Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details). If Warren Buffett catches the virus, his probability of death is 5.6%. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Berkshire Hathaway Inc. (NYSE:BRK-B).
Is Berkshire Hathaway Inc. (NYSE:BRK-B) the right pick for your portfolio? Money managers are becoming hopeful. The number of bullish hedge fund positions increased by 2 lately. Our calculations also showed that BRK-B ranks 14th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). BRK-B was in 113 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 111 hedge funds in our database with BRK-B positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example this gold mining company is acquiring gold mines in Americas at a fraction of the cost of drilling them, so we look into its viability. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to take a gander at the new hedge fund action surrounding Berkshire Hathaway Inc. (NYSE:BRK-B).
How are hedge funds trading Berkshire Hathaway Inc. (NYSE:BRK.B)?
Heading into the first quarter of 2020, a total of 113 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the third quarter of 2019. By comparison, 87 hedge funds held shares or bullish call options in BRK-B a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the largest position in Berkshire Hathaway Inc. (NYSE:BRK.B). Bill & Melinda Gates Foundation Trust has a $11.3052 billion position in the stock, comprising 52.9% of its 13F portfolio. Coming in second is Eagle Capital Management, managed by Boykin Curry, which holds a $2.3179 billion position; 7.4% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish contain Tom Russo’s Gardner Russo & Gardner, Bill Ackman’s Pershing Square 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 52.94% of its 13F portfolio. Punch Card Capital is also relatively very bullish on the stock, designating 52.7 percent of its 13F equity portfolio to BRK-B.
As aggregate interest increased, specific money managers have jumped into Berkshire Hathaway Inc. (NYSE:BRK.B) headfirst. GQG Partners, managed by Rajiv Jain, created the largest position in Berkshire Hathaway Inc. (NYSE:BRK.B). GQG Partners had $229.9 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also made a $169.9 million investment in the stock during the quarter. The following funds were also among the new BRK-B investors: Shane Finemore’s Manikay Partners, Mubadala Investment’s MIC Capital Partners, and Frank Brosens’s Taconic Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Berkshire Hathaway Inc. (NYSE:BRK.B). These stocks are The Procter & Gamble Company (NYSE:PG), Mastercard Incorporated (NYSE:MA), Exxon Mobil Corporation (NYSE:XOM), and AT&T Inc. (NYSE:T). All of these stocks’ market caps are closest to BRK-B’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PG | 79 | 10725870 | 5 |
| MA | 125 | 14560784 | 0 |
| XOM | 63 | 2028251 | 8 |
| T | 50 | 1406918 | -1 |
| Average | 79.25 | 7180456 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 79.25 hedge funds with bullish positions and the average amount invested in these stocks was $7180 million. That figure was $23616 million in BRK-B’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 50 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 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 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Hedge funds were also right about betting on BRK-B, though not to the same extent, as the stock returned -3.9% during the first two months of 2020 (through March 2nd) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
