PI Global Investments
Hedge Funds

The Hedge Funds That Remain De

I like to closely monitor the hedge funds that own Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) in their portfolios.

Berkshire is not a typical hedge fund investment. Therefore, the shares tend to be owned by a relatively close group of value-focused fund managers, who spend more time analyzing individual businesses and their intrinsic values than growth investors may.

This could provide more insight into the under/over valuation of the business based on their investment trends.\

The Bill and Melinda Gates Foundation Trust

The largest owner by far of the stock is the Bill Gates’ (Trades, Portfolio) Bill and Melinda Gates Foundation Trust. This trust has around 54% of its portfolio invested in
Warren Buffett
(Trades, Portfolio)‘s conglomerate, a total position value of $9.5 billion.

During the second quarter of the year, the trust’s portfolio managers increased its holdings of Berkshire by 21%, a noticeable change. However, there is a bit more here than meets the eye. Looking back through the firm’s past 13F history, we can see that it typically increases its position in Berkshire in the second or third quarter of every year. This could be due to asset flows or gifts from the Oracle of Omaha himself. In the other three quarters of the year, the firm tends to sell down the holdings, presumably to fund charitable initiatives.

Apart from this, there were no noticeable changes in large hedge fund portfolios concerning Berkshire during this year’s second quarter. A number of smaller hedge funds made slight changes to their ownerships, but this does not really signal anything.

The dedicated value investors

The top hedge fund owners of Berkshire reads like a who’s who of value investing. Thomas Gayner, who manages the portfolio for Markel (MKL, Financial), has built one of the most significant single positions, followed closely by Thomas Russo, another storied value investor. Guy Spier,
Li Lu
(Trades, Portfolio) and Wally Weitz also hold large positions.

Markel’s stake in Berkshire is quite interesting because the company has been called a baby Berkshire in the past, primarily due to its insurance sector presence and its growing investment portfolio.

The company has owned a position in Berkshire for as long as records go back. It has been a crucial part of its equity portfolio for nearly two decades and the company owns both the A and B shares.

Gayner has a reputation for being a great value investor specifically because he is willing to take large, high conviction bets on companies and hold them for the long-term. As his position in Berkshire shows, he is also willing to let other managers take over if he thinks they are doing a better job at creating value.

This has to be one of the best qualities of any investor. The ability to acknowledge that you might not be the best person to create value and there are better ways to build value is vital to achieving growth and positive returns in the long term.

It is also important to concentrate on finding great managers. Buffett is probably the most notable example, but great managers who can create value are the only people whom we should be investing alongside. There’s no point in investing alongside a manager that destroys value, as this will not turn out well for shareholders.

Markel does have an excellent track record of creating value purely because it knows where to invest. It focuses on areas of the insurance market where it has an edge, and its investment portfolio is built around Berkshire and other successful investment managers, such as Brookfield Asset Management (BAM, Financial).

Buy and hold great ideas

To be great investors, we don’t have to be continually looking for the next best idea. All we have to do is find a couple of good ideas, a couple of good companies run by great, competent managers, and stick with them for the long term.

There is no shame in following this sort of strategy, a strategy that needs almost no effort once it’s set in place. The best investors know they don’t have to impress others by trading every single day. They know the best way to create value is to buy and hold a couple of the best ideas.

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