Hedge Funds Have Never Been This Bullish On Berkshire Hathaway Inc. (NYSE:BRK-B)

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The latest 13F reporting period revealed hedge funds’ favorite stocks during the COVID-19 crash. Insider Monkey processed 13F filings from 821 hedge funds and well-known value investors who are required to disclose their stock holdings to the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Berkshire Hathaway Inc. (NYSE:BRK-B).

Berkshire Hathaway Inc. (NYSE:BRK-B) was in 115 hedge funds’ portfolios at the end of March. BRK-B investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 113 hedge funds in Insider Monkey’s database with BRK-B positions at the end of the previous quarter. Our calculations also showed that BRK-B is also among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Warren Buffett

Now let’s take a gander at the latest hedge fund action surrounding Berkshire Hathaway Inc. (NYSE:BRK-B).

How have hedgies been trading Berkshire Hathaway Inc. (NYSE:BRK.B)?

At Q1’s end, a total of 115 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the fourth quarter of 2019. On the other hand, there were a total of 91 hedge funds with a bullish position in BRK-B a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the most valuable position in Berkshire Hathaway Inc. (NYSE:BRK.B). Bill & Melinda Gates Foundation Trust has a $8.2114 billion position in the stock, comprising 47.3% of its 13F portfolio. Coming in second is Eagle Capital Management, managed by Boykin Curry, which holds a $1.8462 billion position; 7.7% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Tom Russo’s Gardner Russo & Gardner, Bill Ackman’s Pershing Square and Ric Dillon’s Diamond Hill Capital. In terms of the portfolio weights assigned to each position Punch Card Capital allocated the biggest weight to Berkshire Hathaway Inc. (NYSE:BRK.B), around 50.31% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, earmarking 47.32 percent of its 13F equity portfolio to BRK-B.

As one would reasonably expect, key hedge funds have jumped into Berkshire Hathaway Inc. (NYSE:BRK.B) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the biggest position in Berkshire Hathaway Inc. (NYSE:BRK.B). Two Sigma Advisors had $147 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $53.9 million position during the quarter. The following funds were also among the new BRK-B investors: Adam Peterson’s Magnolia Capital Fund, Jim Simons (founder)’s Renaissance Technologies, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

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 Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), and JPMorgan Chase & Co. (NYSE:JPM). This group of stocks’ market valuations match BRK-B’s market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position
V,157,14390735,14
JNJ,82,5454317,-3
WMT,55,4887227,3
JPM,112,9730557,14
Average,101.5,8615709,7
[/table]

As you can see these stocks had an average of 101.5 hedge funds with bullish positions and the average amount invested in these stocks was $8616 million. That figure was $18119 million in BRK-B’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 55 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately BRK-B wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BRK-B were disappointed as the stock returned 4.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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