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With Berkshire Hathaway recently releasing their annual report, Warren Buffett mentions that their performance in 2012 was “subpar” even though they have a growing book value of $24.1 billion and a stock portfolio consisting of 41 companies worth $75.3 billion.

In the most recent letter to Berkshire Hathaway shareholders, Warren Buffett said that ownership interest in the top four companies American Express, Coca-Cola, IBM and Wells Fargo will likely increase at some point in the future. At the end of the year, the total unrealized gain was worth $26.7 billion. From all of these shares mentioned, Berkshire Hathaway gained a total of $1.1 billion in dividends. Here’s a link to the complete Berkshire Hathaway shareholder letter.

Since they are heavily investing in DaVita Healthcare Partner, the behavior of Berkshire Hathaway shows investors they believe that the healthcare provider of kidney dialysis services will continue to grow in Europe and the United States throughout 2013. The company has recently added many shares of DVA to the Berkshire Hathaway portfolio – and as of February 27, 2013, they currently hold 14,808,959 shares.

Here’s a brief review of the top four companies mentioned in the annual letter to shareholders written by Warren Buffett: AXP, KO, IBM and WFC.

Wells Fargo & Co. is Warren Buffett and Berkshire Hathaway’s number one holding. They consist of about 20% of their overall portfolio, and they currently have 439,857,861 shares of the financial institution.

The large banking institution Wells Fargo & Company is in service to one out of every 3 households in the United States of America, as well as 35 other countries. Buffett often speaks very highly of the fantastic management of this bank. It is ranked fourth in assets out of all the banks, but it currently ranks first in market value of its common stock out of all banks in the United States. This is one of the fastest recovering banks during the industry implosion that took place a few years back. The management of Wells Fargo was responsible for turning around the bank just several years ago.

During the past, Warren Buffett has mentioned the bank’s low cost of funding, which is a powerful advantage when it comes to lending. Wells Fargo & Co. is a company incorporated under the laws of Delaware. They are a financial holding company, as well as a bank holding company and they are registered under the Bank Holding Company Act of 1956. The market cap of Wells Fargo & Co. is $187.38 billion. Its shares currently trade near $35.50, they have a P/E ratio of 10.6, and their P/S ratio is 2.2. The dividend yield of the company’s stock is 2.6%. They also possess an annual average earnings growth of 1.5% over the last 10 years.

In a previous annual letter, Warren Buffett commented, “the banking industry is back on its feet, and Wells Fargo is prospering. It’s earnings are strong, its assets solid and its capital at record levels.”

Coca-Cola is Warren Buffett and Berkshire Hathaway’s number two holding at the time of this writing. They consist of about 19.3% of the Berkshire Hathaway portfolio, and the company currently owns 400 million shares.

Coca-Cola is a worldwide brand and a company that is known for its carbonated beverages, and also known for its juices and tea drinks. Seventy five percent of the revenue generated by this company is from countries outside of the United States. The Coca-Cola brand is famous in almost every country in the world, and this includes Africa.

The company is considered to be very healthy, and it is consistently growing. The annual Coca-Cola earnings over the last 10 years have been 9.6% consistently. The soda manufacturer has a market cap of $172.16 billion. At the time of this writing, the shares traded at $38.63. The current P/E ratio is 19.6, and the P/S ratio is 3.7. Coca-Cola’s current dividend yield is 2.6%. They received a business predictability rank of five stars from GuruFocus. Buffett said that he was late to the Coca-Cola party, and he commented on the longevity of the brand at one time. He bought his shares in 1988 along with shares of Freddie Mac. At the time, Buffett said this in regards to his new purchases:

“In 1988 we made major purchases of Federal Home Loan Mortgage Pfd. (“Freddie Mac”) and Coca-Cola. We expect to hold the securities for a long time. In fact, when we own portions of outstanding businesses with outstanding management, our favorite holding period is forever. We are just opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang onto businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds.”

International Business Machines Corp. (IBM) is the number three Berkshire Hathaway holding. They currently consist of 17.3% of the Berkshire Hathaway portfolio, and number 68,115,484 shares.

