The Secret Berkshire Discount

Warren Buffett is up to his old tricks again.

Buffett's holding company, Berkshire Hathaway (NYSE: BRK-B), is buying the railroad Burlington Northern (NYSE: BNI) in a savvy move that's sure to bear fruit for years to come.

But as StreetAuthority's Andy Obermueller recently noted, the 50-to-1 split of Berkshire's Class B shares is the real cause for excitement. When the shares split, each share of Berkshire B, which trade for about $3,400, will be turned into 50 shares worth about $68. Nothing materially changes with the shares -- they will just seem more affordable at $68 than they do at $3,400.

The split is also causing speculation that the B shares may be included in the S&P 500 Index. Such a move would attract large orders from index funds, many of which now have share price and liquidity requirements that exclude Berkshire.

  All of these factors could trigger a wave of buying activity.

Splitting the shares so they trade at $68 instead of $3,400 is a nice trick, but there's an even cheaper way to own Berkshire Hathaway.

Nathan Slaughter, editor of TheETF Authority, found a way for investors to own Berkshire for as little as $5.50 a share in March. Investors can do this by buying Boulder Growth & Income Fund (NYSE: BIF). BIF is a closed-end fund, and it's been one of the best ways to invest in Berkshire Hathaway without ponying up thousands of dollars.

Berkshire is far-and-away the fund's largest holding, comprising 25% of the portfolio. The rest is filled quality names like Wal-Mart (NYSE: WMT) and Johnson & Johnson (NYSE: JNJ). Both are Buffett holdings.

The fund carries an additional bonus: It trades at a -17% discount to its net asset value. Closed-end funds can trade at a discount when the share price falls below the fund's per share asset value. This means investors who buy will get a dollar's worth of assets for 83 cents. The market often reacts when funds sell at steep discounts -- investors quickly pile in, the shares pop and the discount narrows.

BIF has beaten the S&P 500 in six of the past seven years. It has even outperformed Buffett during the past year:

Since the market's March lows, BIF has returned +35% while Berkshire's shares have remained flat.

Berkshire's shares won't remain flat for long. Buffett began acquiring Berkshire for $8 a share and the 'A' shares trade for $102,000 today. His track record speaks for itself. When Buffett's latest moves begin to pay off, BIF will be along for the ride.