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Berkshire Buys VeriSign, ADM Stakes as Deputies Add Holdings

February 15, 2013

Berkshire Adds VeriSign, ADM Stakes as Deputies Build Portfolios

Rail cars filled with ethanol sit outside the Archer Daniels Midland Co. corn processing facility in Decatur, Illinois. The ADM stake expands Berkshire’s bet on farming, after the company added a stake in Deere & Co., the world’s largest maker of agricultural equipment, in the third quarter. Photographer: Mark Cowan/Bloomberg News

Berkshire Hathaway Inc. (A:US) added stakes in VeriSign Inc. and Archer-Daniels-Midland Co. as Chairman Warren Buffett’s deputies took on more responsibility.

Berkshire held 3.69 million shares of the Internet-address database manager VeriSign (VRSN:US) as of Dec. 31, Buffett’s Omaha, Nebraska-based company said yesterday in a regulatory filing disclosing U.S. stockholdings at the end of 2012. The stake in Decatur, Illinois-based ADM (ADM:US) was 5.96 million shares.

Buffett, 82, has used premium revenue from insurance units and earnings from operating businesses to buy stocks (A:US) and take over companies, building Berkshire’s market value to more than $240 billion. He has been preparing the firm for his eventual departure, in part by hiring former hedge fund managers Todd Combs and Ted Weschler to oversee some investments.

“Most of the new holdings in the portfolio are coming from Todd and Ted,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, who has taken students to visit Buffett in Omaha.

ADM, the world’s largest corn processor, climbed 4.4 percent to $32.57 at 4 p.m. in New York. Reston, Virginia-based VeriSign, which translates the words in an Internet address into the numbers that a computer server understands, jumped 1 percent to $46.14.

Mutual funds and individuals watch Berkshire’s filings for clues about the company’s strategy. Last year, the billionaire affirmed his preference for buying stocks and taking over companies rather than investing in debt. Low interest rates and inflation make bonds among the “most dangerous” assets, he wrote in a letter to Berkshire shareholders in February 2012.

Heinz Deal

Buffett yesterday disclosed a deal with 3G Capital to buy ketchup-maker HJ Heinz Co. (HNZ:US) for about $23 billion. Berkshire will spend about $12.1 billion, receiving $8 billion of preferred shares that pay a 9 percent dividend, and more than $4 billion in equity.

Berkshire more than doubled its stake in Wabco Holdings Inc. (WBC:US), a Piscataway, New Jersey-based maker of truck parts, to 4.1 million shares from 1.6 million, according to the filing. The shares gained 4.7 percent to $71.90 after Wabco posted quarterly profit today that beat analysts’ estimates.

The stake in Portland, Oregon-based Precision Castparts Corp. climbed to about 2 million shares from 1.2 million. The metal-products maker climbed 0.5 percent.

Buffett’s firm cut its stake in Mondelez International Inc. (MDLZ:US), after the company spun off its North American grocery business, Kraft Foods Group Inc. Berkshire also reduced its holdings of Kraft.

Mondelez, Kraft

Berkshire held 12.8 million shares of Deerfield, Illinois- based Mondelez and 1.67 million Kraft shares at year-end, according to yesterday’s filing. The company would have held 30.4 million Mondelez shares and about 10.2 million of Kraft if it didn’t sell in the last three months of 2012. Mondelez climbed 0.6 percent, extending its gain to 5 percent this year. Kraft was little changed and is up 3.7 percent since Dec. 31.

Berkshire has been scaling back its bet in snack-food maker Mondelez, which was known as Kraft Foods Inc. before the October split. Mondelez Chief Executive Officer Irene Rosenfeld spun off the North American grocery business so that she could push products into emerging markets by adding new offerings.

The ADM stake expands Berkshire’s bet on farming, after the company added a stake in Deere & Co., the world’s largest maker of agricultural equipment, in the third quarter. ADM turns crops including corn and wheat into food and fuels, according to its website.

Farming Bets

Howard Buffett, 58, a Berkshire director and the second of Warren Buffett’s three children, has worked as the head of investor relations at ADM. He lives and farms in central Illinois, and is executive director of the Howard G. Buffett Foundation, which works to improve subsistence agriculture and resolve conflicts tied to food.

Buffett has accumulated the largest holdings in companies including Wells Fargo & Co. and American Express Co. Gains in equities helped Berkshire’s Class A shares climb 17 percent last year, beating the Standard & Poor’s 500 Index’s 13 percent advance. The stock rallied to a record close yesterday after the Heinz deal and climbed another 0.6 percent today.

Buffett has said he’s responsible for larger investments while the deputies make smaller bets, such as a stake in General Motors Co. disclosed last year. He told Bloomberg Television’s Betty Liu in July that he’s been giving Weschler and Combs more money to invest.

“They’ve been terrific additions to Berkshire,” he said in the July 13 interview.

Yesterday’s filing outlined a portfolio valued at about $75 billion. The document lists equities traded on U.S. exchanges. Buffett discloses other holdings in annual reports and filings with non-U.S. regulators.

To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

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


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Companies Mentioned

  • A
    (Agilent Technologies Inc)
    • $57.72 USD
    • 1.01
    • 1.75%
  • VRSN
    (VeriSign Inc)
    • $49.58 USD
    • 0.43
    • 0.87%
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