Warren Buffett's Top Holdings for 2017 - Berkshire Hathaway BRKA

On Saturday February 25, 2017 Warren Buffett released his 2017 Annual letter to shareholders for his Berkshire Hathaway (BRKA) performance through December 31, 2016.  I wrote a detailed article about this for Seeking Alpha you can read at:

• Buffett's 2017 Letter To Shareholders - 3 Stocks Close To His Purchase Price

Summary:

Buffett Listed 3 stocks of note with prices within 6% of his average purchase price.

He did not add to two top holdings that went down in 2016, an up year for the market.

Apple was a new position for 2016.

Any short-term market pullbacks to the average price Buffett paid could be a buying opportunity to do better than Buffett.

Holdings as of 12/31/16 from 2017 Shareholder letter:

Holdings as of 12/31/15 from 2016 Shareholder letter:

My Core and Explore Performance vs Warren Buffett's BRKA:

Kirk Lindstrom's Investment Letter:

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I'll use this article to add additional charts people request in comments here.

2/27/17 4:01 PM PST Update: 

• According to Jim Cramer, on CNBC this morning Buffett said he now owns 133 million shares of Apple, making it equal to his holdings in Coke!  

2/28/17 7:09 AM PST Update:  

• Doc Hopey wrote in the comments section of my article: "I am often impressed about the confidence regarding the depth of a moat. "Apple has a much bigger moat than IBM". How can you be so sure? I'd remember a lot of stocks in the tech business, that I guess I'd thought having a strong moat. Blackberry, Nokia, Kodak, Polaroid, Yahoo... Most of those have been (nearly) gone long before I started investing. Nonetheless in the rearview mirror all of those brands lost their mojo for technical revolutions. (Mostly) All of those consumer brands are gone and I am not sure if I would have gotten that right. Not so IBM."

Apple vs Sony Graph

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Warren Buffett Sells Moody’s Stock

Buffett's favorite holding period for stock may be "forever" but that doesn't mean he never sells. Today Reuters reported Warren Buffett's Berkshire Hathaway (BRKA Charts and Quote) sold Moody's Corp. stock (MCO) for the sixth time since July.

Dec. 23 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. cut its stake in Moody’s Corp. for the sixth time since July after the ratings company was hit by profit declines, lawsuits and criticism from regulators.

Berkshire sold 87,992 shares on Dec. 18 for $26.77 apiece and remains Moody’s biggest shareholder, according to a regulatory filing yesterday. Omaha, Nebraska-based Berkshire’s stake is down about 34 percent from the 48 million shares it owned at the end of June.

Remember that Moody’s, Standard & Poor’s and Fitch Ratings were blindsided by the financial meltdown when all three firms gave top grades to U.S. subprime mortgage bonds that caused the financial crisis.

Our Favorite holding period is forever.”
-Warren Buffett

As of December 23, 2009, "Kirk's Newsletter Explore Portfolio" is up 33.6% YTD vs. DJIA up 19.2% YTD vs BRKA up 2.4% YTD (FREE Sample Issue)

click charts courtesy of stockcharts.com for full size image

More Information:

• BRKA Charts and Quote

• FREE Sample Issue of "Kirk Lindstrom's Investment Letter"

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP at tiny 9.0% vs. NASDAQ UP at tiny 3.2% (All through 12/23/09) (More info)

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As of December 23, 2009, "Kirk's Newsletter Explore Portfolio" is up 33.6% YTD vs. DJIA up 19.2% YTD vs BRKA up 2.4% YTD

Becky Quick Warren Buffett Interview on CNBC

Today CNBC's Rebbecca (Becky) Quick (Anchor Women of CNBC) spent three hours with Billionaire investor Warren Buffett, Chairman and CEO of Berkshire Hathaway (BRKA Charts).

Key Points:

Mark-to-Market Accounting: Buffett said he was not in favor of eliminating "market to market" accounting. He says too many took advantage of accounting tricks in the past so this is needed to keep companies honest. He suggested a great idea that we change the rules that require companies to raise capital on mark-to-market triggers.

Uptick Rule: Buffett is in favor or reinstating the uptick rule.

Market timing: Buffett said nobody can time the market, including him. Sure he would have done better to have waited but he still likes good stocks for the long term.

On President Obama's Administration: Washington's message about the economy has been "muddled." He has not spoken to president Obama in many months but he has spoken to key people in his administration. He thinks they are making mistakes:

• We've had an economic Pearl Harbor. "You have got to win the economic war, that is the only priority."
  
