Outskirts of Shrewd'm / Shrewd'm Family Care
No. of Recommendations: 1
Why is it rising and rising while absolutely not cheap anymore, in a straight line? Contrary to the much more variable S&P and Apple? Nothing against momentum, but that should have played out. Are there other factors?
No. of Recommendations: 0
thinking of lightening up in my IRA but what do to with the funds???
No. of Recommendations: 3
I frequently toy with the idea of lightening up, same last year but never bothered pulling the trigger and likely wont this time either. I have never sold a share and a regular buyer since 2006. If I was retired on the other hand would likely take some money out but comfortable holding brk even at current prices
No. of Recommendations: 2
I am not sure if this means anything but recently the stock price has been fast out of the gate at the market open and then faded as the day goes along.
No. of Recommendations: 4
Pre 2008 the stock traded at a floor of 1.5x book value. That was during a more normal interest rate regime.
Buffett has said before that higher rates are good for Berkshire.
No. of Recommendations: 5
Just going from memory, Berkshire's stock price tends to outperform the market right before the stock market in general changes directions and goes lower. I remember right before the 2008 crash, Berkshire actually zoomed to a new high. It has happened similarly several times. Not a prediction - that would be worthless anyway - but it wouldn't surprise me if this time works out similarly.
No. of Recommendations: 0
Interested in your rationale as to why higher interest rates would justify a higher valuation multiple for Berkshire as I would assume the opposite. I've never seen that discussed as a possibility before in any detailed analysis.
No. of Recommendations: 5
Interested in your rationale as to why higher interest rates would justify a higher valuation multiple for Berkshire as I would assume the opposite. I've never seen that discussed as a possibility before in any detailed analysis.
I'm not the one you asked, but just generally the value of a huge pool of no-cost float is not usually appreciated during several years of ZIRP.
No. of Recommendations: 0
Hi Nola, do you recall what year it was when the SEC wanted brk to mark to market its ibm position, and Buffett was opposed to marking? I believe it was a sec comment letter. Thank you.
No. of Recommendations: 1
No. of Recommendations: 6
Hi Nola, do you recall what year it was when the SEC wanted brk to mark to market its ibm position, and Buffett was opposed to marking? I believe it was a sec comment letter. Thank you.
I think you are remembering a different equity position, probably Kraft Heinz.
The SEC let Berkshire keep the IBM position confidential while he was buying it (so it was hidden from a few quarters of 13-Fs) but Berkshire always marked the IBM position to market because it was never an equity method level of ownership. I think he peaked at something like 8.5% of IBM. So always marked to market.
No. of Recommendations: 0
No. of Recommendations: 0
' I think you are remembering a different equity position, probably Kraft Heinz.' thanks, I don't recall if you were on the Fools board, 10-15 years ago? However, when I take incoming attacks from the usual suspects, I don't forget the facts. The SEC told Buffett to mark the ibm, his position was, it was short term weakness, he wasn't selling, therefore no reason to mark the position, since it was not material. I'm in a park playing pickleball when I get home I'll check the 2013 -2015 time period. Thanks again.
No. of Recommendations: 8
Buffett was asked at a meeting, "at what rate can you continue to grow intrinsic value in the future". At the time Buffett said, 10% if rates rise, he said it would be hard if they had rates low for another decade.
They have tons of float getting real interest rates now.
I will find the quote and post it.
No. of Recommendations: 17
In 2017, question 15, Buffett said in the previous 10 years they compounded intrinsic value at 'about 10 percent'
"and I think that's going to be tough to achieve, in fact almost impossible to achieve, if we continued in this interest ate environment
That's the number one ' if you asked me to give the answer to the question, if I could only pick one statistic to ask you about the future before I gave the answer, I would not ask you about GDP growth. I would not ask you about who was going to be president.
I would ' a million things ' I would ask you what the interest rate is going to be over the next 20 years on average, the 10-year or whatever you wanted to do.
And if you assume our present interest rate structure is likely to be the average over 10 or 20 years, then I would say it'd be very difficult to get to 10 percent.
