Berkshire Makes Secret Trades and Opens Express Scripts Stake

Berkshire Hathaway, owned by Warren Buffett, just announced that they have taken out a $35 million stake in Express Scripts Holding Co. The investment company has also made one other trade that they requested it be kept confidential.

The company’s holdings in General Motors have risen by 21%. They also had an investment in Charter Communications Inc., which doubled in size during the third quarter. Lastly, based on information mentioned in a filing to the US SEC, they also have a stake in DirecTV that has risen in value.

The additional share purchases were probably made by Ted Weschler and Todd Combs, the deputy investment managers for Warren Buffett. Each of these individuals has been building up stock portfolios for the last few years at Berkshire Hathaway. They have less capital to control, so they are making smaller purchases than Warren Buffett. This has given the 84-year-old investing billionaire a lot more time to focus on larger deals.

“He’s giving them capital so that they can act like he did in 1980,” purchasing stocks that are going to outperform over the long run, said Bill Smead, who oversees roughly $1 billion, and this includes shares of Berkshire Hathaway, at Smead Capital Management. He hopes that they will “pounce on their highest conviction ideas.”

Based on information found in the filing, Berkshire Hathaway owned a total of 449,489 shares of Express Scripts, based out of St. Louis, Missouri. This company, which manages 90 million Americans’ prescription drug benefits, is worth roughly $78 per share.

Buffett and the Confidentiality Treatment

The report intentionally held back some data that was reported as confidential to the regulators. The SEC, on occasion, will allow companies to hold back data from the public in order to prevent copycat investing while a firm is cutting or building up a position.

In the past, Buffett requested confidential treatment back in 2011, when he spent more than $10 billion building a stake in IBM. He did the same in 2013 while building a position in Exxon Mobil.

As of September 30, 2014, the Berkshire Hathaway portfolio is worth $119 billion. The biggest holdings are Coca-Cola and Wells Fargo, which are currently unchanged during the third quarter.

The overall investment in Charter, the US cable provider, rose to 4.95 million shares, we learned according to the filing on September 30. The shares should be worth about $750 million at this time.

Their investment in DirecTV has risen to 30 million shares, which is a 28% increase. It’s currently valued at $2.6 billion. Weschler and Combs both invested in this company. In May, AT&T announced a deal that they are going to buy the satellite provider, a transaction that Weschler and Combs certainly support.

Swapping Stocks

At the end of the third quarter, Berkshire Hathaway shares of General Motors were valued at $1.27 billion, and the company has 40 million shares. The automaker dropped 22% in value this year, and it had to recall vehicles due to faulty ignition switches that are in connection with 32 deaths. According to Smead, the drop in value is an enticement to purchase more shares.

“If they still like General Motors, they probably like it a lot more now,” said Smead. “It’s cheaper.”

Buffett has definitely made changes to the portfolio this year, swapping stocks that Berkshire Hathaway has held for a long time in exchange for businesses. Berkshire Hathaway changed in most of its shares of Graham Holdings in June for a television station in Miami, the Berkshire Hathaway stock that Graham owned and cash. Graham is the previous publisher of the Washington Post.

Buffett also made an announcement last week that he is buying Duracell, the battery business, from Procter & Gamble. Berkshire Hathaway will use $4.7 billion worth of P&G shares in order to make the purchase. Both of these purchases were specifically designed as ways to limit capital gains taxes on the Berkshire Hathaway holdings.

They also simplify the portfolios of Combs, who is 43, and Weschler, who is 53. Buffett has mentioned that one day these two individuals will be responsible for the entire portfolio of Berkshire Hathaway. They have even been given more money to invest each year. Both individuals have overseen $7 billion beginning in 2014. The recent filing does not tell us who is responsible for each stock purchase.

Berkshire Hathaway also disclosed increases in two of the company’s biggest holdings. Their Walmart investment has risen by 3% and their investment in IBM has risen by less than 1%.

This filing showed no holding of Deere & Co. When compared to the end of June, the company stake was roughly 4 million shares.

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