Hedge Funds Are Dumping Berkshire Hathaway Inc. (BRK.B)

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Berkshire Hathaway Inc. (NYSE:BRK.B) has seen a decrease in hedge fund sentiment of late. BRK.B was in 69 hedge funds’ portfolios at the end of the third quarter of 2015. There were 71 hedge funds in our database with BRK.B holdings at the end of the previous quarter. At the end of this article we will also compare BRK.B to other stocks including Exxon Mobil Corporation (NYSE:XOM), Wells Fargo & Co (NYSE:WFC), and Johnson & Johnson (NYSE:JNJ) to get a better sense of its popularity.

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Keeping this in mind, we’re going to take a look at the key action regarding Berkshire Hathaway Inc. (NYSE:BRK.B).

How have hedgies been trading Berkshire Hathaway Inc. (NYSE:BRK.B)?

At the end of the third quarter, a total of 69 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 3% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the biggest position in Berkshire Hathaway Inc. (NYSE:BRK.B). The trust has a $10.3 billion position in the stock, comprising 60.1% of its 13F portfolio. Coming in second is Eagle Capital Management, led by Boykin Curry, holding a $1.46 billion position; the fund has 6.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain Tom Russo’s Gardner Russo & Gardner, D. E. Shaw’s D E Shaw and Ken Fisher’s Fisher Asset Management.

Seeing as Berkshire Hathaway Inc. (NYSE:BRK.B) has faced bearish sentiment from the smart money, it’s easy to see that there is a sect of money managers that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management sold off the biggest position of all the hedgies tracked by Insider Monkey, totaling close to $46.9 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund sold off about $20.9 million worth of shares. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Berkshire Hathaway Inc. (NYSE:BRK.B). We will take a look at Exxon Mobil Corporation (NYSE:XOM), Wells Fargo & Co (NYSE:WFC), Johnson & Johnson (NYSE:JNJ), and General Electric Company (NYSE:GE). This group of stocks’ market caps are similar to BRK-B’s market cap.

As you can see these stocks had an average of 74 hedge funds with bullish positions and the average amount invested in these stocks was $10.9 billion. That figure was $19.4 billion in BRK.B’s case. Wells Fargo & Co (NYSE:WFC) is the most popular stock in this table, while Exxon Mobil Corporation (NYSE:XOM) limps behind with only 61 bullish hedge fund positions. Berkshire Hathaway Inc. (NYSE:BRK.B) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard WFC might be a better candidate to consider a long position.