The stock performance of Berkshire Hathaway (BRK.A and BRK.B) rhymes with the success of famed investor Warren Buffet and serves as a great benchmark for any portfolio manager, trader or investor. Even though the share price has simply correlated with the S&P 500 the past five years, most investors listen when Warren Buffet speaks.

Before we get into how we can perform better than BRK.B, it is worth noting that BRK.B is an equity and not an ETF. Additionally, Warren Buffet’s advice to the average lay man of investing in an index fund, is not what created his fortune. Nevertheless, there is a lot to learn from the man and the deals he has orchestrated outside of the stock market. For the sake of simplicity, we will explore how we can beat the performance of BRK.B in this article.

To perform as well as BRK.B you can simply buy BRK.B shares. If it would be an ETF, you could invest in the underlying stocks. But in case of BRK.B, the share price is not the equivalent of the assets it holds. Just like any other publicly traded stock, the price is established by multiple factors, not least the presence of key employees such as Warren Buffet. 

To perform better, you could trade your position back and forth as the share price fluctuates. If you are trading for an institution, you might have restrictions on how much cash you can hold so this strategy would suit a private investor better. Sitting on cash and going periodically all-in is not in the nature of humans and certainly not in the nature of a day trader glued to the Bloomberg screen. Since the BRK.B price correlates with the S&P 500, you could for instance invest in the SH (ProShares Short S&P 500 ETF) in case cash is not an option.

The above sounds simple, but not easy. The card counter approach can be used to trade the position. A card counter places a minimum bet at every shuffle and then adjusts the bet according to the displayed cards. If the share price drops, you buy more. If the share price goes up, you sell more. There is a transaction cost (so we do not want to trade too frequently) and a cost for spending time on monitoring the share price (you can of course place standing orders).

We mentioned before that the price of BRK.B has historically correlated with the S&P 500. If we suspect this will continue (even if Warren Buffer would retire), we could trade the two in arbitrage.

Alternatively, we could invest with a similar technique as Warren Buffet. Pick companies with the same criteria and, most importantly, convince the rest of the world to invest in you. Warren Buffet did not become wealthy by investing his salary. So even if you beat the performance of BKR.B, you will not become as wealthy as Warren Buffet unless you can convince others to invest in you or your company.