GoodHaven Funds, an investment management firm, published its second-quarter 2021 investor letter – a copy of which can be downloaded here. The fund returned 24.95% for the first half of 2021, while its benchmarks, the S&P 500 Index advanced 16.94%, the Wilshire 5000 Total Market Index returned 16.19%, the HFRI Fundamental Growth Index returned 17.61%, the HFRI Fundamental Value Index had a 22.68% gain, and the CS Hedge Fund Index delivered a 10.72% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of GoodHaven Funds, the fund mentioned Berkshire Hathaway Inc. (NYSE: BRK-A) and discussed its stance on the firm. Berkshire Hathaway Inc. is an Omaha, Nebraska-based multinational conglomerate company with a $628.9 billion market capitalization. BRK-A delivered a 21.21% return since the beginning of the year, while its 12-month returns are up by 31.72%. The stock closed at $418,101.00 per share on September 24, 2021.
Here is what GoodHaven Funds has to say about Berkshire Hathaway Inc. in its Q2 2021 investor letter:
“Berkshire Hathaway remains our largest holding, was close behind Alphabet for our biggest dollar winner, and remains undervalued. We have articulated our Berkshire thesis in recent letters. It’s ironic that despite Berkshire’s storied past, our stance was a contrary one as many long-time Berkshire investors and pundits had grown critical and displeased with the company’s recent strategy and performance. Berkshire’s 2020 annual report detailed a material increase in their share repurchases and improved operating results, all things consistent with our thesis. Berkshire owns fixed assets (PP&E) that are, on a GAAP basis, the largest of any domestic company and continues to generate attractive returns on invested capital. In 2020, Berkshire’s repurchase activity meant a shareholder increased their ownership of the company by 5% without having to do anything. Previously, Berkshire rarely repurchased shares in a material way, but 2020 was the largest repurchase on record and the company plans to continue repurchasing if the stock remains undervalued relative to other capital allocation opportunities. Just recently Berkshire purchased more than $6bn of its shares since the beginning of the second quarter of 2021.”
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Based on our calculations, Berkshire Hathaway Inc. (NYSE: BRK-A) ranks 12th in our list of the 30 Most Popular Stocks Among Hedge Funds. BRK-A was in 116 hedge fund portfolios at the end of the first half of 2021, compared to 111 funds in the previous quarter. Berkshire Hathaway Inc. (NYSE: BRK-A) delivered a 1.27% return in the past 3 months.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
