THE RETAIL TRADE… COSTCO vs. WAL-MART

Costco Wholesale Corporation (NASDAQ: COST) is 4,333,363 shares, which was the same as the last quarter but that is after it had been lowered from 5.254 million before.  The other is a stake of Wal-Mart Stores Inc. (NYSE: WMT) at just over 39 million, also the same as the prior quarter but the difference is that this stake had been raised earlier.  On a personal note, Costco is much better overall experien
ce.  But business is business.  Wal-Mart may have been dead money for some time, but Wal-Mart is much more fairly valued, it has nearly a 2.4% vs. 1.5% dividend yield, and its $191 billion market cap is more than 7-times that of Costco.  If Buffett wants to have an “all in bet on America” then Wal-Mart fits that role perfectly.  Wal-Mart is likely the new destination of millions of more Americans now that The New Normal means lower pay, fewer jobs, and a much more price-conscious consumer.  The vast size of this company also allows Buffett to really dig in deep here as much as he wants if he ever wants to raise the stake.  Buffett’s stake is more than $2 billion here, but he could raise that exponentially if he ever wanted to and it would not create a drastic move.

AND THEN THE FINANCIAL WEIGHTING…

How much financial exposure does Buffett need for Berkshire Hathaway in banks and insurance?  Maybe having so many holdings gives Berkshire’s management a better grip on a full snapshot of the financial markets.  But some is overkill and redundant beyond belief.  Berkshire’s current worth in these is $6+ billion in American Express, $8+ billion in Wells Fargo, $1.4 billion in US Bancorp, the Goldman Sachs preferred shares, and literally endless billions in vast outfits in insurance and reinsurance operations in the Berkshire subsidiaries.  It goes on and on and some of these could be widdled down to nothing.

M&T Bank Corp. (NYSE: MTB) is 5.363 million, which is already a decrease from 5.563 million shares before that and down from 6.71 million shares before that.  This is worth over $460 million whether a deal gets wrapped up with Banco Santander or not.  By the looks of it, Buffett is already on the way out and that may happen whether he wants it or not if a cash deal comes the way of M&T.

Wesco Financial Corp. (NYSE: WSC) is 5.703 million shares, same as last quarter, and this is 80.1% owned by Berkshire Hathaway.  The company has already submitted an offer for the remaining 19.9% not already owned, but it is at book value and supposedly Buffett and Munger won’t budge.  This represents a change coming either way, and Buffett could even consider monetizing an eclectic mix of its operations holdings unless they were going to be integrated and rolled up into the eclectic mix of Berkshire’s private subsidiaries.

Again, Buffett’s most recent full holdings are here.

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JON C. OGG