Subject: Re: Some Thoughts - Maybe Too Many
Just hold the damn stock. And ignore calls to sell it. Even from THE most trusted sources. Like the one who chimed in in 1996.

I have been a holder of B shares from near the time of the split. I must qualify as a long term holder who has mostly followed this principle. But I am trimming back on my holdings and will probably continue to do so if I get the opportunity at high multiples. It strikes me that this is fundamentally, substantially different firm going forward than the one that was in place when B shares were first created. And its hard for me to believe that the multiple predictions by Buffett that the size of BRK will be a hinderance on future returns isn't going to come true. What is remarkable is not the prediction, which seems rationale and inevitable to me just as it seems to WB, but the fact that Buffett has managed to keep the reality at bay for as long as he has. But that time might be ending.

Five years from now, BRK will be run by an operations leader, with two investment managers who haven't shown nearly the stock picking ability of WB and CM. If recent history is an indicator, the culture of stock picking will also be less long term with a higher proportion of trading in and out of opportunities. BRK is already at a point where it generates tons of free cash flow and can't find enough productive investment opportunities to deploy it inside or outside. If it wanted to buy a giant company like Disney for example, it could do it today outright without even dipping into its required reserves or debt. Paying a high multiple for that kind of excess cash sitting in a company doesn't make sense especially if you don't have a WB and CM to deploy it.

Many people here oppose the company paying a dividend for tax reasons and argue you can create your own by selling B shares. But I think that misses the other part of the core reason for paying a dividend which is that it doesn't make sense for a corporate entity to be a holder of such huge sums of excess cash far beyond the firm's ability to productively deploy it. Once WB is gone, I would prefer that excess cash to be distributed back to me rather than left with the team at BRK. They will still have plenty of cash to work with and trouble deploying it given the quarterly cash generation of the underlying business. But unless they are about to make a huge entry into LLM development for AI where people are talking about hundreds of billions in investment required, they shouldn't hold $300M+ and growing cash balances. Allowed to go too long, that will inevitably lead to lower quality deployments or the firm becoming more and more like a T-bill mutual fund. Not what I would want as a shareholder and worth the tax bill to avoid.

I don't think BRK will be a bad business 5 years from now. The underlying businesses are of good quality and good cash generators. But some of them probably don't merit continued cash absorption and their future prospects are probably dimmer than what they used to be. I just don't think BRK merits the outsized position that it has in my portfolio today. So that means trimming at good opportunities when I can get them.

COUNTER: If things really do hit the fan and BRK gets the opportunity to deploy $250M in fantastic deals that refresh the underlying collection of businesses, that might change the equation. But when the circumstances for something like this does occur, its hard to tell if things are actually about to end or if it is an opportunity. Even Buffett had trouble deploying the cash with confidence during the GFC. Will the new mgmt have more courage than him? Seems like a tough thing to bet on.