On August 14, 2024, $Berkshire Hathaway(BRK.A)$ $Berkshire Hathaway(BRK.B)$ , led by Warren Buffett, filed its 13F with the SEC, revealing its latest portfolio changes for the previous quarter.
Berkshire’s biggest buy this quarter was $Occidental(OXY)$ , with an additional 7.26 million shares, worth $458 million. This increased their stake by 2.9% compared to the previous quarter, and nearly 70% more shares than before.
Next up was $Chubb(CB)$ , with Berkshire adding almost 1.11 million shares, worth around $283 million, growing their position by about 4.3%. Chubb was a new addition in the previous quarter.
The third-largest increase was $Sirius XM(SIRI)$ , with Berkshire buying approximately 96.2 million more shares, valued at $272 million, a huge 262.2% increase.
Berkshire also added $ulta beauty(ULTA)$ to its holdings for the first time this quarter, purchasing 690,000 shares worth about $266 million.
Besides Ulta Beauty, Berkshire started a new position in $Heico(HEI)$ , buying 1.04 million shares.
For investors interested in copying Buffett’s moves, a good strategy might be the Synthetic Long Stock Option Strategy. Here’s how it works:
1.What’s the Synthetic Long Stock Option Strategy?
The Synthetic Long Stock Option Strategy involves a call option and a put option. Investors set up this strategy by buying a call option and selling a put option, with both options having the same strike price and expiration date.
This approach offers higher potential returns compared to just buying a call option and costs less than buying the stock directly. It’s a cost-effective way to mimic owning the stock without tying up a lot of capital.
If you hold the position until expiration, you end up with a long stock position regardless of the stock price movement. If the stock price is above the strike price at expiration, you can exercise the call option. If the stock price is below the strike price, you'll end up with the stock through the put option.
The maximum profit is unlimited because owning the stock allows you to benefit from any price increase. The maximum loss is also unlimited if the stock price falls, as your losses can keep growing.
2. $Apple(AAPL)$ Options Strategy Example
Let’s look at an example using Apple options to see this strategy in action.
Apple is currently trading at $222, and if you believe the price will go up, you might consider buying a call option with a $222 strike price expiring on January 17, 2025, while selling a put option with the same strike price and expiration date.
Here’s how it breaks down:
Step 1: Buy an Apple call option with a $220 strike price for $17.20, costing a total of $1,720.
Step 1: Sell an Apple put option with a $220 strike price for $11, receiving $1,100 in premium.
If Apple’s stock price hits $300 at expiration, you’ll make $6,280 from the call option (minus the initial cost), and add $1,100 from the put option premium, totaling $7,380.
By comparison: If you just bought the stock, you’d make $8,000 at $300. With only the call option, your profit would be $6,280.
From the Apple example, it’s clear that this strategy can achieve nearly the same result as owning 100 shares of Apple, but without the large upfront cost of buying the stock outright. The synthetic long stock strategy also provides better returns compared to just buying call options, bringing it closer to the benefits of holding the actual stock.
For conservative investors who hold a lot of low-risk bonds and have little cash but significant margin, this strategy greatly reduces the capital needed for investing. That’s the appeal of the synthetic long stock strategy. Plus, it enhances returns compared to only buying call options.
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