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Berkshire bets on telecoms with Verizon investment

Bloomberg

Warren Buffett’s Berkshire Hathaway Inc disclosed a holding in Verizon Communications Inc in a wager that the telecommunications company will benefit after buying out its partner in the largest US wireless business.

Berkshire held 11 million Verizon shares as of March 31, Buffett’s company said on Thursday in a regulatory filing. The investment is valued at about US$530 million.

Verizon acquired Vodafone Group PLC’s minority stake in Verizon Wireless in February, allowing it to it stop paying a dividend to its partner. The US$130 billion deal is a bet that there is still room for growth in the US even though a majority of customers in the country already have smartphones. The company has forecast higher adjusted profit margins this year on a 4 percent increase in revenue.

“Verizon has an attractive dividend and an enviable position in the wireless market,” Roe Equity Research analyst Kevin Roe said. “It’s good ballast for investors in a choppy market.”

The telecommunications company is the 24th-highest payer of dividends in the Standard & Poor’s 500 Index, with a yield of 4.4 percent, according to data compiled by Bloomberg.

Bob Varettoni, a spokesman for New York-based Verizon, declined to comment on Berkshire’s holding. The deal with Vodafone was announced last year.

Buffett, 83, has long championed a concentrated approach to stock investing. More than half of Omaha, Nebraska-based Berkshire’s US$118.5 billion equity portfolio at the end of March was in four companies: Wells Fargo & Co, Coca-Cola Co, American Express Co and International Business Machines Corp.

The Verizon investment was probably taken by one of his backup stock pickers, Todd Combs or Ted Weschler, based on its size, Cook & Bynum Capital Management LLC cofounder Richard Cook said.

The deputies each oversee about US$7 billion for Berkshire and have been given more funds to manage by Buffett since being hired in 2010 and 2011.

Berkshire also said in the filing that its stake in General Motors Co declined by 25 percent to 30 million shares. The holding of DirecTV fell to 34.5 million shares from 36.5 million three months earlier. Buffett has said that both picks were made by his deputies, who outperformed the S&P 500 in 2012 and last year.

“It is very interesting to follow what Todd and Ted are doing,” said Cook, who manages about US$310 million, including Berkshire shares. “They’re smart investors and they’ve had some home runs already.”

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