Have Weschler & Combs Picked Any Winners?

If you don’t already know, Berkshire Hathaway hired two individuals to manage their portfolio. This was done so they have a team of three people that will be able to take over once Berkshire Hathaway founder and Chairman Warren Buffett finally retires. There is no date as of now when he plans on retiring. Todd Combs is a hedge fund manager who was hired by the company in 2010. He was chosen out of hundreds of different applicants when Warren Buffett placed a help wanted ad in 2007. Ted Weschler met Warren Buffett while winning an auction to have lunch with him. He’s a former hedge fund manager, and he was hired by the company in September of 2011.

Here’s what Warren Buffett said in his shareholder letter: “when our quarterly filings report relatively small holdings, these are not likely to be buys I made but rather holdings denoting purchases by Todd or Ted.”

Granted, neither manager has had a great deal of time to prove himself in the roles in which they were hired for, but the stock performance of their recent picks definitely tells us that the future of Berkshire Hathaway should be in good hands. The top winners for both managers are MasterCard, Visa and CVS.

MasterCard

Berkshire Hathaway picked up 216,000 shares of MasterCard during the first quarter of 2011 at an average price of $243 per share. They also picked up more during the second quarter of 2011, and they grabbed another 189,000 shares at $274 per share. This is currently the best-performing stock that the new managers picked. MasterCard has gone up 84% from the average purchase price, and it’s even risen 27% during 2012.

MasterCard provides an important economic link between businesses, banks and the cardholders, and they connect them with merchants all across the world. Their current market cap is $56.34 billion, and the stock currently trades around $473.70 per share. The current P/E ratio is 21.8, and the P/S ratio is 8.4. MasterCard’s dividend currently pays 0.3% per share.

MasterCard saw a revenue increase in the third quarter by 9%. They also increased their net income by 17% year-over-year. Also, their worldwide purchase volume increased by 13% during the third quarter to a total of $661 billion.

Visa

Berkshire Hathaway purchased 2,291,708 shares of this company stock during the third quarter of 2011 at an average price of $87 per share. They also increased the amount of shares they owned during the fourth quarter of 2011 by adding on another 573,300 shares. They did this at an average price of $94. During the second quarter of 2012, Berkshire Hathaway sold 785,349 shares at an average price of $119 per share. Visa was the second best performer from the new managers, and it increased 82% from the average price that they paid, and it’s up 38% year to date. It’s currently trading at $140.26 per share as of the time of this writing.

Visa currently has the largest retail electronic payment network across the globe, and it’s the most recognized financial services brand on a worldwide scale. Their current market cap is $108.92 billion, and its current share price is $140.26. The P/E ratio is 22.7 and the P/S ratio is 11.9. The stock has a dividend yield of 0.7%.

During the third quarter of 2012, Visa suffered a net loss of $1.8 billion. This happened because they spent $4.1 billion on litigation. If you take out the litigation provision and the tax benefit that comes along with it, they would have made a net income of $1.1 billion. This is a year-over-year increase by 25%. Visa’s payments grew to $979 billion, which is a 6% gain.

“Visa once again reported solid global growth in payments volume, cross border transactions and processed transactions outside the U.S., executing on our strategy of growing the electronification of payments worldwide. We are pleased that we were able to come to a resolution in the merchant litigation which was acceptable to most parties while ensuring the long-term health of the U.S. payments industry,” said Joseph Saunders, chairman and chief executive officer of Visa Inc. “As we look forward, we remain focused on launching new payment solutions and products for our financial and merchant partners and consumers, while supporting the Visa brand and the advancement of electronic payments.”

Visa also repurchased a total of 4 million shares of their stock during the third quarter, and paid a total cost of $461 million. This was authorized as part of a $1 billion repurchase program.

CVS

Berkshire Hathaway purchased 5,661,000 shares of CBS during the third quarter of 2011. They paid an average price of $36 per share. During the fourth quarter of 2011, they added another 1,445,500 shares which they paid an average price of $37 to purchase. Berkshire then sold 1,804,584 shares of CVS stock during the second quarter of 2012 at an average price of $45 per share. Their total position size was 5,301,916 shares at the end of the second quarter. CVS share price went up 48% from the average price paid, and the stock is up 20% year to date.

CVS/Caremark is a premier integrated pharmacy services provider in the United States of America. This combines one of the biggest pharmacy chains with one of the largest pharmaceutical services companies.

The total market cap for CVS Caremark Corporation is $61.61 billion. Its current share price is $48.86 at the time of this writing. They have a P/E ratio of 15.9 and a P/S ratio of 0.6. The CVS Caremark Corporation dividend yield is 1.3% per share. The company also saw an annual average earnings growth of 15.7% during the last 10 years. CVS was given the business predictability rank of 4-star by GuruFocus.

The third quarter net revenue for CVS has increased by 16.3%, and reached a record total of $30.7 billion. Their pharmacy services were up 28.2%, and the retail pharmacy was up 6.9%. The increase in pharmacy services sales happen primarily because of the new clients that they successfully acquired during the 2012 selling season, coupled with drug cost inflation and new activity that they gained in April of 2012 when they acquired the Medicare prescription drug plan of Universal American Corp.

Weschler and Combs have also made other picks that have done quite well. They bought shares of DirecTV, and they are up 16% higher than the average purchase price that they paid, and the stock is up 24% year to date. DaVita, another company they purchased, is currently 34% higher than the average purchase price that they paid. The stock is also up 16% year to date. General Dynamics is up 5% higher than the average purchase price that they paid, and currently 1.2% higher year to date.

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