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Minority Stock Positions Stock Portfolio

Berkshire Ups Phillips 66 Stake with Major Purchase

BRK.A), (BRK.B)

Berkshire Hathaway continues to be high on refiner Phillips 66 (PSX), which has been mostly immune to the downward pressure on oil prices. The demand for refined products, including gasoline, diesel and aviation fuel remains strong.

Berkshire added 2.54 million shares of Phillips 66 worth roughly $198 million stock in ten transactions on January 27 – 29, 2016. Prices of the shares ranged from a low of $76.462 to a high of $79.2699 per share. For the entire month of January, Berkshire bought a total of 10.81 million shares.

In August 2015, Berkshire revealed that it owned more than ten-percent of Phillips 66, and the new purchases ups its stake to 72,293,310 shares. The new purchases bring Berkshire’s stake in the refiner to roughly 13.7-percent.

About Phillips 66

Phillips 66 was spun-off of ConocoPhillips in May 2012, and in addition to its refining and petrochemical business, the company also transports crude oil, refined products, natural gas and natural gas liquids (NGL). It gathers, processes and markets natural gas and NGL to power businesses, heat homes and provide feedstock to the petrochemical industry.

The company’s 52-week share price high was $94.12, and it currently pays an annual dividend of 56 cents, yielding 2.85%.

Despite the weakness in the energy market, Phillips 66 had a profit of $1.31 per share, which exceeded analyst forecasts.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Minority Stock Positions

BYD’s 300 Electric Buses Just the Start for Chinese City of Shanwei

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With air pollution in China making headlines almost daily, BYD Co. Ltd., the Chinese battery and vehicle-maker that is 9% owned by Berkshire Hathaway, is providing 300 pure electric buses to the Chinese city of Shanwei, in Guangdong Province. The electric buses are the first of what could be thousands for the city in the next three years.

BYD will be gradually adding the buses to the city’s public transportation fleet as the city sets ambitious goals for electric bus transportation for the city’s 409,000 population.

According to BYD, the city is purchasing the BYD K7, an 8-meter, 23-seat pure electric bus running on BYD’s proprietary Iron-Phosphate batteries, which give it a driving range of up to 240km on a single charge.

The battery packs are placed on the roof and floor, making it quite spacious inside. It also features in-wheel motors, which saves a lot in terms of maintenance costs, as well as one-button-start system and continuously variable transmission. The company touts the model as ideal for urban transit or as an airport shuttle.

Not Hundreds of Buses, Thousands

The city of Shanwei plans to have 1,810 pure electric buses in service by the end of 2017. Additionally, 1,200 units of 6-to-8-meter new energy buses will be used as short-distance transit buses in urban areas and shuttle buses in suburban areas between 2017 and 2019.

By 2019, the city of Shanwei will have a total of 3,010 pure electric buses in operation. It is the first city in China to make large-scale use of the BYD K7.

Berkshire and BYD

In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares, and today owns roughly 9.1% of the company.

At the time, Warren Buffett said: “”We are thrilled to be partners with BYD and the people of China. Mr. Wang Chuanfu has an extraordinary managerial record, and we welcome the opportunity to work with him.”

The move has certainly worked out well for Berkshire, as BYD’s electric buses have been hot sellers not only in China, but around the world.

In September 2015, BYD scored a massive order in the U. S. from the state of Washington. BYD won a contract from the Washington State Department of Transportation (WSDOT) for up to 800 pure electric buses.

BYD’s electric car business is booming as well, and it is now the number one seller of electric cars worldwide.

Berkshire’s stake in BYD is worth roughly $1.77 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Minority Stock Positions

Berkshire Increases Stake in Phillips 66

(BRK.A), (BRK.B)

Berkshire Hathaway is using the weakness in the energy market to increase its stake in refiner Phillips 66 (PSX), which has been mostly immune to the downward pressure on oil prices, as the demand for refined products, including gasoline, diesel and aviation fuel remains strong.

Berkshire picked up 35,781 shares of Phillips 66 stock on Monday, January 4, 2016, in three transactions. Berkshire bought 612,095 shares at $78.1247 per share, 126,390 shares at $79.1632 per share, and 20,810 shares at $79.6654 per share.

In August, Berkshire revealed that it owned more than ten-percent of Phillips 66, and the new purchases brings its stake to 62,294,493 shares, which is roughly 12-percent.

About Phillips 66

Phillips 66 was spun-off of ConocoPhillips in May 2012, and in addition to its refining and petrochemical business, the company also transports crude oil, refined products, natural gas and natural gas liquids (NGL). It gathers, processes and markets natural gas and NGL to power businesses, heat homes and provide feedstock to the petrochemical industry.

