How Individual Investors Can Replicate Berkshire’s Google Deal

During their recent episode of the Value Options Letter and Acquirers Podcast, Travis and Tobias discussed How Individual Investors Can Replicate Berkshire’s Google Deal. Here’s an excerpt from the podcast:

[Tim] I do, Toby. There’s ways that you could do it with options, I think, that are very, very attractive because what Berkshire is basically saying is we think Google’s a good value here, even though it’s had a big run and the multiples increased, but obviously the business is thriving even with the AI changes that are occurring. And they’re saying, well, if we get a 6% discount and invest in size, that’s very attractive.

We’ll do that deal. They have $340 billion or whatever it is cash to deploy at Berkshire. So it’s attractive for Berkshire shareholders that Greg Abel is to put that to work.

But yeah, I mean, you could sell a put option and what’s attractive about it is you say, okay, what strike, what price do I want to own Google at? Maybe that price is $340. The stock right now is at $356.

It was a little higher prior to the transaction, but maybe you want to own it at $340. Right now today, if you went out to like, let’s say July 2nd, so that’s 29 days out, you could sell a $340 put for about $5.35, $5.35 a share. And so once again, it’s kind of that heads or tails heads.

If Google’s above $340 at expiration, then you make that $535 profit on your investment and you don’t end up owning the stock. If the stock’s below $340, right now it’s at $357, then you’d end up owning Google at a breakeven of $335, I think $65. I forgot how much premium we collected on that, but yeah.

So you’re in it at a really attractive value and the annualised return on that is pretty good. It’s definitely in the double digits from an annualised return basis. And you can do that with a number of stocks.

If you don’t want to do it with Google, you can do it with Meta or Amazon. Some of those stocks, they’re pretty expensive. And so when you’re dealing with an option, it’s 100 shares, Toby, as you know.

And so on the Google trade, it’s going to tie up nearly a little over three grand or 30 grand, excuse me, because it’s 100 shares of stock there. But yeah, if you can afford that in your account, have the proper diversification, it can make a lot of sense.

[Tobias] So we’re not necessarily advocating for that kind of trade. We’re just saying that this is something that if you saw the Berkshire deal and you wanted to replicate the Berkshire deal, this is something that you could do. You could, for $30,000, approximately generate about $500 of return over about a 29 day.

29 days.

[Tim] Yeah. So a very short transaction. And some people like that.

Some people love that, Toby, where it’s like, okay, it’s a quick return. That’s why the zero day expiration options, we don’t do that. But if you can get an attractive double digit yield on Google and you want to buy it, it makes a lot of sense.

So absolutely. And you build a whole portfolio of these types of heads. I make an attractive annualised rate of return.

Tails, I’m buying a really high quality stock that I want to own at a price that I want to own it. It can really pay dividends literally and figuratively.