When most investors hear Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), they think of Warren Buffett (see Buffett’s favorite stock picks), and rightfully so, but it’s important to note that the company has interest from other major players in the hedge fund industry as well. According to our records, 52 of the 400+ hedgies we track hold long positions in Berkshire’s class A and B shares, including Ravenel Boykin Curry III’s Eagle Capital Management, Charles de Vaulx’s International Value Advisors and Crispin Odey’s Odey Asset Management (see all of Crispin Odey’s stock picks).
In fact, in the latest round of 13F filings from the SEC, we found that Berkshire Hathaway’s B shares saw some extremely bullish activity from Ken Fisher (+20,571%), Whitney Tilson (+1,790%) and Israel Englander (+507%), each upping their stakes considerably from one quarter earlier (see all of the hedge fund interest in Berkshire Hathaway).
The logical question that must be asked is: should individual investors monkey these big-timers into Berkshire Hathaway?
Due to the impracticality of owning Berkshire’s Class A shares, which currently trade in the neighborhood of $142,300 a piece, we’ll focus on the Class B shares in our analysis. This class of shares trade at roughly 1/1,500th the value of its more expensive counterpart, and were originally created to prevent investors from turning to unit trusts. Over the past decade, shares of Berkshire’s Class B shares have returned 102.5%, and Berkshire’s Class A shares have returned 101.8%, so the appreciation has been nearly identical.
With that being said, at its current price level, Berkshire’s Class B shares give value investors a decent play at the moment. The stock sports a trailing earnings multiple of 16.7x, which is below Berkshire’s five-year historical average (18.9x) by a moderate margin. Class B shares currently trade at a fairly attractive book multiple of 1.2x, which is the most important metric to consider when analyzing this stock. Berkshire’s has traditionally traded at a premium of 45-50% to book since 2003, close to twice that of current levels.
One particular Buffett-esque ratio we can use is earnings yield, which simply indicates a company’s earnings as a percentage yield of its price. At current prices, the earnings yield of Berkshire’s B shares is 6.0%, far above the yield of a 10-year Treasury (1.9%), which is the common yardstick employed by the Oracle himself. More importantly, this earnings yield is higher than the 5.7% yield that shares have averaged over the past decade. Interestingly, Berkshire’s Class A stock sport an earnings yield near 5.7% as well, indicating that its cheaper counterpart may in fact be the better buy at the moment.
So what about the specific companies within Berkshire’s actual portfolio?