The big news as Berkshire Hathaway was trading in the 170’s two weeks ago was that AAPL represented about 20% of the value of its holdings…
Over half of its stock portfolio at the highs.
Or Did it?
Was Berkshire being crushed in a completely illogical way?
Was its holdings of Burlington Northern Santa Fe, Geico, and Dairy Queen…
…along with a giant portfolio of public companies…
So ridiculously undervalued because of the ‘Covid’ trade that the value of one of the biggest companies in the S&P 500 got displaced?
You tell me.
On July 23rd, Apple Inc dropped over 4.5%.
One would think that 20% of the value of a company dropping almost 5% in a day would create carnage for the company….
…especially with the rest of the market down more than 1%.
Yet take a look at the day BRK.B had:
The stock closed on its highs of the day.
Why?
‘Rotation’ into ‘value’ names was one reason.
A second one, and potentially more important is this:
Even giant conglomerates like Berkshire Hathaway can see the value of their holdings ‘displaced’.
The sum of the parts is supposed to be about the value of the whole…
In this case…that proposition seems to have gotten way out of whack…
Even with the price action today, it is probably still out of whack.
WIth premium’s as expensive as they still are, long dated puts may be attractive here in BRK.B.
Your Only Option,
Mark
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