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- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 3
Berkshire continues to lag a do nothing index. I would like to see Warren asked again about the old rule of creating move value over a five year period which had been revised.
We need to be objective about this especially at Warren's advanced age.
No. of Recommendations: 18
Berkshire continues to lag a do nothing index.
I'm perfectly happy lagging the index ytd. I own Berkshire because Berkshire is what I want to own.
All this hand-wringing over Berkshire and the index. If you want to perfectly match an index, why not just own that index?
No. of Recommendations: 5
"All this hand-wringing over Berkshire and the index. If you want to perfectly match an index, why not just own that index?'
I expected a response like this... and of course some of my funds are in an index but far less than my Berkshire holdings.
The reason it is relative is the Index IS the option Warren recommends for the average person. I get he doesn't want to "promote" Berkshire even though Charlie was fine doing so.
Your response reminds me at what many active managers say when they underperform. "The market is expensive and not in touch with reality"
Meanwhile the average Booglehead enjoys the ride and outperforms.
I get this is a Berkshire board and it can be expected to get pushback on anything deemed critical of it. My favorite is the Board of Directors nepotism with the Buffett children.
To each his own.
No. of Recommendations: 4
If your worried about BRK vs S&P for estate planning purposes,
Charlie’s estate planning advice for Berkshire shareholders.
Check out item #30
https://www.kingswell.io/p/the-uncommon-sense-of-c...This from The Kingswell website,
“In other words, our chance to learn from Charlie Munger need not end with his passing. But, rather, will continue on as long as we never let go of his timeless wisdom.
To aid in this endeavor, I’ve gathered together 99 of my favorite Munger-isms as (hopefully) a launchpad for deeper study into his life and example…”
ciao
No. of Recommendations: 2
Berkshire continues to lag a do nothing index. I would like to see Warren asked again about the old rule of creating move value over a five year period which had been revised.
By my calculations for the last 7 rolling 5-year periods, Berkshire failed the book value test 5/7 and IV test (using 5-groves) 4/7.
They can't find much to buy, so they've been returning excess capital to shareholders when it makes sense. Total buybacks almost $75 billion.
No. of Recommendations: 27
Meanwhile the average Booglehead enjoys the ride and outperforms...
One might rephrase that just a bit:
Meanwhile, the average Boglehead has outperformed Berkshire in the recent period of the broad market getting more expensive and Berkshire not doing so.
The phrasing is only a slight change, but it rather changes the most obvious implication about the future.
Will the broad US market keep getting more and more expensive forever?
Perhaps so, but personally I doubt it.
The cool thing about mean reversion is that the further you get from the norm, the more likely a move towards the norm becomes.
You might not know how strong the mean reversion is or how long it will take, but ultimately it's as unavoidable as gravity.
Whether it's a thousand years ago or a thousand years from now, a share in a typical business will almost always trade for something between 5 and 25 times its on-trend annual earnings power, with a bell curve giving the most common result somewhere vaguely towards the middle of that range.
Jim
No. of Recommendations: 3
Yeah, only up 16-17% this year. What a dog!
No. of Recommendations: 5
I'd submit the average Boglehead has not come close to actually outperforming a concentrated Berkshire investor for two reasons:
1) Most BH's seem to keep at least 30% of their portfolios in bonds as they think this is 'conservative' and
2) Most BH's have a 20%-40% allocation to foreign equity which has dragged down their returns vs. all-US equity over the past decade or so.
I'm sure there are some BH's who just own VOO or VTI but most I know don't and own a healthy serving of bonds/foreign equity.
No. of Recommendations: 16
[i[ I expected a response like this... and of course some of my funds are in an index but far less than my Berkshire holdings.
The reason it is relative is the Index IS the option Warren recommends for the average person. I get he doesn't want to "promote" Berkshire even though Charlie was fine doing so. [/i]
Indeed, BRK and Warren have themselves directed shareholders to SPY as a relevant benchmark, and it gets a little tedious when the concern is simply hand-waved away as effectively irrelevant.
Perhaps one thing the recent past has illustrated is that future returns for either SPY or BRK, from any random point, (1) may not diverge by that much for very long periods of time (I find their proximity to each other re: returns more interesting than the neck and neck of who's winning) and (2) may be in SPY's favour for very long stretches. I won't be surprised if this continues in the future, particularly given BRK's current size.
