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.
