Today, we initiated an aggressive position in Berkshire Hathaway. Our preference is to continue building this into a much larger allocation on any further pullback. A key part of our thesis is Berkshire’s ongoing stock repurchase program. The company has the flexibility to buy back shares whenever they are trading below intrinsic value, and in recent years has deployed tens of billions of dollars toward repurchases. These buybacks are funded by Berkshire’s massive cash position and are executed by the CEO’s discretion but without a doubt, input from Warren Buffett. This creates a natural “buyer of last resort” dynamic that can help support the stock during periods of weakness.
To express this view, we implemented a layered strategy:
- We purchased shares outright to establish immediate exposure.
- We sold a put option with the intention of acquiring a significantly larger position at a lower effective price if the stock declines.
- A call butterfly spread to benefit in the event the stock moves higher quickly without giving us the pullback we prefer.
The full trade details are outlined below:
Bought 6 shares at 469.53 inside of Robinhood
Sold to open: BRKB June 18th (monthly) 450.00 strike put
Credit: 5.55
Max reward = 5.55 or $555.00 of income received
Max risk = owning 100 shares at a cost basis of 444.45 or $44,445 invested (large position and risk)Finally, we are attempting to buy a call butterfly but it has not filled as of this update.
Buy to open: BRKB June 18th (monthly) 475.00 strike call (ratio of 1)
Sell to open: BRKB June 18th (monthly) 500.00 strike call (ratio of 2)
Buy to open: BRKB June 18th (monthly) 525.00 strike call (ratio of 1)
Debit: 5.00
Max risk = 5.00 or $500.00 per spread
Max reward = 20.00 or $2000.00 per spread