3. Bank of America: $11 Billion or More Profit!
It is not a common stock holding of Buffett in the classic sense, but Buffett made a $5 billion preferred stock investment in Bank of America Corp. (NYSE: BAC) after the recession. Berkshire Hathaway gets paid $300 million per year in income from this, but the big kicker in that investment was a warrant allowing Berkshire Hathaway to purchase 700 million common shares of Bank of America for $5 billion at any time before September 2, 2021. At the end of 2016, that would have delivered a profit of $10.5 billion. If it wishes, Berkshire can use its preferred shares to satisfy the $5 billion cost of exercising the warrant. And the post-election rally has been rather favorable to the bank for lower regulatory costs and higher net interest margins. With shares most recently at $24.23, Bank of America shares were up over 9.6% from the end of 2016. Buffett’s report outlined what will create a conversion ahead:
If the dividend rate on Bank of America common stock – now 30 cents annually – should rise above 44 cents before 2021, we would anticipate making a cashless exchange of our preferred into common. If the common dividend remains below 44 cents, it is highly probable that we will exercise the warrant immediately before it expires.
4. Coca-Cola: $15 Billion or More Profit!
It is a dead money stock to the rest of the world, but Buffett’s stake of 400 million Coca-Cola Co. (NYSE: KO) shares is a whopping 9.3% of the company. Buffett’s cost basis is just $1,299 billion (which we have speculated is almost free if you count the dividends and likely income Buffett has been able to make from stock loans). The current value of Coca-Cola was listed as $16.584 billion, a gain of more than $15 billion.
5. Goldman Sachs: $2.1 Billion Profit!
Goldman Sachs Group Inc. (NYSE: GS) is a bank stake that was originally a preferred stake dating back to the recession. The warrants that came with the stock are now 11.39 million shares for a 2.9% stake, but the profit of today does not include the 10% preferred coupon that was paid for years. Buffett’s costs basis is a mere $654 million, worth some $2.727 billion at the end of 2016, implying a profit of almost $2.1 billion. At $247.35 on last look, Goldman Sachs shares were up 3.3% more in 2017.
6. Kraft Heinz: $20.4 Billion Profit!
Kraft Heinz Co. (NASDAQ: KHC) is a stake of 325,442,152 shares that is carried on the balance sheet with a GAAP figure of $15.3 billion. Its year-end value of $28.4 billion represents a profit of more than $13 billion, but Buffett said in his letter that the real cost basis for the shares is $9.8 billion. And to add in a kicker here, Kraft Heinz shares were at $93.08 and were up 6.5% more from the end of 2016. If you look at the real cost basis, Buffett’s profit here from his investment alongside 3G would be a whopping $20.44 billion, considering the gains seen in 2017.
7. Moody’s: $2.5 Billion Profit!
The stake in Moody’s Corp. (NYSE: MCO) was more embarrassing for Buffett during the recession, as giving triple-A ratings to that toxic mortgage and loan sludge almost toppled the company. After suits and fines, Moody’s is back to being used in every credit rating conversation, without even a pencil jab about how bad of a job it did with credit ratings in the years prior to 2009. Berkshire owns 24.669 million shares, a 12.9% stake in Moody’s, but this is actually far lower than what the stake used to be. Berkshire Hathaway’s cost basis is a mere $248 million, but its $2.326 billion value at the end of 2016 generated a gain of almost $2 billion. Now we have to consider that Moody’s shares (last trading at $113.29) had risen another 20% so far in 2017. That new profitability would be almost $2.55 billion.
8. U.S. Bancorp: $2.3 Billion Profit!
U.S. Bancorp (NYSE: USB) is a stake of 101.859 million shares that has grown through time (to a 6.0% stake in the bank) for Berkshire Hathaway. The cost basis of $3.239 billion had a market value of $5.233 billion at the end of 2016, for a profit of just over $1.99 billion. This profit is now well over $2 billion, since U.S. Bancorp shares have risen another 7.3% in 2017. That new profit would be over $2.37 billion.
9. Wells Fargo: $16.2 Billion Profit!
Wells Fargo & Co. (NYSE: WFC) has been the grand prize of Berkshire Hathaway over the years. Buffett has added endlessly to this position, but he did pause buying shares during the account opening scandal and the John Stumpf ouster. Berkshire Hathaway owned 500 million shares for a 10.0% stake. The cost basis was listed as $12.73 billion, and the year-end value of $27.555 billion would generate a $14.82 billion profit. But at $57.81, Wells Fargo shares were up another 4.9% in 2017 and would be worth over $28.905 billion. Buffett’s new profit would be closer to $16.2 billion.