Warren Buffett’s Big Four Stocks Gain $3.9 Billion

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Warren Buffett reported the performance of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) for the fourth quarter and fiscal 2012 through his annual letter to shareholders, which was released on Friday, Mar. 1. Known as the “Oracle of Omaha,” Buffett is one of the most successful investors worldwide and many follow his investment advice and strategies. In other words, when Buffet talks; people listen.

One of the highlights of his letter is the outstanding earnings of his “Big Four” stocks including American Express (NYSE: AXP), Coca-Cola (NYSE: KO), International Business Machines (NYSE: IBM), and Wells Fargo (NYSE: WFC). According to Buffett, Berkshire Hathaway received generous gains of $3.9 billion from its “Big Four” stocks including the dividends received worth $1.1 billion and $2.8 billion earnings.

Buffett emphasized that Berkshire Hathaway’s earnings from the four companies are generally used to repurchase shares to boost its future profits and to fund business opportunities. The billionaire investor expects to generate higher gains from the big four over the coming years.

Berkshire Hathaway boosted its stake in the four companies by the end of 2012. The conglomerate increased its stockholding in American Express from 13% to 13.7% or more than 151million shares. The company owns 8.9 percent or 400 million shares of Coca-Cola, 6% or over 68 million shares of IBM, and 8.7% or more than 456 million shares of Wells Fargo. According to Buffett, Berkshire Hathaway’s ownership in the four companies will possibly increase in the future.

Buffett’s big four delivered positive stock returns and regularly distributed dividends.

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Source:YCharts/Company Data

The stock price of American Express surged from more than $51 to $63 per share over the past 52 weeks. The company’s net income during the fourth quarter of 2012 declined by 47% to $637 million or $0.56 per share due to substantial amount of charges related to restructuring costs and one-time expenditures. Excluding all the charges, the company’s adjusted income at $1.09 per share exceeded the estimates of analysts at $1.06 per share. Its revenue increased by 5% to $8.14 billion during the period. Over the past 12 months, American Express’ stock performance was 17.66%, higher than the 12.94 percent total returns delivered by the S&P 500.

Coca-Cola reported that its global volume grew by 3% during the fourth quarter. The company posted $0.41 earnings per share, a 14% increase and net revenue of $11.45 billion up by 4% during the three months period that ended Dec. 31, 2012. Last month, its board of directors raised its quarterly dividend to shareholders from $0.25 cents $0.28 per share. The company returned $9.1 billion capital to shareholders including $4.6 billion in dividends and $4.5 billion in shares buyback for the year 2012.

On the other hand, International Business Machines posted a strong financial result during the fourth quarter FY12. The tech giant’s net income climbed to $5.8 billion or $5.13 earnings per diluted share. Its revenue was $29.3 billion. During the same period a year earlier, IBM’s net income was $5.5 billion or $4.62 diluted earnings per share and $29.4 billion revenue.

Meanwhile, Wells Fargo also delivered an outstanding financial performance during the fourth quarter with $5.1 billion net income and $0.91 earnings per share, an increase of 24% and 25%, respectively. Its revenue increased by 7% to $21.9 billion. The company said its total core average checking and savings deposits surged to $72 billion and total loans increased by $29.9 billion to $799.6 billion.

Based on the latest quarterly earnings performance of the four companies, investors who own any of the stocks have strong reasons to remain bullish. Buffett pointed out that talented and shareholder-oriented” managers are leading the “marvelous businesses” of American Express, Coca-Cola, IBM, and Wells Fargo.

Berkshire Hathaway's total earnings for 2012 were $24.1 billion. It is interesting to note that he considers his whopping gains “subpar” compared with the S&P 500 earnings. The conglomerate’s percentage gain in book value at 14.4% is lower than the 16% gain of the S&P 500 including dividend. 

In 2012, Berkshire Hathaway repurchased shares worth $1.3 billion and ended the year with a net worth of $22.8 billion.


MarieCabural has no position in any stocks mentioned. The Motley Fool recommends American Express, Berkshire Hathaway, Coca-Cola, and Wells Fargo. The Motley Fool owns shares of Berkshire Hathaway, International Business Machines., and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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