The company’s 52-week share price high was $94.12, and it currently pays an annual dividend of 56 cents, yielding 2.98%.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway Reinsurance Group Charlie Munger Insurance Minority Stock Positions Stock Portfolio

Berkshire Cuts Munich Re Stake, Again

(BRK.A), (BRK.B)

Berkshire Hathaway continues to see the reinsurance business as a low return business and is pulling back from the sector in its own underwriting and in its ownership stake in other underwriters.

Berkshire has again cut its stake in Munich, Germany-based reinsurer Munich Re, this time from 9.7 percent to 4.6 percent. It previously cut its stake from 12 percent to just over 9 percent earlier in 2015.

Berkshire’s own reinsurance business has been less than stellar this year with Berkshire reporting$155 million in losses from storm damage on Australia’s east coast in the 2nd quarter of 2015.

Charlie Says

“The reinsurance business not as good as it once was and is unlikely to get better,” Charlie Munger said at the 2015 Berkshire Hathaway annual meeting. “Money has come in, not because they want to be in reinsurance, but because it’s an uncorrelated asset class. We’re in it for the long haul.”

Uncorrelated (also called non-correlated) asset classes are assets that move in the opposite direction of a particular asset class, thus helping investors reduce risk in exchange for lower upside performance.

Munger’s words were echoed by Ajit Jain, who is the head of Berkshire Hathaway Reinsurance. “What was a very lucrative business is no longer a very lucrative business going forward” Jain was quoted in The Wall Street Journal.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lubrizol Minority Stock Positions Stock Portfolio Todd Combs and Ted Weschler Warren Buffett

Berkshire’s 13F Filing Hints at Surprise in the Wings

(BRK.A), (BRK.B)

Berkshire Hathaway’s Form 13F filing, which is required to be filed quarterly with the Securities and Exchange Commission, always give plenty to chew on for Berkshire watchers.

On the surface it has been a relatively quiet 2nd quarter 2015 for much of its minority-share stock holdings, with its purchase of a large number of shares in Charter Communications one of the few major increases.

Steady as She Goes

Berkshire’s four biggest holdings all remained unchanged, with Wells Fargo making up 24.68% of the total portfolio, Coca-Cola 14.64%, IBM 12.07%, and American Express 10.99%.

In the case of Coca-Cola, the $518 million in dividends it received in 2014, on a very low cost basis, meant an effective yield of 40%, so no wonder Warren Buffett calls Coca-Cola one of his “forever stocks.” You would drink five Cokes a day too if it got you a 40% return.

A Surprise Coming Soon?

The company did note that “confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission,” which likely implies that the company is amassing shares in a company, and in such a case it is not required to reveal the company publicly. Berkshire used the same strategy when it took a position in IBM that made it the company’s largest minority-owner with just over 8% of the company. We will have to wait and see if there is another surprise minority-ownership company bombshell, however we do know that the purchase was in the $3 billion range.

Stocks on the Increase

Berkshire bought 2,535,542 shares of the cable TV operator Charter Communications, increasing its position by 42% to 8,514,678 shares. The position is 7.6009% of Berkshire’s total portfolio.

Berkshire first took a position in Charter Communications during the 2nd quarter of 2014. The company has been on the rise since emerging from bankruptcy in 2009, and is in the process of merging with Time Warner Cable Inc. and acquiring Bright House Networks, a video service provider and cable internet provider. The merger is the work of Chairman John Malone whose Liberty Broadband is the largest Charter Communications shareholder. Berkshire has long been a buyer of shares in Malone’s companies, although in 2014 it sold its entire stake in premium cable channel Starz.

A Stock That’s Paying Dividends

Berkshire also increased its position in U.S. Bancorp by 1,289,777 shares, an increase of 1%, bringing its total to 85,063,167 shares. The position is 4.7538% of Berkshire’s total portfolio.

While Berkshire is famous for being the stock that doesn’t pay a dividend, it certainly loves to receive them, and U.S. Bancorp has been one of the stronger stocks in the banking sector for dividends. The company announced a 4.1% dividend increase in June, the 5th consecutive dividend increase since 2011.

A Potential Lubrizol Acquisition?

Also reported were the 20,000,000 shares of Axalta Coating Systems that it bought from the Carlyle Group for $28 per share. Berkshire first announced plans for the purchase in April, and the big question is whether the former DuPont unit is an acquisition target for Berkshire Hathaway’s Lubrizol Corporation. The $28 price was below the $31.30 share price that Axalta was trading at after the announcement. It now sits at $30.38 as of Friday’s closing bell.