It is widely known that Warren Buffett has praised the leadership of IBM. They rescued this company from the brink of bankruptcy 20 years ago and turned it into the successful company that it is today. In the last annual letter written by Warren Buffett, he mentioned that IBM management has created extraordinary operational accomplishments, saying, “Their financial management was equally brilliant, particularly in recent years as the company’s financial flexibility improved. Indeed, I can think of no major company that has had better financial management, a skill that has materially increased the gains enjoyed by IBM shareholders.”

IBM was incorporated in New York on June 16, 1911 under the name Computing–Tabulating–Recording Co. International Business Machines Corp. has a market capitalization of $227.92 billion. At the time of this writing, the shares traded at $204.5 per share. The current P/E ratio is 14.1, and the P/S ratio is 2.2. The IBM dividend yield for company stock is 1.7%. Over the last 10 years, International Business Machines Corp. has had an annual average earnings growth of 12.1%. GuruFocus has rated IBM with the business predictability rank of five stars.

American Express Co. (AXP) is the number four holding in the Berkshire Hathaway portfolio. They currently make up 11.6% of the portfolio, and Berkshire Hathaway owns 151,610,700 shares.

American Express Company is another Warren Buffett favorite. In an effort to create an entire value chain, the company segmented its credit card lending business into three separate businesses: international card and global commercial services, US card services and global network and merchant services. As the owner of the entire chain of value, AXP has created a very profitable niche for itself throughout the financial service market. This presents a tremendous potential for profits. Being it has a very closed loop of its own related services and products, as well as marketing, the pricing of American Express has a competitive advantage already built-in.

American Express Company was originally founded in 1850 as a joint stock association. They incorporated in 1965 as a New York Corporation. The American Express market cap is $69.06 billion. It shares currently trade at $62.5. The P/E ratio is 16, and the P/S ratio is 2.3. The stocks dividend yield is 1.3%, and the American Express Company has seen an average earnings growth of 5% over the last 10 years. GuruFocus has given American Express a business predictability rank of 3.5 stars.

Berkshire Hathaway is drawn to the fair value computation of American Express, and they are a stock currently undervalued with lots of room to grow. In addition, they have a nice dividend. American Express presents a nice opportunity for many investors and according to the recent shareholder letter from Warren Buffett, he will probably be adding to this position in the near future.

The year 2012 showed us that Warren Buffett is as excellent at picking people as he is at picking stocks. In the 2013 annual letter to shareholders, one piece of good news shared by Warren Buffett was the overall performance of his new two managers, Ted Weschler and Todd Combs. Both managers were able to outperform the S&P 500 by margins in the double digits, said Buffett – which tells us that the 16% return made by the S&P in 2012 was topped by at least 26%. They both managed to beat their boss as well.

Now that they did such a fantastic job in their first year with Berkshire Hathaway, Buffett increased the amount of assets they manage to the tune of $5 billion each. And for the very first time, one of their holdings – DirecTV – showed up on the official list of common stock owned by Berkshire Hathaway, and it is a holding whose market value exceeds $1 billion. The combined holding of both men was worth $1.154 billion at the end of 2012, which you can compare to the original value of $1.057 billion.

Both of these managers were able to achieve such large returns due to the way their top stock holdings performed: DaVita HealthCare Partners, DirecTV and Viacom Inc.

DaVita HealthCare Partners

DaVita is continually in the news for Berkshire Hathaway’s constantly expanding holding of this company, which as of the last purchase on February 27, has ballooned to 15.52% of its outstanding shares. They opened this position in the fourth quarter of 2011, and Berkshire has increased this holding 10 times since November 26, 2012.

The market value of the company has risen by over 40% over the last year.

DaVita is a kidney patient care and kidney dialysis company, and they have grown quite rapidly over recent years. Over the past five years, the average annual growth rates for revenue are 10%, EBITDA is 10.4%, for free cash flow they are 39.6% and book value is 7.2%.

The company reported very strong earnings in the fourth quarter and the year-end of 2012 results on a year-over-year basis. The company’s adjusted net income was $173.3 million, which works out to $1.68 per share, during the fourth quarter, and $612.4 million, and $6.25 per share throughout 2012. You can compare these results to $148.1 million, or $1.56 per diluted share, and $492.4 million, or $5.11 per share, for the quarterly figure and year-end figure that ended December 31, 2011.

