No. of Recommendations: 19
Competition tends to eliminate unusually high profits resulting from business models that have worked spectacularly well for decades.
Will Berkshire's playbook continue to perform well in the future?
It is an essential character of moats that they have a finite lifespan as a rule.
But Berkshire's model isn't simply buying those companies, it's buying them and using the proceeds from the current collection to buy more. As the old ones fade, new ones are added to the fold. A decade from now it's likely that most of Berkshire's assets will be allocated to things we don't already own, mainly because the money keeps stacking up. So I think the model might have a few more years left in it. There are always some companies earnings outsized returns.
The biggest problem isn't the model, but the limit of how far it can be scaled. There aren't many $100bn cash cows. Oddly enough, Wells Fargo is only one of only 10 companies in my database with market cap over $100bn and trading at under 10 times earnings. Cit is another, and AT&T. The rest are either resources or Chinese, both of which are problematic when trying to forecast the length of time that earnings will be accessible.
Jim
