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One intractable problem flummoxes income investors and their desire to own Berkshire Hathaway (NYSE: BRK.b). It’s the obvious problem: Berkshire Hathaway pays no dividend.
Many income investors would like to hitch their wagon to Warren Buffett’s investment mule-train for obvious reasons: Buffett has proven his acumen over decades of investment success. Berkshire Hathaway today is an amalgam of sturdy, dividend-paying stocks. It’s a conservative investment that appeals to many income investors.
Though Berkshire shares pay no dividend, it’s possible to generate income from a Berkshire investment, if you know the right strategies.
A covered-call strategy ̶ selling call options against Berkshire stock ̶ is one strategy. An investor could buy Berkshire stock and then continually sell calls against the stock to generate income.
But a covered-call strategy isn’t for everyone. Many income investors are unschooled in options writing. Knowing the appropriate strike price and duration to sell is no inconsequential matter. What’s more, investors run the risk of having their Berkshire shares called away.
A culling strategy could also generate income. After Berkshire shares advanced a specified percentage from a base, the amount of appreciation would be sold. For example, after a 10% advance, the number of Berkshire shares that equates to the appreciated amount ̶ roughly 10% of Berkshire stock ̶ would be sold.
A culling strategy has two notable shortcomings, though: 1) When the requisite price appreciation will occur is unknown; 2) Berkshire shares are being continually liquidated.
Third Way to Berkshire Shares
I offer a third strategy ̶ one that requires no addition work, and one within the grasp of every income investor: Buy a distribution-paying fund that’s overweighted with Berkshire shares. And, yes, such a fund exists.
The fund I refer to allocates 29% of its investment portfolio to Berkshire Hathaway stock. The remaining 71% is allocated to Buffett-esque stocks ̶ principally, large-cap, higher-yield dividend growers.
But unlike Berkshire Hathaway, this fund pays a dividend, and one delivered in monthly installments. This dividend generates a 4.3% yield.
A high-yield dividend is good; a bargain-priced high-yield dividend is better.
Fund on Sale
This Berkshire fund is on sale. Its shares trade at a 17% discount to net asset value (NAV). For every $0.83 invested in this fund, a dollar’s worth of investment value is received. This includes Berkshire Hathaway stock.
Few investors know this fund (or others of its kind) exists. Mention the word “fund” and images of mutual funds and exchange-traded funds are conjured, which is understandable. These funds account for 98% of all the retail money allocated to fund investments.
But less than 2% of all retail money is invested in the type of fund that owns Berkshire Hathaway, yet these funds are the only funds that enable you to buy the underlying investment portfolio at a discount to market value.
If you want to learn how to buy Berkshire shares and other investments at discounts of up to 20% of market value and earn high-yield income of up to 15%, you’ll want to join me for an exclusive live webinar on Wednesday, June 7. You’ll learn not only how to buy investments at a discount, you’ll learn how to earn a high yield on your discounted investments.