Berkshire Takes GM, Viacom Stakes as Deputies Buy Stocks

May 16, 2012 05:33 AM

Berkshire Hathaway Inc. disclosed stakes in General Motors Co. and Viacom Inc. as former hedge- fund managers Todd Combs and Ted Weschler built portfolios under Chairman Warren Buffett.

Buffett’s firm had 10 million shares of the automaker on March 31, Omaha, Nebraska-based Berkshire said yesterday in a filing disclosing U.S. stockholdings. The stake in New York- based Viacom was about 1.59 million shares. The filing excludes some confidential data.

Buffett, who also is Berkshire’s chief executive officer, has been preparing the company for his eventual departure, in part by hiring Weschler and Combs to help oversee investments. The 81-year-old billionaire has said he makes Berkshire’s larger wagers, while the back-up stock pickers are responsible for smaller bets. Each oversees $2.75 billion, Buffett said May 5 at the company’s annual meeting.

“There’s a pent-up demand for cars in this country, because of the financial crisis,” David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, said in a phone interview. Buffett’s stock pickers “had an opportunity to buy at an attractive price, well below the initial public offering price,” he said.

GM jumped 3 percent to $22.07 at 9:36 a.m. in New York and averaged about $25.15 during the first quarter. The U.S. government, which backed the company’s 2009 bankruptcy, sold shares in a public offering in 2010 for $33 each. Jim Cain, a GM spokesman, said the automaker doesn’t comment on investors buying or selling its shares.

Vehicle Sales

Americans put off purchases of new cars and trucks during the recession, sending the average age of vehicles on U.S. roads to a record high of 10.8 years, according to researcher R.L. Polk & Co., based in Southfield, Michigan.

GM is benefiting from a recovering U.S. auto market, on pace for its best vehicle sales since 2007, and growth in China that helped the carmaker reclaim global industry leadership in annual deliveries last year. CEO Dan Akerson has introduced models such as the Sonic small car and ATS luxury sedan to push Chevrolet and Cadillac as global brands.

“GM has a lot of good product in the showroom and product coming in 2013,” said David Kudla, who manages about $1 billion as CEO of Mainstay Capital Management. “When we look at the economy, at the fundamentals of the industry and the company, the stock’s a buy.”

Viacom Stake

Berkshire’s stake in Viacom, the owner of MTV and Paramount Pictures, recalls Weschler’s holding of Liberty Media Corp. when he was running hedge fund Peninsula Capital Advisors LLC, said the University of Maryland’s Kass. Viacom advanced 1.2 percent in New York trading.

Buffett’s firm reported a holding in Liberty Media last year and almost doubled its investment in the Englewood, Colorado-based communications and entertainment company, to 3 million shares in the first quarter.

Buffett, the world’s third-richest person, and Berkshire Vice Chairman Charles Munger built a reputation for buying equities and companies below their intrinsic value and reaping gains as prices rose. The stock picks are watched by mutual funds and individuals looking for clues about their strategy.

“The beauty of stocks is that they do sell at silly prices from time to time,” Buffett said at the annual meeting. “That’s how Charlie and I got rich.”

Berkshire increased its holding of Wal-Mart Stores Inc. to 46.7 million shares from about 39 million at year-end. The New York Times reported last month that the Bentonville, Arkansas- based retailer’s executives bribed officials to speed expansion in Mexico. The U.S Justice Department is investigating, people familiar with the matter have said.

Earning Power

“I don’t think the earning power of Wal-Mart five years from now will be materially affected by the outcome of this situation,” Buffett said at the meeting on May 5.

The firm’s stake in Procter & Gamble Co., the world’s largest consumer-products maker, fell to 73.3 million shares from 76.8 million. The Cincinnati-based company has struggled to raise prices for some products and compete against low-cost competitors, Buffett told CNBC in a May 7 interview.

Berkshire’s stock portfolio climbed to $89.1 billion on March 31 from $77 billion at the end of December, according to a regulatory filing. Buffett’s firm is the largest shareholder in companies including Coca-Cola Co., Wells Fargo & Co. and American Express Co.

Buffett, whose company has more than $20 billion invested in U.S. banks, said at the May 5 meeting that the nation’s lenders are in better shape than European rivals. Berkshire added 3.81 million shares of Bank of New York Mellon Corp., the world’s largest custody bank, bringing its total holdings to 5.61 million shares.

Confidential Information

Buffett’s firm said in the document that confidential information has been filed with the Securities and Exchange Commission, “implying that Berkshire is likely building a new sizable position,” Meyer Shields, an analyst with Stifel Nicolaus & Co., said in a note to clients today.

The SEC sometimes allows companies to withhold data from the public to limit copycat investing while building or cutting a position. Buffett’s firm requested confidential treatment in filings last year, as he spent more than $10 billion amassing a stake in International Business Machines Corp.

Berkshire boosted its stake in Armonk, New York-based IBM by about 1 percent to 64.4 million shares. Buffett’s firm cut its stake in Intel Corp. by 33 percent to 7.75 million shares at March 31. The Santa Clara, California based-company’s processors run more than 80 percent of the world’s personal computers.

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