2. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 104
Investing in Berkshire Hathaway Inc. (NYSE:BRK-B) can be the same as investing in a high-quality ETF, simply because of the conglomerate’s investments in diverse sectors including retail, industrials, consumer staples, utilities, and real estate among others. A diverse portfolio is critical to risk management and maximizing returns, and legendary value investor and CEO of Berkshire Hathaway Inc. (NYSE:BRK-B), Warren Buffett is committed to driving shareholder returns.
Over the past 20 years, Berkshire Hathaway Inc. (NYSE:BRK-B) has returned a median of 10.3% per year on an annualized basis, outpacing the S&P 500’s comparable returns of 9.2% per year. Having a diversified portfolio of investments and a successful track record of returns makes Berkshire Hathaway Inc. (NYSE:BRK-B) one of the safest stocks to invest in now.
Berkshire Hathaway Inc. (NYSE:BRK-B) boasts a track record of reporting robust and strong financial results. On April 30, Berkshire Hathaway Inc. (NYSE:BRK-B) released earnings for the fiscal first quarter of 2022 in which it beat both EPS and revenue estimates. The company reported earnings per share of $3.18, beating estimates by $0.31. Berkshire Hathaway Inc. (NYSE:BRK-B) reported revenue of $70.81 billion for the quarter, up 9.61% year over year, outperforming Wall Street consensus by $1.66 billion. Moreover, as of June 9, Berkshire Hathaway Inc. (NYSE:BRK-B) has returned 6.99% to investors over the past twelve months.
At the end of the first quarter of 2022, 104 hedge funds held stakes in Berkshire Hathaway Inc. (NYSE:BRK-B) worth $19.06 billion. This is compared to 108 positions in the previous quarter with stakes worth $19.31 billion. Of these, Bill & Melinda Gates Foundation Trust was the dominating shareholder in Berkshire Hathaway Inc. (NYSE:BRK-B) owning over 28.68 million shares of the conglomerate. The fund’s stakes were valued at $10.12 billion, which covers 51.22% of its 13F portfolio.
Black Bear Value Partners mentioned Berkshire Hathaway Inc. (NYSE:BRK-B) in its first-quarter 2022 investor letter. Here is what the firm said:
“Below is the rough Berkshire on-a-napkin valuation I like to do periodically. Recently BRK acquired Alleghany for $11.6BB. I assume a reduction in cash for this amount and an increase of $550MM in operating income. I do not give benefit to the increased float nor any synergies. Again, this is a rough exercise to sanity check our assumptions.
Cash of ~$103,000 per class A Share (vs. $104k 1 year ago)
-Down/Base/Up marks cash at book value to an 8% premium (vs. to 10% a year ago)
-Investments based on December prices ~$248,000 per class A share (vs. $194k a year ago)
Presume a range of stock prices that result in:
-Down = $149,000 per class A share (-40%- assumes portfolio is overpriced)
-Base = $211,000 per class A share (-15% – assumes portfolio is overpriced)
-Up = $285,000 per class A share (+15%)
Operating businesses that should generate ~$17,000 of pre-tax income per Class A share (vs. $15k)
-Down = 9x = $153,000 per share – equates to ~8% FCF yield
-Base = 12x = $204,000 – equates to ~6% FCF yield
-Up = 12x = $204,000 – equates to ~6% FCF yield
Overall (vs. $529,000 at quarter end)
-Down = $413,000 (-28%)
-Base = $526,000 (fairly priced)
-Up = $600,000 (13% underpriced)
Going forward I expect Berkshire to compound at good, not great returns. The likely question is why own it at all if we expect modest returns…
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 8% 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.”
