Hey there! Let's dive into the fascinating world of one of the most celebrated investment firms, Berkshire Hathaway, and its relationship with the tech giant, Microsoft.
Have you ever wondered how an investment legend like Warren Buffett decides which companies to add to his portfolio? It's a question many investors and aspiring investors ponder. The answer is often rooted in a deep understanding of a company's business, its competitive advantages, and its long-term potential. With that in mind, let's explore Berkshire Hathaway's ownership of Microsoft, a topic that has a very interesting history.
Step 1: Unpacking the "Circle of Competence"
Before we get into the nitty-gritty of the numbers, it's crucial to understand Warren Buffett's core investment philosophy, which is often referred to as his "circle of competence".
What is it? Simply put, it's the area of business and industry that an investor truly understands. Buffett has always maintained that he only invests in companies whose businesses he can comprehend, with predictable earnings and durable competitive advantages.
How does this relate to Microsoft? For many years, Buffett openly admitted that he did not invest in technology companies like Microsoft because he felt they were outside his "circle of competence." He had a long-standing friendship with Microsoft co-founder Bill Gates, and he even served on the board of the Bill & Melinda Gates Foundation, which holds a significant stake in Microsoft. However, Buffett has stated that because of this personal relationship, he avoided investing in Microsoft to avoid any potential conflicts of interest.
This is a key point to remember: For a long time, the answer to "how much Microsoft does Berkshire Hathaway own" was virtually zero, despite the close ties between Buffett and Gates.
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| How Much Microsoft Does Berkshire Hathaway Own |
Step 2: The Activision Blizzard Arbitrage Play
So, did Berkshire Hathaway ever invest in a company that Microsoft was acquiring? The answer is a resounding yes, and it sheds light on how Berkshire's investment strategy can evolve.
Sub-heading: The Strategic Move
In 2022, Microsoft announced its massive acquisition of video game developer Activision Blizzard for $68.7 billion. This is where Berkshire Hathaway entered the picture.
The Investment: Berkshire Hathaway acquired a significant stake in Activision Blizzard. This wasn't a typical "buy and hold" investment based on the video game company's long-term business prospects. Instead, it was an arbitrage play.
What is Arbitrage? In this context, it meant betting on the successful completion of the merger. Berkshire bought Activision shares at a price below the proposed takeover price of $95 per share, banking on the fact that the deal would go through.
The Outcome: The deal faced significant regulatory scrutiny, but Berkshire's wager paid off. As the merger gained approval, the stock price of Activision Blizzard rose, and Berkshire's position became profitable.
Sub-heading: The Subsequent Sale
Cashing Out: Once the merger was approved, Berkshire Hathaway began to sell off its Activision Blizzard shares. This is a crucial detail because it demonstrates that the investment was a short-term, event-driven strategy, not a long-term holding of a technology company. According to regulatory filings, Berkshire sold a large portion of its stake in the second quarter of 2023.
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Step 3: A Deeper Look into Berkshire's Portfolio
Now that we've covered the Activision Blizzard maneuver, let's address the central question: what about a direct stake in Microsoft (MSFT)?
Sub-heading: Checking the 13F Filings
The Filer: Every quarter, institutional investment managers with over $100 million in assets must file a Form 13F with the U.S. Securities and Exchange Commission (SEC). This filing provides a snapshot of their equity holdings.
The Data: When you examine Berkshire Hathaway's 13F filings, which are closely watched by investors, you'll see a clear picture of their portfolio. The top holdings consistently include companies like Apple (AAPL), Bank of America (BAC), American Express (AXP), and Coca-Cola (KO).
The Verdict: As of the latest available filings, Berkshire Hathaway does not have a significant, direct ownership stake in Microsoft (MSFT). While some smaller, managed portfolios within the Berkshire ecosystem might hold a very small position, it is not a core holding of Berkshire Hathaway itself, and it is not a part of Warren Buffett's personally managed portfolio.
Sub-heading: The "Secret Portfolio"
It's worth noting that some sources mention a "secret portfolio" of stocks owned by a Berkshire Hathaway subsidiary, which may include a small number of Microsoft shares. However, these are not large, core positions of the kind that Buffett is known for. The total value of such holdings would be a tiny fraction of Berkshire's massive portfolio.
Step 4: The Core Takeaway
QuickTip: Compare this post with what you already know.
The amount of Microsoft that Berkshire Hathaway owns directly is negligible to non-existent in the grand scheme of its portfolio. The narrative is defined more by a conscious decision not to invest in the company for a very long time, and a specific, short-term investment in a company Microsoft acquired, rather than a long-term commitment to the tech giant.
Key Reason: Warren Buffett's historical reluctance to invest in tech, coupled with his personal relationship with Bill Gates, has kept Microsoft out of Berkshire's main portfolio.
Exception: The Activision Blizzard deal was a strategic exception based on merger arbitrage, not a change in philosophy regarding technology as a core long-term investment.
The bottom line? If you're looking at Berkshire Hathaway's holdings for investment ideas, you should focus on the companies they have owned for years, such as Apple, Coca-Cola, and American Express, not Microsoft.
10 Related FAQ Questions
Here are some quick answers to common questions about Berkshire Hathaway and its investment strategy:
How to find Berkshire Hathaway's latest stock holdings? You can find Berkshire Hathaway's latest stock holdings by checking their quarterly 13F filings with the U.S. Securities and Exchange Commission (SEC). Websites like Nasdaq, Fintel, and Investing.com also provide this information in a user-friendly format.
How to interpret a 13F filing? A 13F filing lists the equity holdings of a large institutional investor. It shows the number of shares held, the value of the holding, and any changes from the previous quarter (e.g., new positions, increased or decreased positions, or sold-out positions).
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How to invest like Warren Buffett? To invest like Warren Buffett, you should focus on value investing. This means buying shares of great companies with durable competitive advantages ("moats") at a reasonable price, and holding them for the long term.
How to know if a company has a "moat"? A "moat" refers to a company's competitive advantage. You can identify it by looking for things like a strong brand name, low-cost production, network effects (like with a social media platform), or high switching costs for customers.
How to understand Warren Buffett's investment philosophy? Warren Buffett's philosophy is rooted in finding "wonderful companies at fair prices." He focuses on the intrinsic value of the business, its management, and its long-term earnings power, rather than short-term stock price movements.
How to invest in Berkshire Hathaway? You can invest in Berkshire Hathaway by purchasing its Class A shares (BRK.A) or Class B shares (BRK.B) on the stock market through a brokerage account. The Class B shares are much more affordable and accessible to a wider range of investors.
How to read Berkshire Hathaway's annual report? You can read Berkshire Hathaway's annual report, which includes Warren Buffett's famous shareholder letter, on the company's official website. These letters are a treasure trove of investment wisdom and insights.
How to learn more about Warren Buffett and his career? You can learn more by reading his shareholder letters, watching interviews, and reading biographies like "The Snowball: Warren Buffett and the Business of Life" by Alice Schroeder.
How to understand why Warren Buffett avoided tech stocks for so long? Buffett avoided tech stocks because he believed he didn't have the expertise to understand their long-term competitive landscape. He felt they changed too quickly and were outside his "circle of competence," which he believes is crucial for successful investing.
How to differentiate between Berkshire's long-term holdings and arbitrage plays? Long-term holdings are positions that Berkshire holds for many years, often increasing its stake over time, like Apple or Coca-Cola. Arbitrage plays, like the Activision Blizzard investment, are short-term, strategic bets on a specific event, like a merger or acquisition, and are usually sold once the event is complete.
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