Buffett May Post a $6 Billion Gain After Wells Fargo Rally, Barclays Says

Warren Buffett’s Berkshire Hathaway Inc. may report that the value of its equity portfolio rose by $6.3 billion in the last three months of 2010 as holdings in Wells Fargo & Co. and Coca-Cola Co. rallied, Barclays Plc said.

The stock market rally may have helped boost Omaha, Nebraska-based Berkshire’s fourth-quarter unrealized net investment gains to $7.2 billion from $322 million a year earlier, Jay Gelb, a Barclays analyst, said today in a research report. Unrealized gains, which reflect increases in the market prices of investments such a stocks and bonds, aren’t used to calculate net profits and losses.

Berkshire’s stock portfolio, which Buffett built in four decades as chief executive officer, benefited from advances in the top six holdings in the fourth quarter. Wells Fargo, the San Francisco-based bank that counts Berkshire as its biggest shareholder, posted a 23 percent gain, its largest in six quarters. Coca-Cola rose 12 percent. The portfolio was valued at about $57.6 billion as of Sept. 30, with more than a third of the assets in Atlanta-based Coca-Cola and Wells Fargo.

Berkshire’s book value, a measure of assets minus liabilities, “could rise about 6 percent, due to its significant exposure to equities,” Gelb said.

Photographer: Daniel Acker/Bloomberg

Warren Buffett, chief executive officer of Berkshire Hathaway, walks past a Burlington Northern Santa Fe. Corp., display. Close

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Photographer: Daniel Acker/Bloomberg

Warren Buffett, chief executive officer of Berkshire Hathaway, walks past a Burlington Northern Santa Fe. Corp., display.

Fourth-quarter operating earnings may have risen 43 percent to $1,794 a share, Gelb said. Advances in the firm’s manufacturing, service and retail units and the addition of railroad Burlington Northern Santa Fe, which Buffett bought for $26.5 billion in February, may have helped results, Gelb said.

Burlington Northern

Burlington Northern, the second-biggest U.S. railroad by 2009 revenue, may have recorded $4.5 billion of revenue in the fourth quarter, up 21 percent from a year earlier when the firm was publicly traded, Gelb said. Pretax earnings at Berkshire’s division that includes toolmaker Iscar Metalworking Cos. and NetJets Inc. may have doubled to $1.2 billion, Gelb said.

Buffett, the world’s third richest person, manages investments at Berkshire and oversees subsidiaries that employ about 260,000 people selling insurance, producing energy and hauling freight. At the end of September, Berkshire had $36.4 billion of fixed-maturity securities including government bonds, mortgage holdings and corporate debt. Buffett said in October that investors buying bonds were “making a mistake.”

“It’s quite clear that stocks are cheaper than bonds,” Buffett said at a conference in Washington on Oct. 5. “I can’t imagine anyone having bonds in their portfolio when they can own equities.”

Berkshire Class A shares, which declined 3.3 percent in the fourth quarter, advanced 21 percent on the New York Stock Exchange last year, their best annual performance since 2007.

Buffett disclosed Berkshire’s U.S. stock holdings as of the end of the third quarter in a November regulatory filing. The fourth-quarter investments must be disclosed by mid-February.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.

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