Buy Berkshire Hathaway Shares at Double the Discount
Global Masters Funds Limited is a Listed Investment Company nearing two decades of performance history. It trades on the ASX under the ticker “GFL”.
GFL has a very concentrated position in Berkshire Hathaway (BRK) which accounts for over 60% of the portfolio value. The fund has traditionally held a high weight to Berkshire Hathaway as it is considered not just a good way to get exposure to quality growth stocks on the US market, but also the stock selection of Warren Buffer, Charlie Munger and other experts at Berkshire Hathaway.
BRK trades on the NYSE and its stock price at the time of writing was US$469,645. While on an absolute basis, this sounds very expensive, the stock BRK price is considered by many to be cheap because it is currently trading at a considerable discount to its Net Asset Value.
Investors could buy BRK shares to obtain the US exposure and stock-picking skills of Warren Buffet and the Berkshire Hathaway team, and they would do this while the stock trades at a discount to its NAV. If you had a medium to long-term investment horizon then obtaining Berkshire Hathaway shares while they are at a discount seems like a solid investment idea.
For those who are interested in this, there is a way to effectively double the discount in your BRK share: and that is to obtain GFL shares to obtain your discounted Berkshire Hathaway exposure. If you did this you would get “double the discount” because GFL also trades at a discount to its own Net Asset value.
The reported 31 December 2022 Net Asset Value of GFL was $3.15 per share. The corresponding share price was $2.23. This means that investors can acquire already discounted Berkshire Hathaway shares at a further discount by acquiring them through the also discounted GFL shares.
The Global Masters Fund investment portfolio has performed extremely well – outperforming the MSCI Index and Australian All Ordinaries Index over 3 years, 5 years, 10 years and since inception in 2006 (refer to table 2 below). Considering so much of its portfolio is and always has been Berkshire stock this would not be surprising to many people.
Why Global Masters Fund?
Global Masters Fund Ltd (GFL) was established for investors seeking long-term capital growth through investments in high-quality global assets. Berkshire Hathaway Inc, a New York Stock Exchange-listed investment corporation headed by famed businessman Warren Buffett, is Global Masters’ principal stake.
The primary source of value creation for Global Masters Shareholders is the capital appreciation of their shares since Berkshire Hathaway does not pay a dividend and any excess cash received by the Company after paying expenses is reinvested.
The GFL Board takes the view that Global Masters’ international investments provide currency diversification to investors and therefore the Australian dollar/ US dollar currency exposure is not hedged. GFL’s Board of Directors monitors the resultant portfolio performance.
The Global Masters portfolio also includes other global quality growth companies which are listed on various stock exchanges including the London Stock Exchange and the Australian Stock Exchange.
As noted the performance of the investment portfolio has been very strong, consistently outperforming relevant indices over multiple time periods.
Discount/ Premium to NAV
With the 31 December 2022 share price of $2.23 well below the Net Asset Value of $3.15 per share GFL is currently trading at a sizable discount to its NTA providing a discounted access point to the investment portfolio.
As with all Listed Investment Companies (“LICs” and referred to as Closed Ended Funds in other countries), there can be no promise as to the future direction of the share price in relation to its Net Asset Value. What we can say is that the current discount is about as deep as it has been since the fund was listed in 2006 and that this represents a great way to obtain discounted exposure to Berkshire Hathaway shares.
GFL does not charge a management fee or a performance fee on the passive part of the portfolio- which is currently over 80%. It invests a portion of the portfolio into Flagship Investments Ltd (ASX: FSI) and the dividends received from FSI provide income to cover the operating expenses of the fund.
We can also note that FSI itself does not charge a management fee for its services. GFL really is a low-cost method of obtaining exposure to Berkshire Hathaway at a sizable discount.
With a low portfolio turnover, the Global Masters Fund sits in the buy-and-hold category. Investors hold the shares for their low-cost, low-turnover approach to global investing. First through discounted exposure to Berkshire Hathaway, and then through some additional active positions