All things considered, Berkshire Hathaway and Warren Buffett had a fairly eventful year in 2013. They made a number of significant stock purchases and they even had a major acquisition. And then there’s the main question that continues to linger.
Warren Buffett and His Acquisition of Heinz
On February 14, 2013 – Valentine’s Day – Berkshire Hathaway formed a partnership with 3G Capital. They entered into this partnership to purchase the food and condiment company Heinz for a total of $28 billion. Buffett often talks about his elephant gun and aiming at acquiring large companies. The Heinz takeover move certainly fits into this category, and it even allowed the company to continue with its distinct identity.
In regards to this transaction, Buffett mentioned: “Heinz has strong, sustainable growth potential based on high quality standards, continuous innovation and excellent management and great tasting products… we are very pleased to be a part of this partnership.”
All in all, Berkshire Hathaway’s investment total to purchase their portion of Heinz was $12.25 billion. It’s clear that Buffett and Berkshire never disclosed the total and potential impact that this will have in effect to the bottom line and the stockholders, Buffett also mentioned during a CNBC discussion talking about the deal in May:
“Well, we always prefer to buy businesses, and that’s what we consider Heinz to be. Well, we’ll – we’ll be in Heinz forever and – if a few of our partners decide to sell out at some point, I hope they sell to us.”
When you take into consideration that a large part of the investment included $8 billion of preferred shares that pay a total of a 9% dividend, Buffett is probably very pleased with the current investment at this time, and when he stated simply about the new partnership with Jorge Paulo Lemann in his annual letter to shareholders, “we couldn’t the in better company,” there’s no question that this is going to be a deal that pays off tremendously for many years down the road.
Berkshire Hathaway Investments
Berkshire Hathaway recently disclosed opening up a $3.5 billion position in Exxon Mobil Corporation. In total, the massive energy giant is now the seventh largest position in the portfolio of Berkshire Hathaway.
Besides the Exxon Mobil purchase, Berkshire sold off a large chunk of its holdings in Conoco Phillips, which was originally purchased back in 2008. But they weren’t the only two energy companies to catch the eye of Warren Buffett, because Berkshire also began a $500 million position in Suncor Energy Inc. during the second quarter.
Buffett and company have taken interest in more than just the energy sector. They also added Liberty Media Corp. to the portfolio at $625 million worth of shares. They made an investment in Chicago Bridge & Iron Company NV for $400 million. And on top of that, they added an additional $700 million worth of shares to their already massive position in Wells Fargo & Co., and this was just in the first quarter.
In total, at the end of 2012 Berkshire Hathaway’s stock holdings were worth $75.3 billion. But due to additional purchases during 2013, plus market growth that added to their bottom line, the portfolio for Berkshire Hathaway is now worth over $92 billion.
There’s Still the Lingering Successor Question
Berkshire Hathaway continued to do what it does best, and that’s performing. In 2013, the company delivered its shareholders roughly $14.5 billion in the first nine months alone. This is a 40% gain when compared to the same exact time period last year. There’s no question that Berkshire and Buffett are in a market leadership position, but there has been no more clarity in regards to who will succeed Buffett when his Berkshire Hathaway tenure comes to a close.
While no specific person has been announced for the position, in May at the annual shareholder meeting, Buffett mentioned, “[t]he key is preserving a culture and having a successor, a CEO that will have more brains, more energy, more passion for it than even I have,” and he mentioned that the Berkshire board of directors and he are “solidly in agreement as to who that individual should be.”
So even though the public has no further insight into who will take over as Berkshire Hathaway CEO, they should at least feel relieved that the person has already been chosen and that the Board of Directors and Buffett all agree that this person is the right one to handle the job once Buffett departs will from the role.
We have no way of predicting what happens in the future for Berkshire Hathaway. But we do know that 2013 was another incredible year for Buffett and company, and there is no reason why it shouldn’t continue in 2014 and beyond.