4. Burlington Northern Santa Fe
> Date Sold: Still Held
> Amount Made: n/a
> % Gain: n/a
Burlington Northern Santa Fe was one of the greatest investments ever made by Berkshire Hathaway. Oddly enough, it does not seem that way on the surface. Buffett called this “an all-in bet on the future of America” but this was truly an all-in bet on Berkshire Hathaway. You have to recall that many had accused the Berkshire Hathaway empire of becoming a mutual fund rather than a conglomerate. This $34 billion cash and stock investment in the railroad company changed that perception forever. That is what made BNSF so valuable. When Berkshire Hathaway spilt its “B” class of shares so they became nominally affordable to more shareholders, it suddenly gained a larger shareholder base due to the BNSF holders sticking with the stock. Berkshire was added to the S&P 500 Index and to the Russell indexes. The new investors drawn to the stock because of these maneuvers drove gains on top of gains. You could argue that the post-merger impact gave BNSF to Mr. Buffett for almost free. As of December 31, 2009, Berkshire owned 22.5% of BNSF’s outstanding common stock. It said in its report at the time “our equity in net assets of BNSF was $2,884 million and the excess of our carrying value over our equity in net assets of BNSF was $3,702 million. Prior to February 12, 2010, we accounted for our investment in BNSF pursuant to the equity method.”
> Date Sold: Still Have
> Amount Made: $1.8 Billion (Unrealized)
> % Gain: 762% (Unrealized)
Throughout most of his career, Buffett has famously avoided tech stocks, citing his ignorance on the subject. It was this strategy which allowed him to avoid the dot-com bubble and bust at the turn of the century. Buffett broke his no-tech rule in October 2008, when he saw incredible potential in Chinese Electric Car Company BYD. With the recession in full swing, emerging technologies like lithium-ion batteries and the cars that operate on them seemed a dangerous bet. Oil prices had fallen dramatically from all-time highs that summer and green technology was no longer on many people’s minds as an industry that would see growth any time soon. The 225 million shares he acquired cost $232 million. As of December 31st, 2009, Berkshire Hathaway owned 225 million shares of BYD stock worth about $2 billion, equaling a 9.9% stake in the company. This equates to an unrealized gain of $1.8 billion, or 762%.
6. Dow Chemical/Rohm and Haas (NYSE: DOW)
> Date Sold: n/a
> Amount Made: n/a
> % Gain: n/a
Buffett is sitting on a gain today from his investment in The Dow Chemical Company (NYSE: DOW) when he came in with $3 billion to assist Dow to acquire Rohm & Haas for $18.8 billion in 2009. He effectively became the single largest shareholder in the larger Dow Chemical Company after acquiring 3,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock in Dow Chemical Company. Under certain conditions, each preferred share is convertible into 24.201 shares of Dow common stock, but the preferred share comes with dividends at a rate of 8.5% per year. Beginning in April 2014, if Dow’s common stock price exceeds $53.72 then Dow can elect to convert the Dow preferred shares into common stock at the applicable conversion rate. Calculating a total return if things remain static is no easy task today and would require having access to the purchase agreement contract, but the underlying Dow common stock has risen from $10 (and under $10) up to around $36.00. In retrospect, buying the common stock would have made more profits, but if you take the 8.5% per year into consideration Buffett’s income out to 2014 will bring in more than $1.27 billion in interest income – without the effect of the higher value in the shares. The preferred shares might not participate in as much gains as the common shares, but Buffett made this investment when many investors wanted to be much higher in the capital structure due to the economic uncertainty of the time.
7. Washington Post (NYSE: WPO)
> Date Sold: Still Held
> Amount Made: $720 million (Unrealized)
> % Gain: 6,500% (Unrealized)
In 1973, Buffett started purchasing shares of the parent company which owned the Washington Post. By the end of the year, he had about 10% in non-controlling shares. In 1974, the famous investor joined the board of directors. He became close friends with Katherine Graham, then the Post’s controlling shareholder, and who had overseen the paper during its best years, including the Watergate scandal. By the fourth quarter of 2004, Buffett owned 1.7 million shares at a cost basis of $11 million, and had increased his stake of the company to 18.1%. At that time, the market value of those shares was $1.698 billion. That represents an unrealized gain of $1.7 billion and an increase of 15,336.4%. However, since 2004 the newspaper industry has suffered, and shares of WPO have declined more than 50%, and Berkshire’s stake is now only worth about $730 million. That still represents a gain of about $720 million and a 6,500% increase. Warren Buffett has just announced he will step down from the board of directors at the Post. Multiple reports indicate that Buffett plans to hold those shares and focus more on Berkshire Hathaway.
8. PetroChina (NYSE: PTR)
> Date Sold: 2008
> Amount Made: $3.6 Billion (Realized)
> % Gain: 880% (Realized)
In 2002 and 2003 Berkshire bought 1.3% of PetroChina for $408 million, during a time which the company was worth roughly $37 billion. In October 2008, the price of oil was rising rapidly, and Berkshire Hathaway’s report claims that he and Vice-Chairman Charlie Munger believed the company had reached its prime, and sold their shares on a realized cost basis of roughly $4 billion. This equates to a gain of $3.6 billion, and an increase of 880%. However, Shares of PetroChina continued to rise with the price of crude and Buffett admitted that he may have sold prematurely. Some believe the investor chose to bail on the stock because the Chinese company had received a great deal of bad press because of its connection with Sudanese oil operations, the profits of which were going at the time to a genocidal Sudanese military. Buffett claims his only reason for the sale was price, and not political pressure. Ironically, Team Buffett decided to invest heavily in ConocoPhillips and it took large hits after the energy bubble popped. The Conoco shares were effectively cut in half from peak to trough before the recovery. Berkshire Hathaway still held 29.1 million shares at our most recent reporting date.