Another Potential Takeover Candidate

DaVita Healthcare Partners, which also looks like a good fit with Berkshire, considering that an aging population and increased health care coverage under the Affordable Care Act benefits its kidney dialysis business, was unchanged at 38,565,570 shares.

Berkshire entered into a standstill agreement with Davita in May 2014, pledging not purchase more than 25% of the company. Its ownership stake currently sits at just under 17.95%.

And One That’s Not So Likely, Yet

The 13F filing does not yet reflect Berkshire’s 26% ownership of Kraft Heinz, which closed after the quarter ended. The filing does show that Berkshire owned 578,000 shares in snack maker Mondelēz International, Inc., which has recently been rumored as a possible merger candidate with Kraft Heinz. Warren Buffett just last week downplayed the possibility, noting that there was still much worked to be done in integrating Kraft and Heinz.

Stocks on the Decrease

Major decreases in holdings, included bailing on energy sector stocks Phillips 66 and National Oilwell Varco. Berkshire sold its entire 7,499,450 position in Phillips 66, and its entire 1,978,895 position in National Oilwell Varco. Both have been hit hard by low oil prices.

Berkshire had already liquidated most its Phillips 66 position in 2014 when it swapped it for ownership of Phillips Specialty Products Inc. and approximately $450 million in cash. The move brought tax saving to Berkshire and a new unit to Lubrizol.

Whither Viacom

Also going down were Berkshire’s shares in Viacom, Chicago Bridge & Iron Company, and WABCO Holdings Inc.

Its Viacom position decreased a whopping 31% as Berkshire sold 2,618,358 shares. Berkshire looks to be wise to get out of Viacom as fast as it can. The mass media company has seen its stock value plummet 42% year to date, as it struggles to hold on to viewers and carriers of its channels. Among its troubles, Viacom is in a battle with satellite TV provider Dish TV, which has dropped the company’s channels from its service.

Berkshire’s holdings in Chicago Bridge & Iron Company decreased 12% as it sold 1,374,189 shares. Berkshire first took a position in the engineering, procurement and construction company during the 1st quarter of 2013 only to watch the share price peak at $86.50 in April 2014 before crashing all the way down to $34.51 a year later. Year to date the stock has risen $23.25% but it appears that Berkshire has now cooled on it as an investment.

Buffett, Combs or Weschler

Berkshire does not normally announce which transactions are the work of Warren Buffett, and which transactions are the work of his two portfolio managers Todd Combs and Ted Weschler. However, Buffett recently revealed that Berkshire’s 2.9% position in aerospace manufacturer Precision Castparts was originally purchased by Todd Combs. It was Buffett that decided to make the bid to purchase the entire company for $37 billion.

While Warren Buffett has acquired most of Berkshire’s portfolio, Todd Combs and Ted Weschler each manage a portfolio that is roughly $9 billion in assets. The two investment managers are widely assumed to be the future managers of the entire portfolio.

The total portfolio slipped to a market value of $107.182 Billion from $110.776 billion at the end of the 1st quarter 2015.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Minority Stock Positions Special Report Stock Portfolio

Special Report: BYD, Berkshire’s Tesla

(BRK.A), (BRK.B)




While Tesla has grabbed major headlines the past few years, China’s BYD Company Limited has grown from just 20 employees in 1995 to over 190,000 today, and in the process become the world’s largest rechargeable battery supplier.

The company has some 16,000 R&D engineers.

In 2015, BYD jumped to number one in worldwide EV sales thanks to the popularity of its Qin sedan and Tang SUV, beating Nissan, Tesla, Volkswagen and Toyota.

The growth directly benefits Berkshire Hathaway. In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares for $230 million, and now owns roughly 9.1% of the company.

Today Berkshire’s stake in BYD is worth roughly $1.77 billion.

Like Tesla, BYD is both an automaker and a battery maker. The company purchased Xi’an Tsinchuan Auto Co., Ltd. in 2003 and has aggressively pursued both the auto and bus businesses.

Unlike Tesla, BYD manufactures both gasoline-powered and electric cars, including traditional fuel cars, dual mode electric cars, and electric-only cars and buses. BYD has jumped into the EV market with a broad range of vehicle types, including the bus, coach, taxi, private car, urban logistics truck, sanitation truck and construction truck (concrete mixer); and 4 specific off-road vehicles for use in the warehouse, airports, ports and mining.

Pure Electric Buses

It is in the bus market that BYD is making rapid progress. BYD’s zero-emission pure electric buses have already been deployed in Brazil, China, Columbia, England, India, Malaysia and Thailand.

