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HomeMarketBerkshire's Taiwan Semi Purchase Spurs Questions Over Who Made the Buy

Berkshire’s Taiwan Semi Purchase Spurs Questions Over Who Made the Buy

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Berkshire Hathaway
(ticker: BRK/A, BRK/B) disclosed a $4.9 billion investment by in
Taiwan Semiconductor
(TSM) late Monday, immediately raising the question about which Berkshire equity manager made the purchase.

CEO Warren Buffett oversees Berkshire’s roughly $350 billion equity portfolio and runs about 90% of it. The other 10% is managed by Todd Combs and Ted Weschler, who have both been with Berkshire for a decade or more. They are expected to take over the entire portfolio in the post-Buffett era.

Buffett, 92, hasn’t disclosed their investment performance or which stocks in the Berkshire equity portfolio are theirs. The closest he came to describing their showing was a comment to CNBC in 2019 that each had trailed the
S&P 500
by a “tiny bit” since joining Berkshire and had done better than him. It is believed they usually make investments independent of one another.

The lack of disclosure is frustrating to some Berkshire investors who would like to see greater accountability, and it hasn’t stopped speculation about which Berkshire holdings are theirs.

It is fair to say that the largest Berkshire holdings likely are Buffett’s, including Apple (AAPL),
Coca-Cola
(KO),
American Express
(AXP),
Chevron
(CVX), and
Bank of America
(BAC). Combs and Weschler, however, may piggyback with Buffett on some of these holdings, notably Apple.

Most of the holdings of $3 billion or less are generally assumed to be those of Combs and Weschler, given that Buffett likes to traffic in larger stakes that can move the needle given Berkshire’s outsize market value of $690 billion.  

Berkshire didn’t respond to a request for comment.

Taiwan Semiconductor, the world’s largest contract chip maker with a market value of $375 billion, would be an unusual Buffett investment because he has tended to view technology stocks as outside his circle of competence. Buffett hasn’t bought
Alphabet
(GOOGL), for instance, despite recognizing more than a decade ago the lucrative nature of its search platform.

Apple is Berkshire’s largest equity investment at about $140 billion, but Buffett has tended to view it as a consumer company with a loyal and sticky customer base. Weschler and Combs tend to be more comfortable with tech stocks.

Berkshire’s holdings of
Amazon.com
(AMZN) and
Snowflake
(SNOW), the cloud software company, are viewed as Combs or Weschler investments.

The argument that Taiwan Semi is a Buffett investment is due to its size at nearly $5 billion, which would be large for either Combs or Weschler. And Taiwan Semi’s valuation would suit Buffett since it has come down sharply with its shares, which are off over 30% this year.

The stock has popped 13% to $82.40 on the Berkshire news and a rally in Taiwan and Chinese stocks. It now trades for about 14 times projected 2022 and 2023 earnings—Buffett often likes to pay no more than 15 times earnings.

Chris Bloomstran, who is chief investment officer at Semper Augustus Investments Group, a St. Louis investment firm that holds Berkshire stock, thinks Taiwan Semi is a Buffett stock.  

“It would be a very large allocation for Todd or Ted given the proportion of the equity portfolios they are responsible for. I don’t think it’s outside Warren’s circle of competence either. Durable profitability, great balance sheet and a high earnings yield. All characteristics of a Buffett investment,” he wrote Barron’s in an email.

Besides Amazon.com and Snowflake, it is a good bet that Weschler or Combs holdings include Berkshire’s investments in 
DaVita
(DVA), General Motors (GM),
Kroger
(KR), Liberty SiriusXM Group (LSXMA), Charter Communciations (CHTR), Visa (V),
Mastercard
(MA), and
Celanese
(CE).

All these are $3 billion or less in current market value. DaVita is likely a Weschler holding—he had held it prior to joining Berkshire. The provider of kidney dialysis services hasn’t been a great investment, with the stock unchanged since 2014.

Buffett once said that the Kroger investment was by one of the “fellows,” a reference to them, explaining that he wasn’t comfortable with the supermarket industry. Buffett also hasn’t cottoned to another competitive industry, autos, making GM a likely Combs or Weschler investment.

It is also possible that Berkshire’s holdings in
Citi
group (C) and
Paramount Global
(PARA), the parent of CBS, are by one of the duo. The Citi stake is valued at less than $3 billion and Paramount at close to $2 billion.

Berkshire’s new investments in the latest quarter of
Jefferies Financial Group
(JEF) and
Louisiana-Pacific
(LPX) of under $500 million each likely was made by either Combs or Weschler.

Some of these stocks have been hit hard this year, including Amazon, Snowflake, DaVita, and Charter, which all are down over 35%, versus a 16% drop in the S&P 500.

Write to Andrew Bary at andrew.bary@barrons.com

Credit: marketwatch.com

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