Hedge Funds’ Obsession With Warren Buffett Hitting Their Pocketbook

We hate to say this but, we told you so. On February 27 we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going even though the mainstream financial media journalists don't agree with this approach. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market. Keeping this in mind, let's take a look at whether Berkshire Hathaway Inc. (NYSE:BRK-B) is a good investment right now.

Berkshire Hathaway Inc.  was in 113 hedge funds' portfolios at the end of the fourth quarter of 2019. BRK-B investors should pay attention to an increase in enthusiasm from smart money lately. There were 111 hedge funds in our database with BRK-B holdings at the end of the previous quarter. Our calculations also showed that BRK-B ranked 14th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Warren Buffett's Berkshire has consistently been among the top 30 hedge fund stocks since at least the fourth quarter of 2018. When it comes to Warren Buffett hedge funds are just like ordinary investors. They are blinded by Warren Buffett's stellar reputation as a shrewd stock picker even though Buffett's track record over the last 10 years is absolutely pedestrian. In general, we believe hedge funds are great at stock picking, but we also noticed that Warren Buffett isn't the same man who used to beat the market by 20-30 percentage points year in year out.

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