Air pollution and carbon emissions are the key drivers of the move to pure electric buses. In China, diesel buses make up just 10% of the vehicles on the road but contribute over 30% of city air pollution and GHG emissions.

In January 2018, BYD reached a new milestone with the completion of its 50,000th battery-electric bus.

BYD’s C9, is a two-axle, 40′ coach with the seating capacity to carry 47 people at highway speeds for over 190 miles. The buses use an iron-phosphate battery that after 10,000 charge cycles will still retains 70% of its capacity.

Its largest bus, the K10A, is a 15-meter bus that seats 95 passengers, and is now in service in São Paulo, Brazil.

London saw its first pure electric zero emission double decker bus debut in October 2015, and a fleet of 51 single-deckers debuting in the fall of 2016.

As BYD looks to pure electric bus sales across Europe, it has announced a €20 million investment in a bus assembly plant in the northern Hungarian city of Komárom. The Hungarian plant will begin production in the first quarter of 2017, and will have its own R&D center and battery test facility.

In the U.S. market, BYD has primarily focused on bus sales,becoming the dominant player in the electric bus market. It built a massive 450,000 sq. ft. assembly plant in Lancaster, California.

BYD’s e-buses operate in transit agencies, universities and airports across North America, with more than 40 customers including LA Metro, Los Angeles Department of Transportation, Stanford University, UCLA, UC San Francisco, UC Irvine, Anaheim Resort Transportation, Long Beach Transit, Denver Regional Transportation District, City of Albuquerque, SolTrans, SunLine Transit, Link Transit, COMO Connect, Antelope Valley Transit Authority, and many others.

In the spring of 2015, it also announced a pilot program with Uber in Chicago that uses BYDs E6 sedan. The car is a cross between a sedan and SUV, and currently gets roughly 186 miles (300 km) of driving range per charge. The 2016 E6 will reportedly get a range increase to 250 miles (400 km).

BYD’s biggest breakthrough in the U.S. market came in September 2015, when it won a contract with the Washington State Department of Transportation (WSDOT) for up to 800 heavy duty buses from all different propulsion types that includes 12 different categories for all-electric buses. The buses will serve public transportation systems in the states of Washington and Oregon.

The Explosive Growth of Pure Electric Vehicles in China

In China, it took ten years to go from zero electric vehicles to 1%, but it may take only another five years to reach 10%. In 2018, EVs rose to 3.3% market share.

And, even more amazing is that sales of new energy vehicles in China are projected to hit a whopping 30% by 2025.

BYD sold a total of 520,687 vehicles in 2018 in China alone, of which some 280,000 were pure electric cars.

Strength Around the Globe

While Tesla has struggled in China, laying off 30-percent of its workforce in March 2015, and has its goal of manufacturing in China still on the drawing board, BYD is already a major player. BYD not only has a factory in Shenzhen, but has captured half of the electric car market. Its home field advantage has it selling over 6,000 of its popular stylish QINs per month.

BYD is also having an easier time in emerging markets. It is opening a factory in Brazil by the end of 2015, and is using its strength in pure electric buses as its way to enter the market. What’s more, it beat all U.S. car manufacturers to the Cuba market. In July 2015, the company inked a deal with the Cuban government for the purchase of 719 vehicles to be the first fleet of tourist rental cars. The cars will be traditional fuel vehicles but will give BYD a major foothold in the country, and they are already planning to introduce electric vehicles, and move beyond tourist car rentals to government official vehicles and the nascent private car market.

In September 2015, BYD had its first substantial sale in Africa, signing a deal to sell 10,000 vehicles to Sudan’s state-run company GIAD Motor Co Ltd.

The 7+4 Strategy in Australia

BYD’s comprehensive “7+4” electrification strategy in the Australia region aims at electrification of all forms of ground transportation: urban bus, coach, taxi, passenger car, urban logistics trucks, construction trucks, and urban sanitation trucks (7), as well as vehicles for warehousing, mining, airports and ports (4).

In 2016, the BYD e6 taxi got the green light to access the Australian market becoming the first Chinese made electric vehicle to be certified by the Australian Design Rules (ADRs), the country’s stringent technical standards for emissions, vehicle safety and theft resistance.

The company was already in the Australian market with its pure electric buses in a shuttle service tested for Sidney Airport between December 2014 and May 2015, and it has also sold its pure electric forklifts in Sydney and Melbourne.

A Willing Partner

BYD’s technology makes it an excellent partner with other manufacturers, as cities around the world race to meet ambitious climate change and pollution goals.

