Please be patient and understanding when interacting with others, and avoid getting frustrated or upset if someone does not respond to your posts or if a discussion does not go as you expected. Remember that everyone is entitled to express their own perspectives. Furthermore, even when you don't entirely agree, try to benefit in some way from it.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 10
I ran some numbers for returns of brk.b vs indexes from the inception of B shares (May 1996 26 years) to today... only because I've been looking at the Nasdaq vs S&P.
S&P500 7.35%
BRK.b 10.2%
Nasdaq 10.4%
No. of Recommendations: 0
Take a 0.2% management fee for a Nasdaq index and it's identical to BRK. I found that interesting.
No. of Recommendations: 5
Have you analyzed the sources of Berkshire's outperformance? Here are just a few contributors:
1. Berkshire's equity portfolio, which makes up around half of IV, has outperformed the S&P by about 2 percentage points per year since 1996.
2. Float is about 29% of BV, which adds about 2 percentage points to the growth of BV and IV.
3. Berkshire's P/B has declined by about 1%/yr since 1996. The P/E on the S&P has increased by about 2%/yr.
4. Other contributors?
These are just rough numbers.
No. of Recommendations: 2
"Float is about 29% of BV, which adds about 2 percentage points to the growth of BV and IV."
The low cost float makes me optimistic that Berkshire will continue to outperform the S&P by about 2 percentage points. Even if Berkshire's stock holdings and wholly owned subsidiaries perform only the same as the S&P, Berkshire still has the advantage of low cost leverage.
No. of Recommendations: 6
"Even if Berkshire's stock holdings and wholly owned subsidiaries perform only the same as the S&P, Berkshire still has the advantage of low cost leverage."
If we're trying to predict Berkshire's future performance relative to the S&P, we also need to predict the return of the S&P. During the go-go years 1996-1999 the S&P 500 returned 26.4% to Berkshire's 15.0%, but durning the period 2000-2022 the S&P returned 6.3% to Berkshire's 9.6%. My guess is that over the next decade the S&P will have a relatively low return, maybe 5% or so, and that Berkshire will outperform the S&P by 3 percentage points or so. That's just a guess, but the point is that value stocks, and Berkshire, tend to outperform the S&P when the return of the S&P is low and underperform the S&P when the return of the S&P is high.
No. of Recommendations: 0
"S&P500 7.35%
BRK.b 10.2%
Nasdaq 10.4%"
You might want to double check the returns. I could be wrong, but I get
S&P 500, 9.1%
BRK-B, 10.1%
Nasdaq, 9.6%