That said, one reason I keep coming back to buying, and sometimes selling, BRK over SPY or equivalents is the simple fact that BRK is far easier to understand than the broader indices. It's a collection of profitable businesses, and one can simply evaluate BRK on its actual performance, and what that says about likely future performance, as opposed to what it might be doing ten years from now.
So if its cheap, I buy, sometimes with leverage. If its not, I hold, sell, or de-leverage. I may not know exactly when its cheap or expensive, but being roughly right has allowed me to have about double the returns as compared to BRK's market performance for over a decade now. All this without ever knowing whether 'the market' is selling too richly or too cheaply at any given time.
No. of Recommendations: 1
Yep, "just hold the damm stock" is classic Charlie.
Truth is my heirs will benefit from the step up basis
No. of Recommendations: 0
I have talked to many Boogleheads who are 90% in the Index.
My point however was the comparison for their equity exposure.
In fact, index investing has beaten almost all professionals including my high profile "value" investors who really are nothing but promoters.
No. of Recommendations: 1
"and it gets a little tedious when the concern is simply hand-waved away as effectively irrelevant."
Preach!
No. of Recommendations: 4
No. of Recommendations: 0
good morning, since you have the skills to do those charts can you add in schd, and are dividends reinvested included ? Thank you.
No. of Recommendations: 0
Congratulations on your performance trading BRK.
Where do you see BRK now? Buy, Sell, Hold?
Best,
Brian
No. of Recommendations: 21
...(and acknowledge that Jim has been saying SPY is overvalued for a decade)...
I try always to say merely that it is more overvalued than the historical average on several metrics, which is pretty clear.
Whether that means "overvalued" is more in the eye of the beholder!
The US market might stay at these valuation multiples for decades, so maybe this is the new normal, not "overvaluation". Personally I am dubious, but that's just the eye of this beholder.
One of my long time detractors once said that he'd never seen a post of mine that wasn't in one sense a wager on mean reversion.
That's probably pretty close to true. But mean reversion of one type or another is a good enough wager often enough that I make a pretty good living.
Heck, even BFH and KMX have had a good week.
On the other hand, Hershey at $183.50 still seems to be the dog of the day. Not super cheap in a conventional sense, (between 19 and 20 times current earnings), but certainly super cheap compared to their own history...yet another mean reversion bet!
Jim
No. of Recommendations: 0
Updated thoughts on Dollar General? Price seems to have stabilized.
No. of Recommendations: 1
"The US market might stay at these valuation multiples for decades, so maybe this is the new normal, not "overvaluation". Personally I am dubious, but that's just the eye of this beholder."
About $375 billion of Berkshire's assets sit in equities similar to the index. It is hard to see how Berkshire outperforms relative to the S&P given these assets as a portion of the roughly $1 Trillion of Berkshire assets.
I had this exact discussion with Chris Bloomstran when he said Berkshire would DRAMATICALLY outperform the S&P.
Berkshire is not that undervalued and does face headwinds as a previous poster noted to say nothing of the departure of a superstar capital allocator.
Inquiring minds want to know.
No. of Recommendations: 1
No expert but my fag packet for BRK is this.
Book value 237 @ 9% growth over 5 years = 364 x 1.4 x book equates to 509 and a return of 7.4% IRR over 5 years.
I thought Bloomstran uses BRK as a marketing tool and is always overoptimistic, discussed plenty here before.
No. of Recommendations: 0
Does anybody know the last time Buffett or Munger said Berkshire would out perform the market/
No. of Recommendations: 0
"Updated thoughts on Dollar General? Price seems to have stabilized."
I'm writing calls for income but will accept the profit if called away.
If it's really stabilized, that would be good.
Currently my calls are $125 so that might happen soon if I don't get an acceptable roll.
No. of Recommendations: 2
It depends on your timeframe and trading frequency. My expectation is that DG will be rising from its crash for a few years and that won’t be a smooth climb. If you want to realize the rapid gain you might have now and move on go for it. It’s been a year with many opportunities to buy beaten down stocks: INTC, DG, DVA, GE, GOOG, and maybe OXY.
BTW, one thing that might be neglected about Jim is while he’s wonderful about sharing good investment ideas and valuation and timing calls he trades a lot and he’s not making the buy/sell (especially sell) decisions for you. That’s up to you.
