Ackman's Pershing Square Capital Management bought 3.5 million Berkshire Hathaway B shares during the second quarter, the fund manager said in a regulatory filing on Wednesday. At Wednesday's close, the investment would be worth roughly $686 million.
It marks the first time that Ackman's $8 billion fund has announced a new position since late last year when it bought a stake in Starbucks Corp.
The new stake in the company with a $510 billion market capitalization will be a passive investment for Ackman's firm, a person familiar with his thinking said.
Pershing Square made its reputation as an activist investment firm by pushing for changes at companies ranging from railway Canadian Pacific to restaurant chain Chipotle Mexican Grill.
But Ackman is unlikely to offer suggestions or work behind the scenes to persuade the 88-year old Buffett, Berkshire Hathaway's founder and leader, to change direction.
Indeed, Ackman has publicly credited Buffett with guiding his career. The 53-year old said he has studiously taken pointers from Buffett's investor letters, including the ones he wrote before creating Berkshire Hathaway. Four years ago, Forbes featured Ackman on the cover of its magazine, calling him 'Baby Buffett.'
At first blush, the investment might seem odd, as Berkshire Hathaway ranks among the world's best known stocks - one that parents often bestow as graduation gifts, designed to hold onto for a lifetime. Two Pershing investors Reuters spoke to grumbled that they would pay hedge fund-like fees for a name everyone knows.
But other investors and analysts called it a smart move and described it as a place for Ackman to put cash while searching for another activist position.
Currently Berkshire stock is considered to be less expensive than it has been for some time, having fallen 9% in the last three months.
One reason might be the Kraft-Heinz merger which Berkshire and private equity company 3G Capital engineered in 2015 and which Buffett said earlier this year that he overpaid for.
Speculation has mounted for a week about what Ackman's next position might be after he told investors that he had exited Automatic Data Processing and United Technologies and had a new position on.
Pershing Square has gained roughly 50% during the first seven months of this year, making it one of the world's best performing investment firms.
The gains illustrate how Ackman's efforts to rebuild his performance record after a few rocky years are bearing fruit, with bets on Starbucks and Chipotle proving to be big winners.
Recent changes in the portfolio also suggest that Ackman is not likely to hold onto an investment where he sees potential problems or where there is not much money to be made ahead.
He bought United Technologies in the first quarter of 2018 and exited after the company announced a planned merger with Raytheon that he told management he did not like.
He owned ADP from the middle of 2017 and worked behind the scenes with management after having lost a proxy contest two years ago. He earned $1.25 billion on the ADP investment but told investors last week that he cashed out because gains might not be as steep in the months ahead.
(Reporting by Svea Herbst-Bayliss; editing by Grant McCool and Rosalba O'Brien)
By Svea Herbst-Bayliss