Despite a rally in March, the overall stock market was down sharply during the first quarter of 2009 with the S&P 500 posting a decline of 11.7% and the Dow Jones Industrial Average declining 13.3%. At their low points of the quarter, both the Dow and S&P 500 were down in excess of 25%. Berkshire Hathaway’s stock portfolio has suffered large market declines during the quarter as well. Let’s take a look at Berkshire’s holdings and how they fared during Q1 2009.
Positions on latest 13F Filing
Berkshire filed a 13F Report on February 17, 2009 that listed all equity positions held as of December 31, 2008. This report listed a total of $51.9 billion in equity holdings as of the end of 2008. For purposes of this analysis, I have consolidated the holdings in the 13F report and applied market prices for each security as of 12/31/2008 and 3/31/2009. For the moment, assume that all positions were static for the entire quarter. On that basis, it appears that the positions held on December 31 declined 21.8% to approximately $40.6 billion. For those who are interested in the details, here is a link to the spreadsheet.
Impact of Actions in Q1 2009
The spreadsheet referenced above assumes a static set of holdings for the entire quarter but we know that some actions were in fact taken. We do not necessarily know about all actions taken during the quarter but we have access to SEC Form 4 filings that provide some insight.
Purchases in Q1 2009
Berkshire Hathaway purchased 4,363,000 shares of Burlington Northern Santa Fe between January 15 and January 20 at an average price of approximately $62.15. In addition, on January 30, Berkshire acquired an additional 2,325,000 shares of Burlington Northern at a price of $75 per share due to a put option exercised by a counter party to Berkshire. With Burlington Northern Santa Fe closing at $60.15 today, it appears that these new positions were in the red by about $43.3 million.
Sales in Q1 2009
Following the cancellation of Berkshire’s proposed acquisition of Constellation Energy, Berkshire received close to 20 million shares of Constellation as part of a breakup fee. Berkshire sold 5,066,215 shares of these shares during the quarter. The first SEC filing on January 21 indicates a sale of a total of 2,674,000 shares at an average price of $27.06 for proceeds of $72.4 million.
The second SEC filing on February 9 indicates a sale of an addition 2,392,215 shares at an average price of $27.01 for proceeds of $64.4 million. This brings Berkshire’s stake in Constellation down to 14.8 million shares assuming that no additional sales have taken place. Constellation closed at $20.66 on March 31. Berkshire’s sale of part of the Constellation stake at higher prices reduces the Q1 loss shown in the spreadsheet by $32.3 million.
It is quite clear that Berkshire’s portfolio took significant hits in Q1 2009. Of course, market action alone in any given quarter has little to do with the underlying intrinsic value of the positions in the portfolio or the long run economic prospects of each business in the portfolio.
A quick look at the positions with the largest declines makes it clear that the health of the overall portfolio will depend greatly on how quickly the investments in the financial sector recover. The decline in Wells Fargo alone accounted for $4.4 billion of the decline in the portfolio for the quarter. If Warren Buffett’s prior statements on Wells Fargo still reflect his sentiments on the company, it would appear that he regards the underlying health of the business to be sound.
Berkshire Hathaway will release the 10Q report covering the first quarter at some point in early May. It is certainly possible that additional moves were made this quarter that were not reported to the SEC. Investors will have to wait until May for a definitive word on how Berkshire fared in the equity markets during this tumultuous first quarter.