uploads///ETFs

Why ETFs Prefer Berkshire Hathaway

By

Updated

ETF investments

Over the past decade, Berkshire Hathaway (BRK-B) has generated 9.7% compound annual growth rate returns for its equity investors. In comparison, the S&P 500 Index (SPY) has returned 5.8%.

The stock is preferred by institutional investors, mutual funds, and ETFs (exchange-traded funds). Berkshire equity is owned by ETFs that own financials as well as sector- agnostic equities.

These are some of the major sector-agnostic ETFs with stakes in Berkshire:

  • the SPDR S&P 500 ETF Trust (SPY)
  • the iShares Core S&P 500 ETF (IVV)
  • the iShares Russell 1000 Value ETF (IWD)
  • the iShares S&P 500 Value ETF (IVE)

ETFs prefer Berkshire over other financials such as JPMorgan (JPM) and conglomerates including General Electric (GE) and Procter & Gamble (PG).

Article continues below advertisement

The preferred financial

ETFs that build on financials also have large stakes in Berkshire Hathaway. Two top names include the Financial Select Sector SPDR Fund (XLF) and the iShares U.S. Financials ETF (IYF).

Berkshire will continue to be preferred by ETFs, as the company is expected to grow its earnings per share by 7% to 9% over the next five years. An increase in interest rates will benefit Berkshire’s insurance business, as the company can use the premiums as interest-free capital for other investments.

If Berkshire (BRK-B) continues to outperform the overall index even marginally, ETFs will continue to increase their holdings in the firm.

Advertisement

More From Market Realist