Berkshire-inspired investments

IBM

I bought a modest chunk of IBM around $133, inspired by Berkshire holding it and encouraged by strong cash generation and the established position in IT departments. For non-tech companies, IBM can still be THE partner to handhold them into the world of (public, hybrid or private) cloud and machine learning. I sold it in two chunks, for approx. $155, primarily to free up funds for other investments (VEREIT and EPOL). I will surely consider buying IBM again after a dip or if business performs better than expected.

Wells Fargo (WFC)

Intrinsic Value: $81.5, Current Price: $52.8

This is another investment inspired by Berkshire’s holdings. While not cheap, the ROE is impressive and I was also convinced that downside is limited, given that interest rates will rather go up than down, and therefore business performance can mostly improve. Then the scandal with unauthorized account openings broke out. I increased my position, and I have decent post-Trump unrealized gains (cost basis %45.5), but far from what they would be, should I buy JPM/C/BAC or financial sector ETF instead. I still think by downside is more limited with the best-of-breed bank, and yield is still attractive. And I always have BAC exposure through BRK.B.

Kraft Heinz (KHC)

I was tracking Berkshire’s acquisition of Heinz and subsequent merger with Kraft and I was amazed how Buffett and 3G have turned ~$10B into ~$30B each in 3 years. I think this leveraged buyout indeed created lots of value by making the underlying business leaner and efficiently using the underlying cashflow to pay the acquisition debt. And the stable nature of the underlying business minimized the risk coming from leverage.

I recently bought a token position in KHC, primarily because of a large post-election drop in price as a contrarian, “impulsive” buy. The intrinsic value depends on achieving (or exceeding) the planned $1.5B of savings and I plan to track progress of this business.