Tags: Rolfe | institutional | Berkshire | Hathaway

Strategist Rolfe: Institutional Investors Are Pushing Up Berkshire Hathaway

By    |   Friday, 26 December 2014 11:43 AM

Shares of Berkshire Hathaway, the company led by Warren Buffett, have returned 28 percent so far this year, almost doubling the 14.7 percent return generated by the S&P 500 index.

So what gives?

Institutional investors are playing a major role in the move, says David Rolfe, chief investment officer at Wedgewood Partners, a money management firm that owns Berkshire shares.

"It's not wealthy individuals pushing up the stock. I don't think they have enough firepower," he told CNBC.

Morgan Koenig, Wedgewood's institutional client liaison, told the news service, "We're seeing increased institutional ownership in a period when high-quality stocks are lagging the broad market."

Rolfe agrees. "IBM, Coke, Exxon," he said. "Look at stocks in the mega-cap sector, and look at the ones doing poorly. You start asking yourself, what else out there is big and part of my potential stock universe and has bulletproof earnings?"

IBM has dropped 13. 9 percent so far this year, Coca-Cola has gained 2.5 percent and ExxonMobil has lost 7.8 percent.

Rolfe explained that some institutional investors don't go for Berkshire because they make investments based on sector strategies, which Berkshire does not fit into any one sector. "But if I'm an institutional investor and I have to put money to work . . . maybe I don't care anymore that it is a conglomerate," Rolfe noted. "To hell with the sector mix. . . . You have to think of where we are in the stock market now, and Berkshire may be easier to swallow as a holding."

Morningstar analyst Greggory Warren offers a mixed assessment of Berkshire.

"While we remain impressed with Berkshire Hathaway's ability to grow its book value per share at a double-digit rate annually, we continue to be concerned about the firm's ability (given the size of its operations) to generate meaningful growth longer term," he writes on Morningstar.com.

"And we would like the firm to be more transparent about its plans for the day when Warren Buffett no longer runs the show (Buffett turned 84 this year, and Charlie Munger turns 91 at the start of 2015).

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Shares of Berkshire Hathaway, the company led by Warren Buffett, have returned 28 percent so far this year, almost doubling the 14.7 percent return generated by the S&P 500 index.
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Friday, 26 December 2014 11:43 AM
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