Hedge Funds Have Never Been This Bullish On Berkshire Hathaway (BRK.B)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Berkshire Hathaway Inc. (NYSE:BRK-B).

Is Berkshire Hathaway Inc. (NYSE:BRK-B) a buy here? The smart money was becoming more confident. The number of long hedge fund bets went up by 5 recently. Berkshire Hathaway Inc. (NYSE:BRK-B) was in 116 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 115. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BRK-B ranked 12th among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 111 hedge funds in our database with BRK-B positions at the end of the first quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Now let’s take a glance at the key hedge fund action encompassing Berkshire Hathaway Inc. (NYSE:BRK-B).

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

At Q2’s end, a total of 116 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. By comparison, 107 hedge funds held shares or bullish call options in BRK-B a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Berkshire Hathaway Inc. (NYSE:BRK.B) was held by Bill & Melinda Gates Foundation Trust, which reported holding $12141.4 million worth of stock at the end of June. It was followed by Gardner Russo & Gardner with a $1316.5 million position. Other investors bullish on the company included Arrowstreet Capital, Eagle Capital Management, and Diamond Hill Capital. 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 50.87% of its 13F portfolio. Punch Card Capital is also relatively very bullish on the stock, setting aside 38.49 percent of its 13F equity portfolio to BRK-B.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, initiated the largest position in Berkshire Hathaway Inc. (NYSE:BRK.B). Hudson Bay Capital Management had $23.6 million invested in the company at the end of the quarter. Brad Farber’s Atika Capital also initiated a $13.9 million position during the quarter. The other funds with brand new BRK-B positions are Qing Li’s Sciencast Management, Bruce Kovner’s Caxton Associates LP, and Brett Huckelbridge’s Steel Canyon Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Berkshire Hathaway Inc. (NYSE:BRK.B) but similarly valued. We will take a look at Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Alibaba Group Holding Limited (NYSE:BABA), Visa Inc (NYSE:V), NVIDIA Corporation (NASDAQ:NVDA), JPMorgan Chase & Co. (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), and Walmart Inc. (NYSE:WMT). This group of stocks’ market valuations are closest to BRK-B’s market valuation.

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As you can see these stocks had an average of 103.6 hedge funds with bullish positions and the average amount invested in these stocks was $12033 million. That figure was $22381 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 64 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 75.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.1% in 2021 through September 20th and beat the market again by 6.9 percentage points. Unfortunately BRK-B wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BRK-B were disappointed as the stock returned -1.3% since the end of June (through 9/20) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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