Why Berkshire Hathaway Stock is a Compelling Investment Case

On July 8, 2020, Giverny Capital released its Q2 2020 Investor Letter, a copy of which you can download here. The Fund returned 19.64% for the second quarter of 2020. Meanwhile, the benchmark S&P 500 Index gained 20.54%. You should check out Giverny Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Giverny Capital highlighted a few stocks and Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE:BRK.B) is one of them. Berkshire Hathaway Inc (NYSE: BRK.A) is a multinational conglomerate holding company. Year-to-date, Berkshire Hathaway Inc (NYSE: BRK.A) stock lost 16.2%. Here is what Giverny Capital said:

“Another weak performer in the second quarter was Berkshire Hathaway. While Berkshire’s commercial insurance business should benefit from the harder underwriting market described above, and Geico shares some traits with Progressive, we confess to a bit of anxiety about this holding. We were surprised to learn at Berkshire’s shareholders meeting in May that CEO Warren Buffett could not find any good investment ideas in March, when the market plunged 35%. He opined that Berkshire might need every bit of its $137 billion in cash to weather the COVID-19 induced recession. We appreciate that Berkshire needs to hold cash to backstop its large insurance operations and that this is a frightening time, but we’re also reminded of the old Peter Lynch quip that more money has been lost preparing for corrections than in corrections themselves. We’d love to see Berkshire put more of its capital to work or return it to the owners.

In fairness, we hear Berkshire has been aggressive about writing more insurance in this environment, and it made a $10 billion investment in gas transmission and storage assets in early July. But not even the best investor in the world can outperform the S&P Index if one-third of his portfolio is in cash.”

In Q1 2020, the number of bullish hedge fund positions on Berkshire Hathaway Inc (NYSE: BRK.A) stock increased by about 2% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Berkshire Hathaway’s upside potential. Our calculations showed that Berkshire Hathaway Inc (NYSE: BRK.A) is ranked #13 among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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