Warren Buffett’s Berkshire Hathaway Inc. (A:US) disclosed a holding in Verizon Communications Inc. (VZ:US) in a wager that the telecommunications company will benefit after buying out its partner in the largest U.S. wireless business. Verizon posted the biggest increase in the Dow Jones Industrial Average.
Berkshire held 11 million Verizon shares as of March 31, Buffett’s company said yesterday in a regulatory filing. The investment is valued at about $530 million.
Verizon acquired Vodafone Group Plc’s minority stake in Verizon Wireless in February, allowing it to it stop paying a dividend to its partner. The $130 billion deal is a bet that there’s still room for growth in the U.S. even though a majority of customers in the country already have smartphones. The company has forecast (VZ:US) higher adjusted profit margins this year on a 4 percent increase in revenue.
“Verizon has an attractive dividend and an enviable position in the wireless market,” said Kevin Roe, an analyst with Roe Equity Research. “It’s good ballast for investors in a choppy market.”
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The telecommunications company is the 24th-highest payer of dividends in the Standard & Poor’s 500 Index, with a yield of 4.4 percent, according to data compiled by Bloomberg.
Bob Varettoni, a spokesman for New York-based Verizon, declined to comment on Berkshire’s holding. The deal with Vodafone was announced last year.
Buffett, 83, has long championed a concentrated approach to stock investing. More than half of Omaha, Nebraska-based Berkshire’s $118.5 billion equity portfolio at the end of March was in four companies: Wells Fargo & Co., Coca-Cola Co., American Express Co. and International Business Machines Corp.
The Verizon investment was probably taken by one of his backup stock pickers, Todd Combs or Ted Weschler, based on its size, said Richard Cook, co-founder of Cook & Bynum Capital Management LLC. The deputies each oversee about $7 billion for Berkshire and have gotten more funds from Buffett since being hired in 2010 and 2011.
Berkshire also said in the filing that its stake in General Motors Co. (GM:US) declined by 25 percent to 30 million shares. The holding of DirecTV fell to 34.5 million shares from 36.5 million three months earlier. Buffett has said that both picks were made by his deputies, who outperformed the S&P 500 in 2012 and 2013.
GM slipped 2 percent to $33.68 at 9:40 a.m. in New York trading. DirecTV climbed 0.3 percent.
“It is very interesting to follow what Todd and Ted are doing,” said Cook, who manages about $310 million, including Berkshire shares. “They’re smart investors, and they’ve had some home runs already.”
Bringing on Combs, 43, and Weschler, 52, was a cornerstone of Buffett’s succession plan. The Berkshire chairman and chief executive officer has said they will jointly oversee all investments (A:US) once he’s no longer leading the business he built over the past five decades from a textile maker into one of the most-valuable companies in the world. Its market capitalization surged past $300 billion this year for the first time, buoyed by gains in the stock portfolio and earnings (A:US) from dozens of operating businesses.
That track record has earned Buffett a following among investors, who study Berkshire’s stock picks for clues about strategy. His major equity purchases can often send a company’s shares higher. When Buffett reported a $3.7 billion stake in Exxon Mobil Corp. in November, the world’s biggest oil explorer gained 2.2 percent the following day and closed at its highest level in at least 33 years.
Verizon advanced 1.8 percent to $48.81. Its largest shareholders (VZ:US) include Capital Group Cos., manager of the American Funds mutual funds; BlackRock Inc.; and Vanguard Group Inc., each with more than 200 million shares, according to data compiled by Bloomberg. Billionaire hedge fund manager John Paulson yesterday disclosed a stake of 8.7 million shares.
Berkshire also boosted its stake in one of Buffett’s investments, Wal-Mart Stores Inc., by 17 percent to about 58.1 million shares, according to the filing. The holding in the Bentonville, Arkansas-based retailer is valued at more than $4 billion. Wal-Mart climbed 0.7 percent.
“In terms of what’s going to move the needle for shareholders, Buffett’s very large investments still dominate” the Berkshire portfolio, said Cook.
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