Did The Smart Money Play Berkshire Hathaway Inc. (BRK.B) Correctly?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Berkshire Hathaway Inc. (NYSE:BRK-B) and determine whether the smart money was really smart about this stock.

Is Berkshire Hathaway Inc. (NYSE:BRK-B) a buy here? The best stock pickers were cutting their exposure. The number of bullish hedge fund bets were cut by 10 recently. Berkshire Hathaway Inc. (NYSE:BRK-B) was in 106 hedge funds’ portfolios at the end of September. The all time high for this statistic is 116. Our calculations also showed that BRK-B ranked #14 among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 116 hedge funds in our database with BRK-B positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to review the new hedge fund action surrounding Berkshire Hathaway Inc. (NYSE:BRK-B).

Peter Rathjens of Arrowstreet Capital

Do Hedge Funds Think BRK-B Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 106 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2021. On the other hand, there were a total of 109 hedge funds with a bullish position in BRK-B a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in Berkshire Hathaway Inc. (NYSE:BRK.B), which was worth $10559.1 million at the end of the third quarter. On the second spot was Gardner Russo & Gardner which amassed $1252.2 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Bill & Melinda Gates Foundation Trust allocated the biggest weight to Berkshire Hathaway Inc. (NYSE:BRK.B), around 45.53% of its 13F portfolio. Punch Card Capital is also relatively very bullish on the stock, setting aside 37.23 percent of its 13F equity portfolio to BRK-B.

Due to the fact that Berkshire Hathaway Inc. (NYSE:BRK.B) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Matthew Stadelman’s Diamond Hill Capital sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $759.5 million in stock. Bo Shan’s fund, Gobi Capital, also dumped its stock, about $66.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 10 funds by the end of the third quarter.

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 Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), NVIDIA Corporation (NASDAQ:NVDA), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Alibaba Group Holding Limited (NYSE:BABA), and Walmart Inc. (NYSE:WMT). This group of stocks’ market valuations are closest to BRK-B’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 95.4 hedge funds with bullish positions and the average amount invested in these stocks was $10910 million. That figure was $19464 million in BRK-B’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) 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 70.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on BRK-B as the stock returned 14.7% since the end of Q3 (through 1/31) 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.