• Doing too much too fast on other things like carbon emissions and health care. They are not as important for the moment.
  
• A lot of things attached to the "stimulus" plan were not what he would like to see right now.
  
• "you are not going to get people behind you if you try and cram things down their throat" in reference to the "Cram down" rule forcing banks to break legal contracts called mortgages.
• When you went back to Pearl Harbor, you did not have 535 Congress people criticizing every move FDR made.
• Speed of turnaround depends on wisdom of government policies.
  

I will be updating this article during the day so check back tomorrow.

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 94% vs. S&P500 DOWN 14% vs. NASDAQ down 28% vs. Warren Buffett's Berkshire Hathaway (BRKA) up 37% (All through 12/31/08) (More Info)

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Warren Buffett Buy Signal

In a New York Times OpEd article today, Warren Buffett says he is moving from US Treasuries to US Stocks now. I pay attention to what Buffett has to say.

Buffett wrote that his personal portfolio that was not in Berkshire Hathaway stock was in "nothing but United States government bonds" before this decision to buy stocks now.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Click chart courtesy of stockcharts.com for full size image

Buffett writes a simple rule dictates his buying:

Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Buffett is also clear he can't predict the stock market, but he sure seems better than most given he has been in safe US Treasury bonds with his cash for many years leading up to today's bargain basement prices:

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

I like what Buffett says about cash.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

I agree. On Monday I moved a good chunk of my core portfolio from Vanguard Money Funds to Vanguard's Treasury Inflation Protected Securities (TIPS) fund (VIPSX Charts) after I sent a chart to my newsletter subscribers showing TIPS were paying the highest base rate in years.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I completely agree and have been buying this downturn myself. Some things I bought were the S&P500 exchange traded spiders fund (SPY Charts) at $87.54 on 10/10/08 and my very first shares ever of Google (GOOG Charts) at $310 yesterday.

If you want to know what else I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY and get the October 2008 issue FOR FREE!

For full Buffett Article, see "Buy American. I Am"

Warren Buffett on Goldman Sachs and Financial Bailout Package

Yesterday Warren Buffett invested in Goldman Sachs (GS Charts). His Berkshire Hathaway holding company (BRKA Charts) bought five billion dollars of preferred stock plus warrants to buy another five billion dollars in common stock. Buffett got a very sweet deal that I wish was available to small investors like myself. Of course, you could buy stock in BRKA where you would benefit from this deal.

Chart of GS and BRKA courtesy of stockcharts.com

Details:

• Goldman Sachs plans to offer 40.65 million common shares at $123 per share to raise $5 billion.
• Goldman said Tuesday it will sell $5 billion of perpetual preferred stock to Buffett's Berkshire in a private offering.
• The preferred stock has a dividend of 10% and is callable at any time at a 10% premium.
• Berkshire will also receive warrants to buy $5 billion of common stock with a strike price of $115 a share, exercisable at any time for five years.

Click for BRKA Graphs
Warren Buffett is effectively making about 10% above what others can make in exchange for endorsing this deal and Goldman Sachs as a good, long term investment. It worked as he was on CNBC this AM speaking highly of Goldman.

CNBC Interview

These are edited comments from Warren Buffett interview by Joe Kernen, Becky Quick and Carl Quintanilla on today's CNBC TV's Squawk Box.

Becky Quick: Why is this the right deal at the right time?

Warren Buffett: I don't try to time things but I do try to price things. I got a formula that says bet on brains when it is the the right type of deal. The price was right. The terms were right. The people were right. I decided to write a check.

Becky Quick: Does the government bailout plan have anything to do with this deal?

Warren Buffett: If I didn't think the government was going to act, then I would not be doing anything this week. I might be trying to undo things this week. It would be a mistake to buy ANYTHING now if the government were going to walk away from the Paulson proposal.

Becky Quick: Why?

Warren Buffett: There is no telling what would happen. Last week we were at the brink to going over the precipice into something that would take the economy many years to recover from.

Carl Quintanilla: Was this the most frightening experience in your financial career at evaluating where this economy stands?

Warren Buffett: Yes. The economy and Wall Street are joined at the hip. The market could not have taken another week like was developing last week.

Becky Quick: What does this mean to the tax payer at who who asks "why is this my problem?"

Warren Buffett: It is everyone's problem. Unfortunately, the economy is like a bath tub where you can't have cold water in the front and hot water in the back. Wall Street was going to immerse the tub very quickly. A collapse of the firms in trouble last week would have caused industry and retail to grind close to a halt. It is still very, very dangerous but thank heavens Paulson had the imagination to step up with ideas that I like. I did not think of backing money funds but once I heard it I knew it was a great plan to keep them from tumbling.

