Berkshire Hathaway (BRK-B)

Okay, okay! I know that, in my last post, I said I would write about a couple of all-around funds that could be used as core investment holdings in your portfolio; however, I decided to digress a bit.

Today, it was announced that H.J. Heinz (HNZ) agreed to be bought-out by Berkshire Hathaway (you know, that little company started by a guy named Warren Buffett) and 3G Capital, a Brazilian private equity firm. The deal is valued at $23 billion, or a 20% premium to Wednesday’s closing price for HNZ. Following the announcement, Heinz’s stock price leapt approximately $12.00 per share. The deal not only adds to Berkshire’s already impressive portfolio (good for Berkshire and its shareholders) it removes one of the best defensive dividend paying stocks available to the rest of the world (bad for the rest of us).

In January of 2010 Berkshire’s Class B shares dropped from $3,500.00 per share to $75.00 per share following the acquisition of Burlington Northern. Since then, the price has risen 32.28% to today’s closing price of $99.21 — which, at today’s price, would enable anyone interested in investing alongside Warren Buffett an opportunity to purchase a handful of shares. But, there may be a better way.

Berkshire Hathaway is a behemoth and, personally, I am convinced that someday the world is going to be co-owned by four companies — Apple, Berkshire Hathaway, Google and Microsoft. With that thought in the back of my mind, and following the news of Berkshire’s desire to acquire Heinz, I decided to look for ways to pick-up some shares of Berkshire’s Class B shares (BRK-B). Given that Berkshire does not pay a dividend, however, I do not feel totally comfortable owning BRK-B shares outright. Though I don’t believe that Berkshire’s investors will grow tired of owning BRK-B shares anytime soon, I don’t favor the idea of having to rely on the whims of Wall Streeters to make money. Thus, I began my quest for a better BRK-B investment strategy.

Essentially, my search turned-up several ETFs that boast BRK-B holdings in their “Top Holdings” lists. The complete list of ETFs, along with their Berkshire’s weightings, can be found here. The one, in particular, that I am eyeing for a potential purchase is the iShares Russell Top 200 Value ETF (IWX). The reasons I like IWX are as follows:

  • IWX is a little more diversified and less weighted toward financials
  • It currently pays an annual dividend of 2.55%, and it has a 30-Day SEC Yield of 2.24%
  • It has a reasonable Expense Ratio of 0.20%
  • It boasts a total return of 9.26% since its inception in September of 2009
  • And, finally, it offers some exposure to BRK-B’s shares and their potential upside in price with a total portfolio stake of 3.14%

All-in-all I  believe that IWX offers exposure to one of the most well managed investment firms on the planet, while also offering exposure to other large companies that pay annual dividends. AND, its current, lower left to upper right, chart pattern is beautiful.

In short, I guess one could consider IWX a potential candidate as a core holding.  🙂


Disclosure: As of the date of this post, I did not own any shares of IWX and I did not intend to purchase any shares of IWX at any time within the next three trading sessions (i.e. before 2/20/2013).

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