
| Deere | 11.80% | 11.2 | 4.67 | 8.22 | 6.75 | 1.14 | 355 |
| Wabco | 43.46% | 14.4 | 6.48 | 12.46 | 10.07 | 1.72 | 281 |
| General Dynamics | 6.04% | 10.6 | 2.10 | 30.15 | 17.28 | 0.97 | 262 |
| Visa | 47.56% | 24.6 | 4.68 | 18.01 | 17.09 | 0.98 | 250 |
| Torchmark | 18.82% | 11.2 | 1.25 | #N/A N/A | #N/A N/A | 0.97 | 245 |
| Mastercard | 29.89% | 23.9 | 9.38 | 14.04 | 13.27 | 1.00 | 214 |
| Total / Avg | 34.97% | 15.2 | 33.6 | 15.3 | 9.9 | 1.07 | 8,862 |
And here we can see that Weschler and Combs really “shot out the lights”. 35% performance for 2012 is a fxxxing fantastic result. Ok, Beta is slightly above 1 but at least for 2012 the did a outstanding job. No wonder Buffet said that in his annual letter:
Todd Combs and Ted Weschler, our new investment managers, have proved to be smart, models of integrity, helpful to Berkshire in many ways beyond portfolio management, and a perfect cultural fit. We hit the jackpot with these two. In 2012 each outperformed the S&P 500 by double-digit margins. They left me in the dust as well.
So even if some of the smaller stocks are “Warren & Charlie” stocks as well, Weschler and Combs showed them how its done at least with a smaller portfolio. Maybe the smaller size of the portfolio is the reason ?
Summary:
Once again, the portfolio of listed stocks of Berkshire outperformed the S&P 500 by a nice margin. However it seems to be that Buffet’s “elephants” don’t have a chance against the smaller holdings of Weschler and Combs. Nevertheless, for the “lazy” value investor, copying the Berkshire portfolio looks still like a winning strategy.
Copying the “small” Berkshire stocks however looks like the absolute killer strategy.
value and opportunity 
Great post… FYI I think Buffett is using S&P total return including dividends.
I found it strangely hilarious how he used a very tiny font to write “they left me in the dust as well”. awesome!
btw, Intel was also bought and sold quickly after a 30-40% gain in 2012 it seems…
Etliche der aufgeführten “kleinen” Positionen waren nicht das ganze Jahr über im Depot. Außerdem sind etliche sicherlich Buffett-Positionen (COST, WPO, MTB, USG, Torchmark). Die Renditerechnung hier ist also sehr sehr ungenau und lässt keine exakten Schlussfolgerungen zu.
Was man mit einiger Gewissheit behaupten kann, ist dass insbesondere Weschlers Portfolio eine genauere Untersuchung verdient hat (VIA, DTV, DVA). DTV kann man aktuell etwa zu dem von BRK bezahlten Durchschnittspreis bekommen.
Davita ist nicht enthalten, weil der Teil, der nicht in den Pensionsfonds enthalten ist, nicht über 1 Mrd. wert ist.
Von DTV ist auch nur ein Teil der Aktien in dem Brief aufgeführt, der Rest ist in den Pensionsfonds.
I thought, that the pension funds are also managed bei Tedd and Todd?
“Mondelez”
Kraft wurde aber damals von Buffett gekauft…
ja, aber hatte er nicht Kraft auch wieder verkauft ?
Er hat Kraft reduziert und nach dem Spin-Off KRFT und Mondelez weiter reduziert. Leider verkauft er schon seit 2010 und nicht allzu schnell. Sonst wäre das was als special situation.
http://www.chicagobusiness.com/article/20130223/ISSUE10/302239988/why-buffett-is-giving-up-on-krafts-spinoffs
USG was picked by Buffet years before Ted and Todd joined. Davita is not included in the biggest positions, because most of it is held in pension funds of Berkshire Hathaway.
Opps, sorry double post.
USG is a Buffett pick from years before Todd and Ted joined. Davita is not included in the biggest holdings, because most of it is held for the pensions funds of Berkshire.
ok, thanks for the clarification, makes sense.
Oh, that’s fair. I read that differently (ie incorrectly).
Interesting commentary, but I am confused about the “Non Buffett” portfolio. Swiss Re and, certainly, Washington Post are both Buffett companies. What was the rational behind removing those?
Well, the idea is to look at how Ted Weschler and Combs were doing. My simplified assumption is that all the small positions ex WaPo and Swiss Re are Weschler/Combs stocks…