Joe Kernen: When many in Congress started to question Paulson and gave hints they might not approve the plan yesterday. As a result, the short term treasury yield tumbled as people again pulled money out of money funds to buy treasuries with tiny yields. Can the market get in trouble again if they don't go through with this plan?

Warren Buffett: It will get worse. Last week will look like Nirvana if they don't go through with a plan to get the country back on the right track. Huge institutions in the World all want to deleverage at the same time. We need someone large, like the US government, to step up and provide liquidity. If they do it right, and I think they will, then the US Government will make a lot of money. People who are buying these instruments in the market expect to make 15 to 20% a year. I would like to buy these if I had the liquidity. It should be a lead pipe cinch to make 10% minimum after fees at the prices today.

I think the CEOs and directors should be punished for what they did, but I would not write this into the legislation.

Becky Quick: Would you administer the plan or offer any suggestions?

Warren Buffett: Laughing "I'd love to administer it for nothing." One thing you might do. If someone wants to sell $100 billion of these instruments to the treasury, let them first sell $2 or $3 billion first in the open market and then let the Treasury match that price for the remainder. With Hank Paulson on top of it, you couldn't have a better guy.

Carl Quintanilla: Separate from the Bailout. People are pointing to you as the canary in the coal mine with the Goldman deal. Is this OK?

Warren Buffett: Laughing, as long as the canary lives, it is fine. We've got a lot of cash and we are seeing ways to use the cash sensibly. This is one of them and we plan to buy another $5 billion.

Joe Kernen: How much do you know about AIG?

Warren Buffett: I think I know a fair amount, but I don't think anybody knew what they needed to know including the management. The hole was so deep they were not able to work it out. We would be interested in a couple of assets when they sell them.

Becky Quick: You haven't put any money into an investment bank since Soloman in 1987. I am shocked to see you do it now since you had to run the company in 1991. Why do it?

Warren Buffett: That was a very unfortunate experience caused by a few people (rogue traders that nearly brought Solomon down.) I don't expect this to happen with Goldman which is extremely well run.

Joe Kernen: Could you tell by the way the assets were priced that Lehman was not facing reality?

Warren Buffett: Yes. I feel good about the way Goldman is marking to market which is one reason for the deal. I really think the Treasury will make a considerable amount of money if they price the assets by having the firms sell 5% into the open market to see what people think they are worth so they get a fair price that would net a positive return.

Carl Quintanilla: Is the current stock market price based in reality?

Warren Buffett: Long term, this is going to look like a very good time to buy but people should not use leverage. Leverage lets other people dictate to you and lower prices can take you out of a good position.

Becky Quick: Did Charlie Munger like the deal?

Warren Buffett: I didn't tell him about it until after it was done since his wife had a fall and he was away. Charlie is all for it.

Becky Quick: You've spent about $24 billion in the last 9 months.

Warren Buffett: We had a lot of money but at some point you have to use it. Otherwise, it is like saving up sex for your old age.

Becky Quick: How much cash do you have left?

Warren Buffett: We have enough.

Joe Kernan: How are we going to deal with the other $50 trillion in credit default swaps?

Warren Buffett: Getting regulation around the entire derivative market is important. AIG would be doing fine now if they never heard the word derivative.

Becky Quick: Is your purchase of Goldman a vote of confidence in banking institutions across the globe?

Warren Buffett: It is a vote of confidence in Goldman and a vote of confidence that congress will do the right thing.

Carl Quintanilla: Are you doing this as a philanthropist to help get this package passed?

Warren Buffett: No, I am doing it to make money and betting on congress doing the right thing.

Carl Quintanilla: What is the absolute deadline that this package needs to happen?

Warren Buffett: Anything that ads doubt that they will pass a package will be detrimental to the markets.

Joe Kernen: Do they get it?

Warren Buffett: Yes. This is an "economic Pearl Harbor" we are going through. I believe they will do what is right for the country after they vent their spleen against those who got us into this mess.

Becky Quick: How long were you talking to Goldman Sachs

Warren Buffett: Almost every financial institution has been talking to me. Yesterday they came to us with serious terms we liked and we got the deal done.

Joe Kernen: Did our prodding about when will you step in have anything to do with it?

Warren Buffett: Laughing, "This was a cheap way to get you off my back."

