Buffett's Berkshire Stock Holdings as an Independent Business

Benjamin Graham wrote a long time ago about the importance of seeing stocks as a share of a business, not as pieces of paper that are traded between investors.  Since Warren Buffett is one of Graham's most famous disciples, I thought it would be interesting to apply Portfolio Aggregation to the stocks that Buffett's company Berkshire Hathaway is invested in.

An easy way to get a list of stocks that Berkshire holds is from Buffett's annual shareholder letter.  I took this list, excluding a couple that I couldn't get information for (Munich Re & BYD), and added up Buffett's share of sales, earnings, etc into a separate holding company.  Here's what the holding company looks like with some comparisons to the S&P 500.  Some interesting things that jump out about Berkshire's holdings:

• They are cheaper - 11 P/E ratio vs 14 for the S&P 500 (TTM).
• They are more efficient with capital (no surprise there) - ROE is 4% higher.
• Most of the efficiency seems to come from leverage, since the ROA (backing out interest) looks similar.
• This may be because 34% of these holdings are in banks (WFC and USB) vs 16% for the S&P.
• They have very little capex (2% vs 6% of TTM sales).  This may have been somewhat different if the BNSF railway hadn't been bought out and moved into Berkshire as opposed to in these holdings.
• Their return on retained earnings is far higher (+13% vs -18% for the S&P).  This may be because the S&P earnings are so affected by bad banks & their associated write-offs, but is interesting nonetheless.