No. of Recommendations: 5
I try always to say merely that it is more overvalued than the historical average on several metrics, which is pretty clear.
Indeed, what characterizes your posts is the clear separation between facts and opinions.
No. of Recommendations: 15
Indeed, what characterizes your posts is the clear separation between facts and opinions.
Well, that's your opinion.
Jim
No. of Recommendations: 12
About $375 billion of Berkshire's assets sit in equities similar to the index. It is hard to see how Berkshire outperforms relative to the S&P given these assets as a portion of the roughly $1 Trillion of Berkshire assets.
Given the sense of scale, it's probably worth considering the equity portfolio as "Apple" and "other".
I think it's perhaps a concern for the Apple position, whose current valuation level might be high enough not to support good stock returns in the next few years. There might be some air under it.
So I agree with you there.
For the rest of it, there isn't that much resemblance to the broad market in terms of stretched valuation levels.
Quick glance, the weighted average earnings yield of the non-Apple equities seems to be somewhere around 8.4%, equivalent to a P/E under 12.
The average S&P 500 firm is around 24% more expensive on that primitive metric.
There are a few T&T positions which seem a bit speculative, but their sizes are generally down in the rounding error.
Jim
No. of Recommendations: 7
And the 5000th post on this illustrious board has been published by none other than,,,,,,
,,,,,Drum Roll,,,,
“mungofitch”
ciao
No. of Recommendations: 1
Indeed, what characterizes your posts is the clear separation between facts and opinions.
Well, that's your opinion.
I'm tempted to respond, And that's a fact, but I probably shouldn't
- Anon
No. of Recommendations: 11
In the spirit of this holiday season ,
a nice colorful contemporary Christmas tree like summary of the S&P & it's 11 sectors.
Click the YTD button at the bottom to see the years (thru 12/15) sector perf with the S&P up ~ 25%.
Place your pointer on any "ornament" to see the mystery Co & it's YTD perf.
I was surprised to see.... GE up 85+%...COST up 44+%.... JPM up almost 2X BRK....No surprise in the Rocketing TECH sector.....and definitely surprised to see JNJ down ~10%
https://www.chartfleau.com/bubblechartHappy Holidays
ciao
No. of Recommendations: 9
The Costco bubble seems like a nice little tribute to Mr Munger.
(up by half year to date, and five year return 30.8%/year compounded)
Jim
No. of Recommendations: 0
If you use $SPXTR instead of SPY, even more glaring
No. of Recommendations: 6
Every time I think I should sell some COST, I visit a store first. The crowds always change my mind.
No. of Recommendations: 1
Every time I think I should sell some COST, I visit a store first. The crowds always change my mind.
Exactly. I go at least once a month and rarely see a short line and I go on weekdays, not at lunch. Add in the long lines at the gas pump and I can't see any good reason to sell until I need the money for living expenses. Then I'll sell little bits of my BRK and other holdings every quarter or so.
No. of Recommendations: 11
Despite those long lines, that have provided sizeable profits for the year, a holder of Costco stock is paying over 46 times this year’s profits.
If I was holding I’d be wondering how much longer the lines can get.
No. of Recommendations: 9
This from the WEB…& latest earnings data…
“Because Costco sells merchandise at extremely low mark-ups, membership fees are a key way the company is able to turn a profit. Costco reported nearly $4.6 billion in revenue from membership fees last year, representing over 72% of the total annual profits of $6.3 billion.Sep 26, 2023”
Not sure of anyone else but they could double my yrly membership fee & I would continue to hunt for a parking space & fill my cart on a regular basis.
I told the manager at our local Costco I could easily inc. his sales by 10%, he smiled & I told him to make the carts 10% larger.
One of the biggest things that irritates me is Costco dropping the Am Ex card yrs ago!
ciao
No. of Recommendations: 5
If I was holding I’d be wondering how much longer the lines can get.
It's not the lines, it's the membership fees, the new warehouses, and the internet sales.
The 2023 AR says:
861 warehouses worldwide as of Sept 2023
26 opened in 2023 (I think 23 net new and 3 relocations)
28 projected in 2024. (Their international segment continues to grow nicely)
Plus, a 24% increase in e-commerce revenues 2023 over 2021.
