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Friday, November 14, 2008
Buffett's Berkshire Reports Stake in Eaton Corp.
Ken Sweet
FOXBusiness
In its most recent quarterly filing, Berkshire Hathaway (BRK), the insurance and investment firm led by billionaire investor Warren Buffett, reported a new stake in the industrial manufacturing conglomerate Eaton Corp. (ETN).
The company was the only new addition to Berkshire’s portfolio of companies, according to forms filed with the Securities and Exchange Commission on Friday evening. The 40 companies now owned by Buffett offer a glimpse into the investment strategies of one of the most respected and most important people in the world of finance.
The filings were for the quarter ending Sept. 30, which did not include the massive downturn in October, when Buffett announced he was "buying American."
In the filings, Berkshire also reported increased stakes in NRG Energy (NRG), U.S. Bancorp (USB) and ConocoPhillips (COP), and decreased stakes in Lowe’s (LOW), Home Depot (HD), Carmax (KMX) and Bank of America (BAC). In total, Buffett increased his total stock holdings by $10 billion in the quarter to approximately $69.8 billion.
Before this quarterly announcement, the most recent addition to Berkshire’s portfolio was NRG Energy (NRG), which he reported buying June 30.
Eaton, a diversified industrial company that builds everything from aircraft parts to fluid systems, is very much down the road of the companies Buffett chooses to invest in. The investor has often said he will only invest in companies that he understands. He purchased 2.9 million shares of Eaton Corp, which were worth approximately $163 million, according to the filings.
Shares of Eaton were 3% higher in after-market trading.
In the companies Buffett added his holdings in, the biggest of them was the oil giant ConocoPhillips (COP). Berkshire reported a $5.6 billion stake in Conoco, $4 billion more than what he reported in March. Shares of Conoco were higher by 3% in after-market trading.
One sector that Buffett clearly reduced his stake in was the home improvement retailers. Berkshire reported decreased stakes in Lowe’s and Home Depot, as the housing market continues to remain weighed down by a sluggish economy. He reported a 500,000-share reduction in Lowe’s and a 500,000-share reduction in Home Depot.
He also significantly reduced his holdings Bank of America. On June 30, Berkshire reported a 9.1 million stake in Bank of America, he now is reporting a 5 million-share stake in the company for this most recent quarter.
The "Oracle of Omaha" does not trade stock or even buy stocks with a 12-month time horizon. Buffett’s approach to investing is for the long-term. Some of his most notable purchases over the years have included The Washington Post Co. (WPO) and Anheuser-Busch (BUD), as well as several large railroad companies such as Union Pacific (UNP) and Burlington Northern Santa Fe (BNI).
This quarter’s announcement was being watched even more closely than usual because Buffett told the public in October through an opinion piece in the New York Times that he was “buying American” and others should consider doing so as well.
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
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Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