• He would ask Hank Paulson to stay on.
• He would be happy to help with the financial deal but he has too many conflicts of interest to take a significant position in the new administration. [If this is Pearl Harbor, then he could let Charlie run BRKA while he helped for a few years like Bill and Dave Packard did in WWII when one went into government to help while the other ran HP.]
• I think a "market price" will allow people to deleverage and get cash which will really help them.
  
  
  Jim Cramer Rant Video

Erin Burnett in Giraffe Dress with Jim Cramer on Dec. 11, 2007

Joe Kernen: This is important to get it out that the government could make money on this deal. Most think it is a bailout that will raise their taxes long term.

Warren Buffett: I would do this myself if I could get the terms the government is probably going to get and had the liquidity.

Becky Quick: Michael Bloomberg is against giving the government a blank check.

Warren Buffett: I admire him but sometimes if it makes sense you need to act and not attach unnecessary conditions. It would be nice to have 3 months or 3 weeks to think about it but we don't have that luxury.

Since January 1, 1999 through 9/23/08 Warren Buffett's BRKA is up 83% while "Kirk Lindstrom's Newsletter Explore Portfolio" is up 160%. For more information and a free sample or subscribe today and get the September 2008 issue for free.

Update 7/29/13:

• Jim Cramer's "Action Alerts Plus" Charitable Trust Performance

Warren Buffett Answers To Becky Quick's Questions

Today in a brilliant piece of reporting, CNBC's Becky Quick (see Anchor Women of CNBC) interviewed Warren Buffett live in Omaha, Nebraska asking questions as if she were some famous people.

As Fed Chairman Ben Bernanke: “Did I go far enough or too far with the last cut?”

Warren Buffett Answered: “I don’t think they need more rate cuts” then “if they get rates down too low they have a real problem” and “I think I’d quit now.”

As US Treasury Secretary, Henry (Hank) Paulson: Excuse me Mr. Buffett, do you think the stimulus package is enough or do we need to come up with a second stimulus package?

Warren Buffett Answered: “I don’t think the stimulus is going to do an enormous amount of good. In fact, most people should pay down their credit cards when they get it.” Buffett went on about how dropping money on people can cause problems with future inflation. “Anybody that is paying 15 to 18% on their credit card is out of their mind to not pay it down with the money.” Buffett said they need to be careful about the consequences on inflation from using this tool.

As GOP presidential hopeful John McCain: “Is there anything I can do that would make you think twice” about supporting Obama or Clinton.

Buffett indicated he might reconsider if McCain decided the tax burden should be shifted away from the middle class and poor to the super rich. Buffett went on to say he ‘votes on the issues” but it was clear from his response he was not going to change from a life-long Democrat unless the Republican candidate had a lobotomy and joined his party.

As Microsoft (MSFT) Chairman Steve Ballmer, Quick asked if deciding to walk away from the Yahoo! (YHOO) deal was that the right negotiating tactic or thing to do.


Warren Buffett Answered: “Well I don’t know if this is a negotiating tactic. I think he may have decided he may have gone as far as he can go. “Buffet went on to explain you have to have limits and know what they are for you when you go into a deal. Buffett said the shareholders of Yahoo! could come back to him in six months like Sees Candy did for him in 1972. Buffett said he means it when he walks away. He walked away from Sees when they wanted $30 million and he only wanted to pay $20 million. He walked away and fortunately they came after him.

Graph courtesy of BigCharts

As European Central Bank (ECB) Jean-Claude Trichet: “Am I doing the right thing to keep interest rates high?”

Warren Buffett Answered: “The interest rates in Europe are significantly higher and he may be worried more about inflation. He compared US Fed Chairman Ben Bernanke to Scarlet O’Hare from “Gone with the wind” by saying “I’ll worry about inflation tomorrow.”

Becky asked if there was a chance the ECB is “behind the curve” just like the Fed was too slow to cut rates?

Warren Buffett said Trichet could be wrong but he probably has his own set of data that indicates inflation in Europe is a problem and he’s seen how hard it is to put out run-a-way inflation once it gets started.

As JP Morgan Chase CEO Jamie Dimon: “Do you think I made the right move to step in and buy Bear Sterns.

Warren Buffett said “socially” the Fed made the right move. If they had not stepped in that Sunday then the following week may have been something like Wall Street has never seen.

Final quick questions from Becky Quick:

Quickie #1: Do you think the economy in the mid West is better off than other places?

Buffett A1: Yes because we didn’t have the housing bubble, there are jobs and our furniture business is booming.

Quickie #2: How much were Berkshire Shareholders spending at the annual meeting?