I don't see any reason not to expect steady growth along these lines for the foreseeable (ten year?) future.
--sutton
owner off and on since ca. 2000. (It always seems so overpriced that I sell it when I need to pay college tuition or home improvements. Then, a year later, I find myself buying it back)
No. of Recommendations: 9
Despite those long lines, that have provided sizeable profits for the year, a holder of Costco stock is paying over 46 times this year’s profits.
If I was holding I’d be wondering how much longer the lines can get.
All of my best investments have been when I bought something good and did nothing for a long time. Every time I try to get fancier, it doesn't go as well.
No. of Recommendations: 12
"We need to be objective about this especially at Warren's advanced age."
----------------
A quick check of the BRK vs SPY perf to date(thru 12/15/23) & I get,
1 yr...advantage SPY 5.2%/yr
3 yr...advantage BRK 7.7%/yr
5 yr...advantage SPY 1.6%/yr
10 yr..advantage BRK 0.2%/yr
20 yr..advantage BRK 0.2%/yr
Looking at this perf thru Charlie's "Invert, Always Invert" thinking, one might conclude that SPY "NEEDED" all of it's TECH innovations, social network creations, cloud storage/computing , EV development , ETC ...just to stay up with the stodgy Berkshire!
Imagine if some of these had not come to pass or if the future does not reflect the past.
I'll continue to put my trust in the Front Office at HQ!
ciao
No. of Recommendations: 8
"SPY "NEEDED" all of it's TECH innovations, social network creations, cloud storage/computing , EV development , ETC ...just to stay up with the stodgy Berkshire!"
isn't that a benefit of the index? you get the innovation and success by default.
No. of Recommendations: 9
"SPY "NEEDED" all of it's TECH innovations, social network creations, cloud storage/computing , EV development , ETC ...just to stay up with the stodgy Berkshire!"
...
isn't that a benefit of the index? you get the innovation and success by default.
Sure, but you also get the sundry disadvantages of the index as well.
For example, on any given day you have a disproportionate amount of your money invested in whatever is experiencing a valuation bubble that day. The method of index additions and eliminations ensures a material long term drag. And so on.
It seems that the S&P's construction will give you a drag all the time. The rate of growth of EBIT among non-financial S&P 500 firms lagged US GDP growth by -1.2%/year 1962-1989, and by -0.3%/year 1989-2019. That would suggest to some that it's a worse-than-average set of businesses to invest in, and/or is investing in them in a worse-than-average way.
Much evidence suggests a monkey with a dartboard does better than the S&P 500, though using these specific data points as the evidence you might have to include unlisted firms in the mix, as they are included in GDP figures.
As an aside, there is much to be said for private companies. In a typical year, the typical medium sized business with double digit millions in sales might sell for enterprise value of 5-8 times EBITDA. (I don't like EBITDA as a metric, but that's what is commonly used). In recent years the S&P 500 has traded at around 11-16 ratio of enterprise value to EBITDA. It's not rocket science to suspect that the first choice might be the better one for long run returns, if you can find a way to invest with the level of diversification appropriate to your knowledge of the businesses.
Jim
No. of Recommendations: 4
Jim said:
One of my long time detractors once said that he'd never seen a post of mine that wasn't in one sense a wager on mean reversion.
That's probably pretty close to true. But mean reversion of one type or another is a good enough wager often enough that I make a pretty good living.
If you think about it, the entire concept of predicting the future from the past is a wager on mean reversion. A wager that the rules that govern the development of the future are the same as the rules that governed the development of the past back when it used to be the future.
Are there any notable failures of mean reversion that those who criticize it can point to?
R:
No. of Recommendations: 3
Are there any notable failures of mean reversion that those who criticize it can point to?
CBI :)
No. of Recommendations: 9
Are there any notable failures of mean reversion that those who criticize it can point to?
...
CBI :)
That one does spring to mind!
They spent over 100 years doing (mostly) fixed price big construction projects while managing their risks through thick and thin. Until they didn't.
There was no simple calculation of "normalized earnings" that handled that. It was a known risk, but not a quantifiable one.
"Death via merger" with another company is bad enough, but it adds some extra artistry that that acquiring company then went belly up from asbestos claims.
Like the cartoon character run over by a train that then has a piano dropped on him.
Jim
