Where Do Hedge Funds Stand On Berkshire Hathaway Inc. (BRK-B)?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Berkshire Hathaway Inc. (NYSE:BRK-B) based on that data.

Berkshire Hathaway Inc. (NYSE:BRK-B) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Berkshire Hathaway Inc. (NYSE:BRK-B) was in 109 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 115. Our calculations also showed that BRK-B ranked 15th among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to review the new hedge fund action regarding Berkshire Hathaway Inc. (NYSE:BRK-B).

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

At the end of September, a total of 109 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BRK-B over the last 21 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Michael Larson’s Bill & Melinda Gates Foundation Trust has the most valuable position in Berkshire Hathaway Inc. (NYSE:BRK.B), worth close to $10.0304 billion, amounting to 45.4% of its total 13F portfolio. On Bill & Melinda Gates Foundation Trust’s heels is Eagle Capital Management, led by Boykin Curry, holding a $1.6324 billion position; 5.9% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions encompass Tom Russo’s Gardner Russo & Gardner, Rajiv Jain’s GQG Partners and Ric Dillon’s Diamond Hill Capital. In terms of the portfolio weights assigned to each position Spindletop Capital allocated the biggest weight to Berkshire Hathaway Inc. (NYSE:BRK.B), around 73.31% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, dishing out 45.43 percent of its 13F equity portfolio to BRK-B.

Now, key money managers were breaking ground themselves. GQG Partners, managed by Rajiv Jain, created the most outsized position in Berkshire Hathaway Inc. (NYSE:BRK.B). GQG Partners had $643.9 million invested in the company at the end of the quarter. Richard Oldfield’s Oldfield Partners also made a $91.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Mubadala Investment’s MIC Capital Partners, Parvinder Thiara’s Athanor Capital, and Harry Gail’s Harspring Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Berkshire Hathaway Inc. (NYSE:BRK.B) but similarly valued. These stocks are Tesla Inc. (NASDAQ:TSLA), Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), Mastercard Incorporated (NYSE:MA), NVIDIA Corporation (NASDAQ:NVDA), and The Home Depot, Inc. (NYSE:HD). This group of stocks’ market caps match BRK-B’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSLA 67 8176828 4
WMT 69 5492521 9
JNJ 82 4882436 -12
PG 75 10091350 2
MA 133 15645517 -14
NVDA 82 7672045 -10
HD 73 4957355 -12
Average 83 8131150 -4.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 83 hedge funds with bullish positions and the average amount invested in these stocks was $8131 million. That figure was $19555 million in BRK-B’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 67 bullish hedge fund positions. Berkshire Hathaway Inc. (NYSE:BRK.B) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BRK-B is 76.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. Hedge funds were also right about betting on BRK-B as the stock returned 7.8% since the end of Q3 (through 11/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.