Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 10
I’ll start with the obvious: if you want Berkshire Hathaway, the cleanest way to own it is to buy Berkshire Hathaway. No structures, no discounts that can widen, no fees.
That said, I’ve previously mentioned an interesting side dish for those who already think that way: SRH Total Return Fund (STEW). They just raised their payout by 20%.
Some facts:
• About 38% of the fund is Berkshire Hathaway (A & B)
• Another ~13% is JPMorgan
• This is obviously a very concentrated portfolio, with Berkshire doing much of the heavy lifting
The immediate and entirely reasonable objection is the expense ratio, which is over 1%. People ask: Why pay that for a fund that has little activity/turnover and is 51% in two stocks? Fair question — and if STEW simply sat indefinitely at a wide discount, it would also be a fair criticism.
But that’s not really the play here.
SRH is a closed-end fund, and today trades at a 20.5% discount to NAV. Historically, its discount has tended to be more in the mid-teens. If that discount merely reverts toward its longer-term range — not disappears, just narrows — shareholders benefit from return drivers unrelated to market direction.
Add in the mechanics:
• The fund seems to be doing regular small trimming of overweight Berkshire-it’s higher cost basis B shares at full NAV (its founder is a Billionaire on ultra low cost A shares)
• It returns cash to shareholders through a vehicle priced well below NAV
• A recent 20% increase in the distribution brings the effective yield to roughly 4.3%
Because of the discount, those returned dollars are more valuable to shareholders than their stated cost to the fund — effectively selling assets at par and handing them back to owners who bought them for about 80 cents, while also trimming an oversized Berkshire position.
There’s also an a bonus optionality: persistent wide discounts can create pressure for structural change, including liquidation or conversion, which would return capital at NAV rather than market price. For shareholders — particularly in a tax-advantaged account like an IRA — that outcome would be unusually favorable.
None of this replaces owning Berkshire outright. Fees matter. Discounts can widen. Managers can disappoint. Simplicity still wins most of the time. Berkshire will always be my largest holding.
But as an adjunct holding, where returns may come from:
1. Berkshire’s underlying performance
2. Cash returned at a discount
3. A modest narrowing of an unusually wide NAV discount
4. And the non-zero possibility of a NAV-level exit
…the math becomes more interesting than the expense ratio alone would suggest.
I find this compelling in my IRA. Berkshire at a discount, some diversification in a true value style etf, and interesting optionality…
Main course: Berkshire.
Side dish: this earns a place on the plate.
No. of Recommendations: 3
I've been discussing this CEF for 20 years on various boards. Once upon a time I thought Stew Horejsi, control shareholder, would just sell the entire fund to brk at a 5-7 % discount and cash out, that never happened. Now that Stew is approaching 90 and Buffett is leaving, this might happen in the next two years.
IF, you believe a Dem might get elected in 28 and IF you believe they really might try to tax the super-rich, why not do your estate planning while Trump is in office at the current tax rates?
Stew could call Buffett and do this deal in less than an hour, it's less than 3 billion total, an odd lot buy for brkb.
Years ago the fund was VERY shareholder unfriendly, super high fees, tho they did take my calls.
Here is a bit about Stew.
https://www.forbes.com/profile/stewart-horejsi/
No. of Recommendations: 3
<<I've been discussing this CEF for 20 years on various boards. Once upon a time I thought Stew Horejsi, control shareholder, would just sell the entire fund to brk at a 5-7 % discount and cash out>>
That would have cost Stew several hundred million dollars in unnecessary taxes— as his tax basis is just a few bucks per share. And he would have missed out on several hundred million dollars in still-tax-deferred additional gains.
No. of Recommendations: 1
That would have cost Stew several hundred million dollars in unnecessary taxes— as his tax basis is just a few bucks per share. And he would have missed out on several hundred million dollars in still-tax-deferred additional gains.
Forget about DEFERRED gains. The guy is 88 years old, no 88 year old should be taking capital gains unless absolutely necessary. They are very likely to die in 2, 5, or 10 years, and the basis will be stepped up upon death thus avoiding ALL capital gains taxes.
No. of Recommendations: 1
“That would have cost Stew several hundred million dollars in unnecessary taxes— as his tax basis is just a few bucks per share. And he would have missed out on several hundred million dollars in still-tax-deferred additional gains.” If you are overweight an asset that isn’t liquid and is selling 20 percent below Nav, if you sell at a 5 percent discount to NAV , the true tax is 5-7 percent at what might be lower low tax rates rather than after the 2028 elections. He would have reinvested the proceeds in liquid assets, he loves Jpm, how would that have worked out? Who knows what he might have done with the proceeds 3-5 years ago? What if he passed what are his estate plans, who knows if his heirs would sell brkb down weekly for years? May they change the stepped up basis at death? Would team Mamdani, Aoc, Sanders, etc try to change those tax regs? If I were in his shoes I sell into team trumps tax laws in case I have to leave the country. :)
