Precision Castparts Corp’s Deal with Berkshire Hathaway Took Markets by Surprise but Hedge Funds Anticipated It

The increase of capital inflow in Precision Castparts Corp. (NYSE:PCP) in anticipation of a positive development is a proof why tracking hedge funds can be profitable. The majority of largest shareholders among the funds we track, either initiated new stakes or boosted their holdings during the first quarter. Aside from Berkshire Hathaway, which sat on the top of the list, other large shareholders of the company with new positions included Eric W. Mandelblatt‘s Soroban Capital Partners, Thomas Steyer’s Farallon Capital, Jeffrey Ubben’s Valueact Capital, and Dan Loeb’s Third Point. In addition, Ken Griffin’s Citadel Investment Group more than doubled its position to 879,500 shares and Mario Gabelli’s GAMCO Investors inched up its stake by 5% to 742,700 shares.

Moreover, among the investors with new stakes in Precision Castparts Corp. (NYSE:PCP)  as of the end of March, Lou Simpson’s SQ Advisors has the largest exposure to the company, holding 1.35 million shares worth $283.95 million, which represent 9.7% of its equity portfolio. 3G Capital, managed by Jorge Paulo Lemann, which worked with Buffett on several deals such as the acquisition of Kraft by Heinz, also increased its stake by 51% to 214,600 shares, which represent 3.84% of the equity portfolio.

On the other hand, several investors unloaded their positions untimely, including Rob Citrone’s Discovery Capital Management, which sold off its entire stake of 598,100 shares during the January – March period. Other funds that closed their positions during the same period include Steve Cohen’s Point72 Asset Management, Richard Chilton’s Chilton Investment Company, and Cliff Asness’ AQR Capital Management.

As stated earlier, the deal with Precision Castparts Corp. (NYSE:PCP) could require Berkshire to use around half of its available cash on hand, as of the end of June. In its latest 10-Q, the holding company also disclosed a revenue of $51.37 billion, versus $49.76 billion a year earlier and earnings of $2,442 per share, versus $3,889 delivered a year earlier. The decline in profits is attributed to the fall of investment gains, as well as underwriting losses from insurance operations, which represent a substantial part of Berkshire Hathaway.

Disclosure: none