No. of Recommendations: 21
I am not bearish on Berkshire. The post-Buffett Berkshire may work well. I just think the burden of proof has shifted. At Berkshire's enormous size, the job is arguably harder than it was before, not easier. Evidence, not wishful thinking, is needed to give us confidence that the new Berkshire can overcome the constraint and generate meaningful long-term outperformance.
I think this is exactly right, and it is why I have a big investment in Fairfax, with its $34b market cap, and not Berkshire, with its $1079b market cap. In addition, Abel has not shown that he is a great capital allocator, as Buffett and Watsa have.
Berkshire is cheap, about 15x earnings, and likely to do well in the long run, probably significantly better than the S&P 500. But Fairfax is at about 8x earnings, and I think it will grow faster. I can't justify anything more than a small holding in Berkshire for diversification's sake, and because it is better prepared for a really catastrophic drop in valuations of other companies.
Regards, DTB