Buffett A2: They were buying 1.5 pairs of boots per minute and jewelry every nine seconds. Almost all the places selling goods at the annual meeting broke records and exceeded expectations.

Quickie #3: Is there a commodity bubble?

Buffett A3: I don’t know if it is a bubble but they moved up and there is a lot of inflationary pressure that has not got to wage pressure. When that happens then “the fun begins.”

Quickie #5: Comment on Barrons Cover speculating on who the next chief of Berkshire Hathaway.

Buffett A4: They don’t know but are having fun guessing.

Quickie #5: What about wind power? We hear you are investing in it in a big way.

Buffett A5: They are investing in wind all across Iowa like many other utilities.

Disclaimer: I own MSFT in my personal account and my “newsletter explore portfolio” with large gains. I may take profits should MSFT stock soar on the news Microsoft walked away from the Yahoo! deal.

Graph courtesy of BigCharts

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Bet on Citigroup Hurts Edward (Eddie) Lampert

Often compared to legendary Warren Buffett, Jim Cramer's college buddy Eddie Lampert made a big bet on Citigroup that has not looked good in the short-term. A New York Times article today reports:

In August, a hedge fund controlled by Edward S. Lampert, the value-oriented investor, disclosed that it had built a $1.3 billion stake in Citigroup, the beleaguered financial giant.

In the last year, RBS Partners, an affiliate of Mr. Lampert’s ESL Investments, has steadily poured money into Citigroup shares. As of March 31, it valued its stake, then about 15.24 million shares, at $782.6 million. It increased that stake to 24.8 million shares by June 30, giving its Citigroup holdings a value of about $1.3 billion, regulatory filings show.

Citigroup shares closed at $33.41 yesterday. That would value RBS’s stake at $828.6 million, a paper loss of about $471 million from late June.

Not only did Eddie Lampert, like Citigroup when it was much higher, his buddy Jim Cramer thought Citigroup was a great stock to buy at $53, collect the dividend and wait for it to go higher with a new CEO or announcement of a break-up. In the July 17th, 2007 article, "Cramer's Take on Eddie Lampert's Stocks," Jim is quoted as saying of Citigroup:

"For the life of me I don't understand why everyone isn't buying Citigroup. You've got a much better than average yield," Cramer said in a June 21 RealMoney blog post. "You have a management that doesn't have a clue and could be gone in an instant, which would mean you could pick up a quick $3 or $4. You have a company that could be a big gainer worldwide, and it is a ROWer (that's rest-of-world, for those who've missed my thousand references to it)."

and

"I am blown away that this stock has been stuck at $53 with all of these positives lurking. This isn't Bank of America (BAC) , where you can only hope that they stop buying things. This is one of those stocks where you could have a dramatic move up on any talk of a breakup or a change at the helm, and in the meantime you will get paid to wait."

With Citigroup, I've made a lot of money in my newsletter explore portfolio buying back in Sept 30, 1998 AFTER it crashed from the mid $30's to the teens. I sold enough shares to be on "house money" but I would have done better to have sold in 2000 when it hit the mid $50's before falling 50% to make a bear market low in 2002. That is not my style.

I like to buy great companies when they go on sale, the same way I buy pants and shirts at Macys (M) after holiday markdowns. After holding all through spring and summer, I am wearing a $58 Merino wool polo sweater-shirt now that I bought last year for $15 the day after Christmas. Even if Citigroup goes lower, you should be able to wrap up some shares now, collect the dividend and brag about how smart you are in a year or two when we get past this subprime mess and the stock has recovered.

Since 2002, Citigroup rallied again from the mid $20's to a new all time high in the mid $50's before the sub prime meltdown crushed the stock into the mid $30's. Yesterday, Citigroup clsoed at $33.41, at another major support line shown on the graph below.

Click to view larger graph

I've held all along and collect the dividend. I hope and believe this is yet another great buying opportunity, but I'll get no "trader points" for being a long term buy and holder on Citi, which is what I often do once I am on "house money" for stocks.

Note: I also own Citigroup in my personal portfolio. I may add shares here but I have yet to decide. Yesterday I added to my SPY position using profits taken in my international mutual funds. SPY is the ETF for the S&P500 which has a significant weighting in the financial sector.

---

11/08/07 8:15AM PST Update: Here is a chart I found at "SeekingAlpha: Citigroup 'Crisis': Some Perspective Is In Order" showing the same support line with the "crisis of the day" listed.

Click to view larger graph

Are you one to say "this time it is different?" I hope not.