Four Bullish Takes from Billionaire Warren Buffett

In every round of 13F filings, Berkshire Hathaway‘s equity portfolio is probably the most anticipated by the general investing crowd. Warren Buffett keeps a diversified portfolio consisting of mostly large- and mega-cap companies that have been in business for decades and will probably keep rewarding shareholders with consistent growth for many years ahead. Therefore, while analyzing Berkshire’s 13F filing, it’s not always the top picks that are the most interesting, but rather the changes made to the portfolio. In this article we are going to take a look at some of the most significant moves made by Buffett during the third quarter, including two new holdings and two companies to which Buffett boosted his exposure.

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Three Unchanged Top Picks

Among Warren Buffett’s top picks, three have been in his equity portfolio for years. On the first and third spots, Wells Fargo & Co (NYSE:WFC) and The Coca-Cola Co (NYSE:KO), in which the investor reported 470.29 million shares and 400.00 million shares respectively. The value of the Wells Fargo & Co (NYSE:WFC) holding declined to $24.15 billion, amid an 8% drop of the stock in the third quarter, while the stake in Coca-Cola slid to the third spot from the second as the merger between Kraft and H.J. Heinz (orchestrated by Buffett) was completed and the new company went public at the beginning of July. However, The Coca-Cola Co (NYSE:KO)’s stock inched up by around 3.5% between July and September, increasing the value of Buffett’s holding to $16.05 billion. Another position that remained unchanged at the top of Buffett’s 13F portfolio was the 151.61 million-share stake in American Express Company (NYSE:AXP), that was valued at $11.24 billion at the end of September. Amid a 23% decline of American Express Company (NYSE:AXP)’s stock since the beginning of the year, the value of Berkshire’s position has fallen from $14.11 billion reported as of the end of 2014.

On the next page, we are going to take a look at Kraft Heinz Co (NASDAQ:KHC) and AT&T Inc. (NYSE:T), which represent new additions to Berkshire’s equity portfolio, as well as Phillips 66 (NYSE:PSX) and  International Business Machines Corp. (NYSE:IBM), in which Buffett raised his stakes heading into the fourth quarter.

Buffett’s Two High-Conviction Picks

International Business Machines Corp. (NYSE:IBM)‘s stock lost 10% in the third quarter and is down by 16.50% year-to-date as the company faces tougher competition from cloud companies as it also transitions towards cloud computing, but apparently not fast enough to face its competitors. The company’s revenue has been declining for the last several years, but Buffett keeps his optimism, even though he admitted that Berkshire has lost around $2.0 billion on its investment in IBM. In the third quarter, Buffett went even further and acquired another 1.47 million shares, taking the holding to 81.03 million shares worth $11.75 billion. International Business Machines Corp. (NYSE:IBM) has strong fundamentals and its stock trades at just 8.9-times forward earnings. Prem Watsa‘s Fairfax Financial Holdings is also bullish on International Business Machines Corp. (NYSE:IBM), reporting ownership of 1.36 million shares as of the end of September.

In Phillips 66 (NYSE:PSX), Buffett more than doubled his position during the third quarter, adding 31.79 million shares to lift it to 61.49 million shares valued at $4.72 billion as of the end of September. The stock of the energy giant has appreciated by 26% since the beginning of the year, outperforming the sector by a wide margin. Amid a drop in crude prices, refiners are among the winners of the energy sector as they are able to buy cheaper oil domestically due to an increase in U.S shale production. David Cohen and Harold Levy’s Iridian Asset Management is another shareholder of Phillips 66 (NYSE:PSX), owning 5.22 million shares as of September 30.

Buffett’s New Holdings

Finally, Berkshire reported a $22.98 billion-position in Kraft Heinz Co (NASDAQ:KHC), which went public at the beginning of July following the merger between Kraft Foods Group and H.J. Heinz, in which Berkshire played a major role. Berkshire owns 325.63 million shares of Kraft Heinz Co (NASDAQ:KHC) as of the end of September. The stock has inched down by 2.3% since the IPO, but it managed to gain a lot of attention from smart money investors. Out of more than 730 funds that we track, at least 20 own shares of Kraft Heinz Co (NASDAQ:KHC), including funds managed by billionaires Jim Simons and Dan Loeb.

AT&T Inc. (NYSE:T) is another one of Buffett’s new picks and represents the largest of Berkshire’s two holdings in Telecom companies (Verizon Communications Inc. (NYSE:VZ) represents the second one). The investor reported holding 59.32 million shares valued at $1.93 billion. The stock fell by 7% in the third quarter, and is 2% in the red year-to-date. AT&T Inc. (NYSE:T)’s shares are trading at 11-times forward earnings, which is below the S&P 500’s average. What also makes AT&T’s stock attractive is the 5.7% dividend yield, which is one of the largest in the industry. Phill Gross and Robert Atchinson’s Adage Capital Management added 1.13 million shares to its stake in AT&T Inc. (NYSE:T) during the third quarter as it reported holding 8.57 million shares as of the end of September.

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