There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Berkshire Hathaway Inc. (NYSE:BRK-B).
Berkshire Hathaway Inc. (NYSE:BRK-B) investors should pay attention to a decrease in hedge fund sentiment lately. At the end of this article we will also compare BRK-B to other stocks including Amazon.com, Inc. (NASDAQ:AMZN), Johnson & Johnson (NYSE:JNJ), and Facebook Inc (NASDAQ:FB) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, let’s take a peek at the fresh action encompassing Berkshire Hathaway Inc. (NYSE:BRK-B).
What does the smart money think about Berkshire Hathaway Inc. (NYSE:BRK.B)?
During the third quarter, the number of funds tracked by Insider Monkey long Berkshire Hathaway’s class B stock declined by 5% to 74. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the largest position in Berkshire Hathaway Inc. (NYSE:BRK.B). Bill & Melinda Gates Foundation Trust has a $10.74 billion position in the stock, comprising 58.2% of its 13F portfolio. The second largest stake is held by Boykin Curry’s Eagle Capital Management, which holds a $1.83 billion stake; 7.9% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism comprise Tom Russo’s Gardner Russo & Gardner, Ken Fisher’s Fisher Asset Management, and Charles de Vaulx’s International Value Advisers.
Because Berkshire Hathaway Inc. (NYSE:BRK.B) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers that elected to cut their full holdings by the end of the third quarter. Interestingly, First Eagle Investment Management dumped the largest position of the 700 funds monitored by Insider Monkey, worth about $329.4 million in call options.. Ken Griffin’s fund, Citadel Investment Group, also sold off its call options., about $46.3 million worth.
Let’s now take a look at hedge fund activity in other stocks similar to Berkshire Hathaway Inc. (NYSE:BRK.B). These stocks are Amazon.com, Inc. (NASDAQ:AMZN), Johnson & Johnson (NYSE:JNJ), Facebook Inc (NASDAQ:FB), and General Electric Company (NYSE:GE). This group of stocks’ market valuations match BRK-B’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 109 investors with bullish positions and the average amount invested in these stocks was $11.82 billion. That figure was $20.32 billion in BRK-B’s case. Amazon.com, Inc. (NASDAQ:AMZN) is the most popular stock in this table. On the other hand, General Electric Company (NYSE:GE) is the least popular one with only 55 investors holding shares. 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 Amazon.com, Inc. (NASDAQ:AMZN) might be a better candidate to consider a long position.