Buffetts Berkshire Becomes Largest Kraft Shareholder (Update2)
By Josh P. Hamilton and Erik Holm
Feb. 15 (Bloomberg) — Billionaire Warren Buffetts
Berkshire Hathaway Inc. became the largest shareholder in Kraft
Foods Inc., the worlds second-biggest foodmaker.
Berkshire owned 132.4 million shares, or about 8.6 percent
of Northfield, Illinois-based Kraft, according to a regulatory
filing yesterday that updated the companys holdings as of Dec.
31. Kraft, the purveyor of Nabisco crackers and Maxwell House
coffee, has been independent since March, when Altria Group Inc.
spun off its majority interest.
“Krafts a portfolio of iconic brands in a company that
was undermanaged for quite a long time, said Tom Russo, who
helps manage $3 billion, including shares of Berkshire and
Kraft, at Gardner Russo %26amp; Gardner in Lancaster, Pennsylvania.
“The brands have the ability to carry the returns, once theyre
properly managed, which youre seeing under way now.
Buffett, the second-richest man in the U.S., is often
mimicked by investors who follow his stock picks. Using that
strategy for the past 31 years would have delivered annual
returns of about 25 percent, double the return of the Standard %26amp;
Poors 500 Index, according to an academic study. The index
declined 3.8 percent in the fourth quarter.
Berkshire, based in Omaha, Nebraska, also disclosed a stake
in drugmaker GlaxoSmithKline Plc, with 1.51 million American
depositary receipts. The company increased holdings in Wells
Fargo %26amp; Co., the nations second-largest home lender, by 3.4
percent since Sept. 30 to 289.3 million shares.
`A Field Day
“Warren Buffett is having a field day, said Frank Betz,
who helps manage $800 million, including Berkshire shares, at
Carret Zane Capital Management in Warren, New Jersey. “Hes
always looking, but now hes seeing things that meet his
standards at reduced prices.
Kraft has declined about 15 percent during the past 12
months before today in New York Stock Exchange composite
trading. The ADRs of London-based GlaxoSmithKline, the worlds
second-largest pharmaceutical company, lost 26 percent, and San
Francisco-based Wells Fargo dropped 18 percent.
Kraft gained 6.9 percent to $31.33 at 4:01 p.m. in New York
Stock Exchange composite trading, the biggest one-day gain since
the shares began trading in June 2001. GlaxoSmithKlines ADRs
rose 2 percent to $44.19.
Buffett, 77, built Berkshires portfolio by investing
premiums from insurers such as Geico Corp., National Indemnity
Co. and General Reinsurance Corp. Other subsidiaries include ice
cream company International Dairy Queen Inc., business-jet fleet
operator NetJets Inc. and carpet maker Shaw Industries.
Berkshire earned $10.3 billion in the first nine months of 2007.
`Protection Against Ignorance
Buffett, who says he reviews hundreds of annual reports
each year in search of the best investments, made Berkshire the
largest holder in Kraft, according to Bloomberg data, with a
holding worth about $3.9 billion. He has said he likes to take
large stakes in the companies he knows best.
“Wide diversification is a protection against ignorance,
and we try to understand what were doing, Buffett said in
October in China. “And if we dont understand it, we dont do
it at all.
Berkshire also increased its position in CarMax Inc., the
biggest U.S. used-car dealer, by 50 percent to 21 million
shares. The 9.6 percent stake, worth about $396 million, may
make Berkshire the second-largest shareholder in the Richmond,
Virginia-based company, according to Bloomberg data.
Holdings Disclosed
Investors cant always determine exactly what Berkshire
owns at any given time or whether holdings have been cut or
raised because Buffett sometimes asks the Securities and
Exchange Commission for permission to temporarily delay
disclosure of holdings to deter copycat investing. Yesterdays
filing lists stocks traded on U.S. exchanges that were valued at
$68.8 billion. Shares traded on non-U.S. exchanges arent
reported to the SEC.
Buffett disclosed yesterday that the company held 69.6
million shares of Kraft on June 30 and 107.2 million on Sept.
30. The Wall Street Journal in July reported Berkshire had
acquired a position of less than 5 percent of the shares, citing
an unidentified person familiar with the purchase.
Kraft is “pleased by Mr. Buffetts vote of confidence,
Perry Yeatman, a spokeswoman for the foodmaker, said yesterday.
Berkshires stake in GlaxoSmithKline, Europes largest
drugmaker, is valued at about $65.4 million. The investment
follows purchases of stock in several health-care companies
during the past 12 months, including UnitedHealth Group Inc. and
WellPoint Inc., the two biggest health insurers in the U.S.
Berkshire has also purchased shares of Johnson %26amp; Johnson, the
worlds largest health-products company, and a stake Sanofi-
Aventis SA, Frances largest drugmaker.
More Pills
“Big Pharma has their hand in everybodys pocket these
days, Carret Zanes Betz said. “Old people like me are going
to need more and more pills all the time, and for a longer
time.
Berkshire, with a market value of about $221 billion,
gained about 4,700 percent in 20 years through Dec. 31, about
six times better than the Standard %26amp; Poors 500 Index including
dividends. The stock rose $510 today to $143,500, up 34 percent
in the past 12 months.
Buffetts net worth was estimated at $52 billion by Forbes
Magazine in September, ranking behind only Microsoft Corp.
Chairman Bill Gates in the U.S.
Berkshires biggest U.S. stock investment remains Coca-Cola
Co., the worlds largest soft-drink maker, with 200 million
shares worth about $11.7 billion. Buffett has told investors at
Berkshires annual meeting that he drinks Cherry Coke every day.
Wells Fargo is Berkshires second-largest U.S. holding,
valued at $8.56 billion, followed by American Express Co., the
third-largest U.S. credit card network. Berkshire owns about 8.8
percent of Wells Fargo, according to Bloomberg data.
Berkshire reduced its holdings in Iron Mountain Inc., the
worlds largest seller of records-management services, by almost
50 percent from Sept. 30 to 4.66 million shares.
To contact the reporters on this story:
Josh P. Hamilton in New York at
