What’s Buffett See in DirecTV – a Favorite of Berkshire’s New Fund Manager?
Before being tapped last fall to join Warren Buffett's team, Weschler's Peninsula Capital Advisors had been a big fan of DirecTV (DTV).
Though Weschler was only supposed to start in the New Year, Buffett and his team boosted its stake in DirectTV by almost 400% in the last quarter of 2011, buying 16.1 million shares, according to recent filings with the SEC, and increasing his stake to 20.3 million, or 1.3% of his overall portfolio. Berkshire began accumulating DirecTV in the third quarter.
Growing strength in Latin America, and a higher per-subscriber bill in the U.S., has helped turn around a two-year slide in revenue growth that had squeezed the stock price last year. DirecTV beat expectations for the fourth quarter, as net income rose about 16% to $718 million and revenue gained 12.7% to $7.46 billion. A healthy $6 billion share buyback program will also help support the stock going further.
After long avoiding the tech sector, Buffett et al began piling into IBM in the first quarter of last year and now has almost 18% of his portfolio in Big Blue with 63.9 million shares. Berkshire added 6.6 million shares in the fourth quarter.
What's expected to support IBM's growth, and stock, is its commitment to acquisitions.
Berkshire also added to its long-held position in Wells Fargo, buying 22.3 million shares in the fourth quarter to bring its total stake to 383.7 million shares, or 16% of its portfolio.
Like other banking stocks, Wells Fargo's stock has slumped since the financial crisis began. But its earnings are coming back and its stock price has yet to catch up.
Buffett continued to ease up on his position in Kraft (KFT). He sold 2.7 million shares, bringing his exposure down to 87 million, or 5% of his portfolio, after holding as many as 138 million shares in the first quarter of 2009.
Plus, Kraft's return on equity and dividend yield had been going in the wrong direction for some time.
Berkshire got out of its stake in Exxon (XOM) entirely in the fourth quarter, selling 421,800 stocks after initiating a position back in the second quarter of 2009. With a PE of around 10, it's pricey compared to some of its peers, like ConocoPhillips (COP), at 8.1x and Chevron (CVX) at 7.9x. And Exxon’s earnings and revenue growth is slowing.
Berkshire also lightened its load of Johnson & Johnson (JNJ), selling 8.4 million shares leaving it with 29.0 million, or 2.8% of its portfolio. Like Exxon, J&J's revenue and earnings growth is weakening and with a PE of around 19, there are cheaper healthcare stocks out there.