With its acquisition of Burlington Northern, Berkshire Hathaway will now replace its acquisition target in both the S&P 500 and S&P 100 indexes. There’s no doubt that had you bought a share of Berkshire on the first day of the year in 2000, you would be a very satisfied investor today. The company’s class A/B shares returned roughly 100% since then (see graphs). The S&P 500 had a total return of negative 6%.
Buying the company’s shares means you are exposing yourself to two things; a) the company’s operating businesses (historically primarily insurance) and b) the public market investment prowess of Warren Buffett and Charles Munger in deploying the insurance company’s “float” (i.e. the cumulative net between insurance premiums collected and insurance claims paid less a reserve). But what if you didn’t want exposure to the company’s operating businesses? What if instead, you simply wanted exposure to the company’s public equity investment portfolio (i.e. excluding debt and derivatives)? Well of course that’s exactly what you get when you invest in AlphaClone’s Berkshire clones.
We thought we’d take a look at how the Berkshire’s clone portfolios faired against the performance of the company’s shares over the past ten years. The results are interesting – both the Berkshire Top 10 Holdings clone and the Berkshire Ten Best Ideas clones outperformed the company’s stock:
- The Top 10 Holdings clone, which simply holds the company’s ten largest equity positions each quarter, equal weighted, long only, returned 118.5% at 15.5% annualized volatility (slightly lower than the market)
- The 10 Best Ideas clone returned 171.8% at 18% annualized volatility (slightly higher than the market). You can find a description of the Best Ideas clone strategy in our glossary.