Each of these fourth-quarter results have excluded the expenses in relation to the acquisition of HealthCare Partners Holdings LLC, one of the largest national operators of physician networks and medical groups, which they obtained in November of 2012.

The total fourth-quarter revenue was $2.48 billion as opposed to $1.79 billion comparatively and $8.19 billion for the full year in 2012, as opposed to $6.37 billion in 2011 comparatively.

The company purchased 22 dialysis centers in the United States of America, and opened up 22 more in the United States of America during the fourth quarter of 2012 alone, while also purchasing 10 dialysis centers and opening up two more outside of the United States.

At Peninsula Capital, Ted Weschler’s previous company, he had purchased between 20% and 40% of his entire portfolio in DaVita between the years 2001 and 2011.

DirecTV

Berkshire first started picking up shares of this company during the third quarter of 2011, and continued to do so throughout the fourth quarter of 2012. Berkshire now owns over 34 million shares of DirecTV, and currently has a 5.6% ownership of the entire company. Prior to becoming a member of Berkshire Hathaway, Ted Weschler owned 18.45% of his total managed assets in this company. DirecTV’s stock has earned over 5% in the past year, and as of the time of this writing, the share price is $49.28.

DirecTV is a company that is growing rapidly, and they have particularly done so over the last five years. The average annual growth rate over the last five years is 27.7% in revenue, 28.7% in EBITDA, and their free cash flow has grown by 20.3%.

Throughout the fourth quarter, DirecTV increased their revenue by 8% to the tune of $8.05 billion, and the net income increased to $942 million. Compare that to $718 million in the fourth quarter of 2011. For the full year statistics, they saw an increase in revenue to $29.7 billion from $27.23 billion during 2011. The company net income increased to $2.95 billion, from the 2011 amount of $2.61 billion.

The increase of 31% in the company’s net income during the fourth quarter was a primary result of higher operating profit, and 18% pretax gain for selling the Game Show Network, plus a lower effective tax rate. The 9% increase in the full year’s revenue was largely in part due to higher subscriber growth at DTVLA and DirecTV in the United States, plus higher ARPU at DirecTV US.

The revenue from the companies DTVLA increased by 23% to the amount of $6.24 billion specifically because of strong subscriber growth of 26%, which was a four-year record of 4.42 million, and they saw very strong growth in Argentina, Brazil, Colombia and Venezuela.

GuruFocus points out that DirecTV has been issuing new debt over the last three years, in the amount of $8.8 billion, although the debt level is very acceptable. The P/E ratio is 10.6, which is close to their ten-year low, and the P/S ratio is 1.05, which is also very close to their ten-year low.

Viacom Inc.

Berkshire Hathaway first started acquiring shares of Viacom during the first quarter of 2012, and currently owns around 7.6 million shares. They did not make any new purchases during the fourth quarter. The market price of Viacom gained about 23% over the past year. The company is currently trading at $63.70 at the time of this writing. The company recently surpassed its 52-week high of $60.84 over the last few days.

Viacom is a company focused on entertainment, and they have two main segments in which they operate – filmed entertainment and media networks – and they own such brands as MTV Films, Nickelodeon Movies, and Paramount Pictures just to name a few for you.

Over the last five years, Viacom has seen an average annual growth rate of 6.5% for revenue, EBITDA is 22.3%, free cash flow is 19% and the book value growth rate is 8.7%.

The company’s results in the fourth quarter saw a 16% decrease to $3.31 billion. This is primarily due to a loss of 37% of their filmed entertainment revenue through a mix of releases and inopportune timing. The net earnings increased from $212 million – $470 million.

During the fourth quarter, Viacom repurchased 13.3 million shares to the tune of $700 million in aggregate. They still have $3.85 billion remaining on the $10 billion stock repurchase program. The company has a dividend yield of 1.84%. Over the past three years, Viacom has issued $1.5 billion of new debt, although the overall debt level is currently acceptable. However, the operating margin of Viacom has been expanding.

One of Viacom’s measurements is very close to its ten-year high, and one recently surpassed it: the P/S ratio of 2.36 is near the ten-year high, and the current share price of $63.70 recently surpassed the 10 year high of $60.84 per share.

Some of Viacom’s upcoming film projects to potentially increase earnings and revenue include Star Trek Into Darkness, World War Z, Pain & Gain and G.I. Joe: Retaliation.