Bloomberg News

Berkshire Spends $4 Billion on Equities as Combs Adds Stocks

July 08, 2011

July 8 (Bloomberg) -- Warren Buffett said his Berkshire Hathaway Inc. spent about $4 billion acquiring stocks since February as new portfolio manager Todd Combs added two holdings.

“We bought some equities that we probably spent $4 billion on,” Buffett told Bloomberg Television’s Betty Liu on the “In the Loop” program today, in an interview from Sun Valley, Idaho. “They’re in the space of common stocks.”

Buffett, 80, is overseeing changes in Omaha, Nebraska-based Berkshire’s portfolio after a switch in investment managers last year. He’s also wagering on continued economic expansion, even as the U.S. unemployment rate climbs. Buffett said he doesn’t expect a second recession.

“I would bet very heavily against that,” Buffett. “How fast the recovery will come, I don’t know. I see nothing that indicates any kind of a double dip.”

Buffett’s firm bought MasterCard Inc. shares in the first quarter, the only publicly disclosed addition to Berkshire’s U.S. stock holdings. Berkshire applied to regulators for confidential treatment in the period so he could delay disclosure of some trades. Combs, 40, a former hedge-fund manager, may add to the assets he oversees and doesn’t have to check with Berkshire management before trading, Buffett said.

“He could be buying stocks as we talk,” Buffett said. “He has designated a block of money, which he designated, and he can increase or decrease that block at his call.”

Combs was assigned to initially manage $1 billion to $3 billion, Buffett said in his most recent annual letter. Combs will focus on equities and was permitted to invest in other types of securities, according to the letter.

MasterCard

Berkshire’s MasterCard stake was valued at about $54.4 million as of March 31. Combs oversaw stock in MasterCard, the second-biggest consumer-payments network, at Castle Point Capital Management LLC before joining Berkshire. Purchase, New York-based MasterCard has gained about 40 percent this year in New York trading as consumer spending advanced.

Berkshire said last year it was hiring Combs as the company prepares for Buffett’s eventual departure. Buffett, who is chief executive officer and chairman, oversees most of a stock portfolio valued at more than $60 billion as of March 31. Lou Simpson, who made stock picks with funds at Berkshire’s Geico unit, stepped down last year.

Buffett said Berkshire’s ability to fund takeovers has diminished since February, when he told shareholders in his annual letter that his “elephant gun has been reloaded, and my trigger finger is itchy.” The $4 billion in stock purchases and the $9 billion that Berkshire committed to the acquisition of Lubrizol Corp. have reduced available cash.

“The gun doesn’t have quite as many bullets in it as it did,” Buffett said. “But it rebuilds as it goes along.”

Berkshire had about $41.2 billion in cash as of March 31. The company posted net income of $13 billion last year.

Coca-Cola, Wells Fargo

Berkshire is the top investor in Coca-Cola Co., the world’s largest soft-drink maker, Wells Fargo & Co., the biggest U.S. home lender, and New York-based American Express Co., the largest credit-card issuer by customer spending.

The unemployment rate unexpectedly climbed to 9.2 percent in June, the highest level this year, and hiring by companies was the weakest since May 2010, Labor Department data showed. Berkshire added about 3,000 jobs last year after cutting more than 20,000 positions in 2009.

Employment will gain “big time” when the housing industry recovers, Buffett said.

--With assistance from Noah Buhayar and Brooke Sutherland in New York and Dan Reichl in San Francisco. Editors: Dan Kraut, Rick Green

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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