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How to Buy Berkshire for Half Price...


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Yeah, I've kicked the tires on the boulder complex once or twice.  They just combined all the closed end funds including the one with the Wellington hedge funds in it, with the stated purpose of upping the liquidity and adding some yield to close the discount, at least that is my recollection.  Looks like RiverNorth has ~25% and Bulldog has some, I know they control like 8% via SPE.  But I think Horesj has control of ~ 35%, but those guys are not to be trifled with.  You would have to hold it in tax advantaged account as you know there are huge built in gains.  Dont want to be the schmuck.

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  • 6 months later...

my notes on BIF:

 

$700mm closed end fund trading at a 24% discount to NAV. Portfolio is 25% BRK and various other blue-chip stocks including JPMorgan, Wells Fargo, Yum Brands, and Chevron. Pays a 5.7% monthly dividend. ~1.7% management fee. Trades at a wide discount for what may in fact be a good reason – BIF is ran by Stewart Horejsi (Boulder Investment Advisors) and he owns roughly ~40% of the shares, which creates a serious issue of conflicted interest. Mr. Horejsi can repeatedly buy more of his fund at a 24% discount, doesn’t have to pay the management fee and for the assets he doesnt own – he collects a steady management fee. In a sense, this is a great investment vehicle to build wealth… for… wait for it… Mr. Horejsi. He can easily close the discount himself through buybacks or a liquidation, if he ever chose to sell however he has zero incentive to do so. An activist is unlikely to succeed given Mr. Horejsi’s massive ownership stake.

 

Conclusion: The current discount to NAV is a bit larger than it has historically been, and may narrow slightly. However, in all likelihood, some discount to NAV is likely to persist for years. At a 20% discount to NAV, current fair value is ~$8.00. At the current price, I’m not that interested. I would revist if the discount widened further to 30-40%. As a side note, the dividend is partially self-liquidating – and should, hypothetically, cause the discount to NAV to slowly decrease however shares are likely to just trade down upon distributions.

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