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Buffett's Berkshire Buys Dollar General Stake

Monday, 15 Aug 2011 06:03 PM

Berkshire Hathaway Inc. added a stake in retailer Dollar General Corp. and increased holdings in MasterCard Inc. as Chairman Warren Buffett expanded his equity portfolio with help from new investment manager Todd Combs.

Buffett’s firm had 1.5 million shares of Dollar General at the end of the second quarter, Omaha, Nebraska-based Berkshire said Monday in a regulatory filing that listed the company’s U.S. stockholdings. Berkshire increased its stake in Purchase, New York-based MasterCard by 88 percent during the quarter and held 405,000 shares as of June 30, the filing shows.

Buffett bought stocks at the fastest pace in almost three years as Berkshire’s cash was boosted in the second quarter by earnings and the repayment by Goldman Sachs Group Inc. of a $5 billion capital injection. Buffett, Berkshire’s chief executive officer and head of investments, has turned his focus to stocks as interest rates remained near record lows.

“That does encourage one to invest in equity,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. Short-term U.S. Treasury securities, where Buffett keeps most of Berkshire’s $47.9 billion of cash, “are paying essentially zero or close to zero,” Kass said.

Berkshire’s equity portfolio was valued at $67.6 billion as of June 30, with 40 percent in consumer products firms and 37 percent in financial firms such as banks and insurers. The rest of the portfolio was in a group Berkshire labels “commercial, industrial and other.”

Confidential Treatment

Berkshire omitted information about its portfolio for the second straight quarter. The U.S. Securities and Exchange Commission sometimes allows companies to withhold data from the public to limit copycat investing while a firm is building or cutting a position.

Buffett, 80, is counting on Combs to help reshape a U.S. portfolio that was cut to 25 holdings at the end of 2010 from more than 40 in 2009. Combs was initially assigned to oversee as much as $3 billion with a focus on equities and can make trades without consulting Buffett. Combs, 40, added a stake in the first quarter in MasterCard, a firm that he had bet on while managing hedge fund Castle Point Capital Management LLC.

Buffett has reiterated his view that the U.S. would avoid a second recession in three years.

“Financial markets create their own dynamics, but I don’t think we’re facing a double dip,” Buffett told Bloomberg Television’s Betty Liu in an interview on Aug. 6.

Cash Hoard

Berkshire’s cash soared 71 percent in 12 months from $28 billion on June 30, 2010, as New York-based Goldman Sachs and Swiss Re Ltd. repaid financing extended by Buffett during the credit crunch of 2008 and 2009. Buffett, who doesn’t pay dividends to shareholders, makes investments with Berkshire’s profits and policyholder premiums accumulated at the firm’s insurance subsidiaries.

Buffett is also seeking to acquire whole companies. Berkshire paid $26.5 billion last year to take full ownership of Burlington Northern Santa Fe. Buffett had previously built a 23 percent stake in the railroad in Berkshire’s equity portfolio.

Buffett agreed in March to spend $9 billion on engine- additives maker Lubrizol Corp., and this month offered to buy reinsurer Transatlantic Holdings Inc. for about $3.25 billion.

Berkshire’s second-quarter net income jumped 74 percent to $3.42 billion on a gain tied to Goldman Sachs, derivative returns and earnings from Burlington Northern and manufacturing and retailing units.

Monday’s filing by Berkshire includes U.S. holdings. Equity investments abroad are reported to local regulators.

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