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This Metric Says You Are Smart to Buy Berkshire Hathaway Inc. (NYSE:BRK.B)

Berkshire Hathaway Inc. (NYSE:BRK.B) was in 66 hedge funds’ portfolio at the end of December. BRK-B has experienced an increase in support from the world’s most elite money managers recently. There were 61 hedge funds in our database with BRK-B holdings at the end of the previous quarter.

To most stock holders, hedge funds are assumed to be unimportant, outdated investment vehicles of years past. While there are greater than 8000 funds trading at present, we at Insider Monkey hone in on the crème de la crème of this group, about 450 funds. It is widely believed that this group oversees the majority of the smart money’s total capital, and by watching their highest performing investments, we have formulated a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

How Slower Growth, Falling Oil Will Boost This AirlineJust as integral, bullish insider trading activity is a second way to parse down the world of equities. As the old adage goes: there are a variety of stimuli for a corporate insider to drop shares of his or her company, but only one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the useful potential of this method if piggybackers understand what to do (learn more here).

With these “truths” under our belt, it’s important to take a glance at the latest action encompassing Berkshire Hathaway Inc. (NYSE:BRK-B).

What have hedge funds been doing with Berkshire Hathaway Inc. (NYSE:BRK.B)?

At the end of the fourth quarter, a total of 66 of the hedge funds we track were bullish in this stock, a change of 8% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully.

According to our comprehensive database, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the biggest position in Berkshire Hathaway Inc. (NYSE:BRK.B). Bill & Melinda Gates Foundation Trust has a $7.811 billion position in the stock, comprising 46.5% of its 13F portfolio. Sitting at the No. 2 spot is Boykin Curry of Eagle Capital Management, with a $939 million position; 2.1% of its 13F portfolio is allocated to the stock. Some other hedgies that hold long positions include D. E. Shaw’s D E Shaw, Tom Russo’s Gardner Russo & Gardner and Jean-Marie Eveillard’s First Eagle Investment Management.

Consequently, specific money managers were leading the bulls’ herd. Fir Tree, managed by Jeffrey Tannenbaum, established the most outsized position in Berkshire Hathaway Inc. (NYSE:BRK.B). Fir Tree had 81 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $28 million position during the quarter. The other funds with new positions in the stock are Julian Robertson’s Tiger Management, Stephen J. Errico’s Locust Wood Capital Advisers, and Stephen J. Errico’s Locust Wood Capital Advisers.

What do corporate executives and insiders think about Berkshire Hathaway Inc. (NYSE:BRK.B)?

Insider trading activity, especially when it’s bullish, is best served when the company in focus has seen transactions within the past half-year. Over the latest six-month time period, Berkshire Hathaway Inc. (NYSE:BRK.B) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the returns shown by our studies, retail investors should always keep an eye on hedge fund and insider trading activity, and Berkshire Hathaway Inc. (NYSE:BRK.B) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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