Subject: Re: Why I sold my entire Berkshire stake
So I think
- if you are in for the long-term
- and if you don't need to sell a little from to live for your livelihood
- and if you are not a talented stockpicker (then you should have sold and used your skills for trading long ago already)
- and if you are not convinced the good times for our company are over

if none of those "IF's" do apply that then selling because Berkshire at this moment in time is fully valued does not really make sense, and that any eventually high price and "great selling opportunity" should simply be ignored and met with inaction (or by selling covered calls).

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Holding cash to wait for a good opportunity to present itself can create major boosts to returns. Note: This is not "timing the market" (at least how I define it); but rather waiting for good ideas to arise. I am very confident that at least 3 or 4 good opportunities (better than holding BRK at current levels) will be available in the next 18-24 months.




I think there is a good argument to be made on either side of this debate, and there is no clear answer which is better.

In my case, by said's criteria, I am in for the long-term (have owned Berkshire for over 20 years), I don't need to sell for day to day living (I work full time and save some of my income anyway), am not a particularly talented stockpicker, so I'm 3 for 3, so far. But as for #4, it's harder for me to say. I think there is a real possibility that the good times for our company are over, or at the least, that it will be much harder for Berkshire to beat the index, if its float can not be invested in profitable new ventures. I had thought, until this year, that at the worst, almost capital could be plowed into the railroad and, especially, the utilities, with low returns but with these returns fairly certain, and with a certain amount of leverage from the fact that the float is other people's money being invested to our advantage. After reading Buffett's letter, I am much less confident that these 2 sectors, which account for over as much as 40% of Berkshire's operating earnings, will be good places for Berkshire to invest new capital (throwing good money after bad, in Buffett's words.)

So what about the other 60%? Apple has been a homerun, of course, but that's because it was available at 10 times earnings for a company with good growth. At 28 times earnings for a company with stagnant growth, I'm not so sure.

And then when I look at other recent big acquisitions, like Pilot, or Precision Castparts, I'm even less convinced that Berkshire really has good opportunities for investment.

If Berkshire was not itself trading towards the top of its range of the last 20 years, I probably would have kept a smaller stake, but the high price gives me a good chance to exit and see if I can't do better. And if the general market, or Berkshire in particular, got significantly cheaper, the cash from selling Berkshire this week will be available, the tecmo strategy.

I can't be certain that we will see that price drop, and for someone who is still confident in Berkshire's ability to outperform the general market, I think holding on to their shares is probably a better idea than hoping for a better price in the future. But I don't have that confidence any more, or at the least, I feel like I now need a lower Berkshire price to be confident in outperformance.