In July 2015, BYD signed a deal worth $29.6 million deal with British bus manufacturer Alexander Dennis Limited (ADL) to build 51 single-deck zero-emission buses for London. The buses utilize BYD’s chassis and electric drivetrain with the bodies supplied by ADL. The first 51 buses went into service in September 2016, following a three-year trial that proved the buses could consistently run a 16-hour shift without a recharge. The partnership helps London move towards its goal of having all single-deck buses totally emission-free by 2020.

“Our deep experience of not only battery technology but the critical battery management systems and driveline components necessary to deliver unequaled range and reliability are matched to ADL’s strong track record in building low weight, attractive and durable buses,” said Isbrand Ho, managing director of BYD Europe.

Innovative Mass Transit Solutions

While Elon Musk touts the future prospects of hyperloops in dealing with future transportation needs, Chinese competitor BYD Co. LTD. is looking towards an existing mass transit technology, the monorail, as part of its answer to urban congestion issues. In October 2016, the company debuted its “SkyRail” monorail system in Shenzhen, China.

With a capacity of between 10,000 to 30,000 passengers an hour (each way) and a high speed of up to 80km/h, SkyRail is part of BYD’s focus on the development of layered rail transport that meshes with metro and bus systems. BYD refers to “three-dimensional green traffic” as part of its green mobility platform.

Dramatic Cost Savings Compared to Subways

The electric monorail is a kind of traffic network which interconnects multiple transit backbones in the city at one sixth of the cost of a subway system.

According to BYD, the total market for monorails just in China is in the range of 3 trillion yuan ($450 billion).

BYD’s 4.4 kilometer monorail line at its Shenzhen Headquarters alleviates the traffic problems of 50,000 factory and management employees.

The first commercial sale of BYD’s SkyRail will be to S. Korea.

BYD’s B-Boxes and Vehicle Emergency Power Supply

Like Tesla, BYD has jumped into the home power storage business. The battery maker’s B-Boxes consist of fire-safe, long-cycle Iron-Phosphate rechargeable batteries that perform the same function as the Tesla PowerWall Battery. BYD’s B-Boxes are already on sale in many European countries including Germany, UK, Italy, Spain, as well as in Australia and Africa.

In a move that puts it ahead of Tesla, BYD’s Qin EV300 and e5 cars are equipped with BYD’s signature VtoL function, in which the vehicle serves as a massive mobile electricity supply to power appliances like cookers, refrigerators, power tools and many others, so that users can rely on the vehicle to plan outdoor activities that depend on electricity, or in case of emergencies like power cuts or blackouts.

Berkshire’s BYD Investment

Despite Berkshire Hathaway’s reputation for avoiding high-tech investments, its stake in BYD, like its more recent stake in eVolution Networks, shows Berkshire is not going to be left out of companies on the cutting edge of technology.

(This article contains updated information from when it was first published.)

© 2015-2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Stock Portfolio

Warren Buffett Shows How to Make 354,000% on Your Money

(BRK.A), (BRK.B)

Making 100% on your money in a year is something that any investor would be proud of. Any investor that’s not Warren Buffett, that is. However, that pales before the return Berkshire Hathaway is set to make on Friday.

Berkshire Hathaway is poised to make nearly 354,000% on its money on Friday, December 12, 2014, when it exercises its right to purchase 8,438,225 common shares of Restaurant Brands International Inc. (QSR-WI) for a penny a share. The warrants came attached to 68,530,939 Class A 9.00% Cumulative Compounding Perpetual Preferred Shares.

As of December 12, 2014, Restaurant Brands’ shares were trading at $35.41 a share.

The paper profits come as a result of Berkshire Hathaway’s role in financing Burger King’s acquisition of Canadian restaurant chain Tim Hortons, and give Berkshire ownership and control over 4.18% of the outstanding Common Shares and 14.37% of the total number of votes attached to all outstanding voting shares of the Corporation.

Berkshire provided $3 billion in financing, which entitled the conglomerate to preferred stock paying 9% interest, and the right to buy up to 1.75% of the combined company for a penny a share.

After receiving shareholder approval on Tuesday, December, 9, 2014, the deal will close on Friday, December, 12, 2014. Berkshire has already announced its intention to exercise its warrants that will have a value of roughly $275 million.

The combined Burger King and Tim Hortons will have 18,000 restaurants in 100 countries. The total valuation will be $18 billion.

Berkshire is not expected to sell its new stake in Burger King. The shares will join a $100 billion portfolio of leading companies that includes Coca Cola, American Express, IBM, and Wells Fargo among others.

(This article was amended based on the closing price on December 12, 2014.)

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.