Berkshire Takes Dollar General Stake, Increases Investment in MasterCard

Berkshire Hathaway Inc. (BRK/A) added a stake in retailer Dollar General Corp. (DG) and increased holdings in MasterCard Inc. (MA) 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 today 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 added about 10 million shares in Wells Fargo & Co. (WFC), increasing its stake in the biggest U.S. home lender by almost 3 percent. Wells Fargo climbed 3.7 percent to $25.02 at 4:15 p.m. in New York Stock Exchange composite trading. It has dropped 19 percent this year.

Berkshire’s holding in the San Francisco-based bank is valued at more than $8 billion, the second-largest in the portfolio behind Coca-Cola Co. (KO)

The stake in Goodlettsville, Tennessee-based Dollar General is valued at $48.2 million based on today’s closing share price of $32.19. The retailer sells merchandise including food, cleaning products and pet supplies.

MasterCard Rally

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 assigned to oversee as much as $3 billion with a focus on equities and can make trades without consulting Buffett. It was Combs, 40, who in the first quarter added a stake in in MasterCard, a firm that he had bet on while managing hedge fund Castle Point Capital Management LLC.

MasterCard, the world’s No. 2 payments network, has climbed 33 percent since the end of March and 49 percent this year, the second-best performance in the 75-company S&P 500 Information Technology Index after National Semiconductor Corp.

MasterCard, led by CEO Ajay Banga, 51, climbed the most since 2009 on Aug. 3 after reporting a second-quarter profit that beat analysts’ estimates amid an increase in consumer spending. The firm may be poised to take a bigger share of the U.S. debit-card market as new U.S. rules on transaction fees and processing threaten to erode the dominance of larger rival Visa Inc. MasterCard closed at $335 a share today.

Coca-Cola, Wells Fargo

Berkshire’s biggest holdings, including Wells Fargo and Atlanta-based Coca-Cola have slipped in the last three weeks as global equity markets retreated. Buffett has reiterated his view that the U.S. would avoid a second recession in three years. 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.

Berkshire also disclosed that it owned 2.1 million shares of Verisk Analytics Inc., the actuarial data provider. American International Group Inc., Hartford Financial Services Group Inc. and Travelers Cos. were among insurers that sold holdings in the company in a 2009 initial public offering. Berkshire didn’t sell its shares in the offering.

Buffett’s firm cut its stake in Kraft Foods Inc. by about 5.5 percent to 99.5 million shares.

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.

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

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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