Black Bear Value Partners, an investment management firm, published its fourth quarter 2022 investor letter, a copy of which can be downloaded here. Black Bear Value Fund returned 1.8% in December and 12.5% in 2022 compared to the S&P 500’s return of -5.8% in December and -18.1% in 2022. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Black Bear Value Partners highlighted stocks like Berkshire Hathaway Inc. (NYSE:BRK-B) in the Q4 2022 investor letter. Headquartered in Omaha, Nebraska, Berkshire Hathaway Inc. (NYSE:BRK-B) is in insurance, freight rail transportation, and utility businesses. On March 3, 2023, Berkshire Hathaway Inc. (NYSE:BRK-B) stock closed at $312.45 per share. One-month return of Berkshire Hathaway Inc. (NYSE:BRK-B) was 1.28%, and its shares lost 3.96% of their value over the last 52 weeks. Berkshire Hathaway Inc. (NYSE:BRK-B) has a market capitalization of $686.146 billion.
Black Bear Value Partners made the following comment about Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q4 2022 investor letter:
“Below is the rough Berkshire Hathaway Inc. (NYSE:BRK-B) on-a-napkin valuation. Again, this is a rough exercise.
- Cash of ~$79,000 per class A Share
- Down/Base/Up marks cash at book value to an 11% premium or $87,000
- Investments based on December prices ~$252,000 per class A share
- Presume a range of stock prices that result in:
- Down = $225,000 per class A share (-11%- assumes portfolio is overpriced)
- Base = $294,000 per class A share (+17%)
- Up = $382,000 per class A share (+51%)
- Operating businesses that should generate ~$18,000 of pre-tax income per Class A share
- Down = 9x = $168,000 per share – equates to ~8% FCF yield
- Base = 11x = $205,000 – equates to ~7% FCF yield
- Up = 12.5x = $233,000 – equates to ~6% FCF yield
- Overall (vs. $469,000 at quarter end) o Down = $480,000 (+2%) o Base = $586,000 (+25%)
- Up = $702,000 (50% underpriced)
We added a short of Apple (aapl) vs. the Berkshire position. Apple has become a large part of the BRK business and wanted to limit our exposure to that investment as it seems expensive.
Going forward I expect Berkshire to compound at above average returns from this price.
BRK is a collection of high-quality businesses, excellent management, and a good amount of optionality in their cash position. If the cash were to be deployed accretively, the true value would be greater than an 11% premium (as mentioned above). The combination of a pie that is growing, an increasing share of said pie due to stock buybacks, upside optionality from cash and a tight range of likely business outcomes that span a variety of economic futures gives me comfort in continuing to own Berkshire.”
Berkshire Hathaway Inc. (NYSE:BRK-B) is in 11th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 110 hedge fund portfolios held Berkshire Hathaway Inc. (NYSE:BRK-B) at the end of the fourth quarter which was 104 in the previous quarter.
We discussed Berkshire Hathaway Inc. (NYSE:BRK-B) in another article and shared the list of safe stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
