Buffett: Major additions to stock holdings

In Berkshire Hathaway annual report, Warren Buffett lists positions in new holdings, including Johnson & Johnson, and reports record gain in company's net worth.

By Carol Loomis, Fortune editor at large

NEW YORK (Fortune) -- Berkshire Hathaway, benefiting significantly in its big insurance operations from a benign hurricane season, reported Thursday that its 2006 per-share gain in book value was $16.9 billion, which produced a per-share gain of 18.4%. This increase followed two years in which hurricane losses hurt per-share gains, holding them to 6.4% in 2005 and 10.5% in 2004.

Changes in per-share book value are the customary way that Warren Buffett, chairman of Berkshire, reports the company's progress because this method takes in all of Berkshire's capital gains and losses, whether realized or not.

Under the more commonly used metric of earnings (which does not reflect unrealized capital gains and losses), Berkshire (Charts) reported per-share earnings for its Class A stock of $7,144 in 2006 against $5,538 in 2005. The Class A stock closed Thursday at about $106,400.

Describing the $16.9 billion that Berkshire added to book value, Buffett said in his chairman's letter that he believed it to be a record for a one-year gain in net worth - "more than has ever been booked by any American business, leaving aside boosts that have occurred because of mergers."

He added that other companies, such as Exxon Mobil, have earned more than that but have allocated their earnings to dividends and/or repurchases, rather than building net worth.

New investments

Presenting his annual list of Berkshire's big common stock investments, Buffett listed 17 - up from 12 the year before - in which the company had at yearend a position of more than $700 million. He told shareholders that two investments that would have qualified for the new list, and that had a combined value of $1.9 billion, were omitted because Berkshire is still building its stakes. "I could, of course, tell you their names," he wrote. "But then I would have to kill you."

The names showing up for the first time on the list are Conoco Phillips (Charts), Johnson & Johnson (Charts), Korean steel company POSCO, British supermarket company Tesco, US Bancorp (Charts), and USG.

Berkshire has held stock in the last of these, USG (Charts), for several years but in 2006 more than doubled its position.

The details that Buffett provided allow a reader of the report to deduce that Berkshire's stake in POSCO was established in the past, but that it rose above the $700 million mark only in 2006. Berkshire's ownership of POSCO is the biggest surprise in the list, since this stake had not in any way been previously disclosed.

The other four newcomers, Conoco, J & J, Tesco, and US Bancorp, are companies in which Berkshire built substantial positions in 2006. These stakes were discussed in news stories that appeared during the last year.

The only company that disappeared from the list between yearend 2005 and 2006 is Ameriprise, in which Berkshire acquired stock when it was spun off from American Express in 2005. In 2006, Berkshire sold many, though not all, of its Ameriprise shares.

The companies named in both the 2005 and 2006 lists include two in which Berkshire made relatively large changes in its holdings. It increased its stake in Wells Fargo by almost 15% and reduced its position in Anheuser-Busch by 17%.

Berkshire benefited in 2006 from stock-price gains at the companies in which it holds its three-largest positions, Coca-Cola (Charts), American Express (Charts), and P & G. The value of Berkshire's stakes in these companies rose from $21.7 billion at yearend 2005 to $25.3 billion at yearend 2006.

Together, the rising stock market of 2006 and money that Berkshire put into investments raised its equity holdings from $47 billion at the end of 2005 to $62 billion.

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Buffett’s Biggest Holdings
In the annual list of Berkshire Hathaway’s largest common stock investments, Warren Buffett listed 17 - up from 12 the year before - in which the company had at yearend a position of more than $700 million.
Company Name (ticker) % Owned Cost Market Value
American Express Company (AXP) 12.6 1,287 9,198
Anheuser-Busch Cos. (BUD) 4.7 1,761 1,792
The Coca-Cola Company (KO) 8.6 1,299 9,650
Conoco-Phillips (COP) 1.1 1,066 1,291
Johnson & Johnson (JNJ) 0.7 1,250 1,409
M&T Bank Corporation (MTB) 6.1 103 820
Moody's Corporation (MCO) 17.2 499 3,315
PetroChina "H" shares (or equivalents) 1.3 488 3,313
POSCO (PKX) 4 572 1,158
The Procter & Gamble Company (PG) 3.2 940 6,427
Tesco (TESOF) 2.9 1,340 1,820
US Bancorp (USB) 1.8 969 1,123
USG Corp (USG) 19 536 936
Wal-Mart Stores, Inc. (WMT) 0.5 942 921
The Washington Post Company (WPO) 18 11 1,288
Wells Fargo & Company (WFC) 6.5 3,697 7,758
White Mountains Insurance (WTM) 16 369 999
Source: Berkshire Hathaway

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.