On the other hand, if I were to pick with a whole range of probabilities on interest rates, I would say that that rate might be ' it might be somewhat aspirational. And it might well ' it might be doable.
And if you would say, 'Well, we can't continue these interest rates for a long time,' I would ask you to look at Japan, you know, where 25 years ago, we couldn't see how their interest rates could be sustained. And we're still looking at the same thing.
So I do not think it's easy to predict the course of interest rates at all. And unfortunately, predicting that is embedded in giving a good answer to you.
I would say the chances of getting a terrible result in Berkshire are probably as low as about anything you can find. Chance of getting a sensational result are also about as low as anything you can find. So if I ' I would ' I '
My best guess would be in the 10 percent range, but that assumes somewhat higher interest rates ' not dramatically higher ' but somewhat higher interest rates in the next 10 or 20 years than we've experienced in the last seven years."
That is all lifted from the Buffett archive. My take, is we have dramatically higher rates now, and this is not a headwind for berkshire, if anything its a tailwind and lends credence to the idea that the stock should be doing well right now.
Float is $150 billion, imagine that getting 5.5% or more?
No. of Recommendations: 6
Why is it rising and rising while absolutely not cheap anymore, in a straight line?
A guess? Just the random wanderings of valuation.
If we look back at the last year, we really have not seen BRK trade under median P/B since mid October 2022. It's almost 220 trading days since we have seen valuations below median. A really nice run we can all enjoy.
But the market is moody and it doesn't like to give us exactly 125 trading days above and below median a year. If we look back to May 2019 to April 2021, we went nearly 500 trading days never trading above median trailing P/B other than a handful of brief blips above. A wonderful time to accumulate.
So where do we go from here? I have no idea. I'm only holding a few Jan25 Leaps currently and I've sold a fair number of Jan24 covered calls so I'm betting there will be lower prices on offer soon. The market will almost certainly make a fool of me.
Jeff
No. of Recommendations: 8
I don't forget the facts. The SEC told Buffett to mark the ibm, his position was, it was short term weakness, he wasn't selling, therefore no reason to mark the position, since it was not material.Enjoy your workout. I don't know why Berkshire's IBM would have ever *not* been marked to market but maybe you are referring to the SEC perhaps wanting the unrealized loss to pass through the income statement, since at that time unrealized stock portfolio fluctuations didn't pass through the income statement like they do today.
I do know that the SEC has asked Berkshire at least once, maybe more, about their equity method value of KHC being above the market price of KHC stock. Berkshire resisted the write-down at the time.
There was also another SEC letter asking for details about Berkshire's investment in the bonds of Texas Competitive Electricity or whatever those TXU leveraged buyout bonds were called. I forget the details but that was a bond investment and Berkshire had taken an 'other than temporary impairment' and the SEC wanted to know what the story was.
By the way, Berkshire just published some more SEC letters this week. This time some SEC functionary wants more detail on Berkshire's proxy statement.
link to recent SEC letter to Berkshire, opens a PDF:
https://www.sec.gov/Archives/edgar/data/1067983/00...
No. of Recommendations: 7
As to Berkshire's stock price...
Using Jim's narrative is and has been for years an excellent way to make a decision to buy and to sell. If you plan to hold the stock, which evidently a few here do, then price/value is something best enjoyed as entertaining after you've bought. It is, or will be, proof that popularity comes and goes, like the metaverse was the future... and then end of Facebook... and 5 seconds later AI became the only two letters of the alphabet.
The risk is always eras like the late 1990's when years of one-dimensional thinking reduced Berkshire and Buffett to a level of near being despised by most investors...you know kind of like ole dealraker is now since he said, "Please can we go elsewhere of DG!" For those with a huge overweight of Berkshire just realize a plan is what you have until you get punched in the mouth. Then you are in grind and survive mode and owning a lot of any one stock will put you in the 100% probability of that punch-in-the-mouth coming to you.
Life is great, if you can stand it. Instead of obsessing over beating the market or never experiencing those fobidden lower quotes (from when you bought) on an over-weighted stock, there's the option of putting probability of a good outcome, or more importantly lessen one of bad outcome, on your side by simple well-thought out diversification. Sleep well, avoid the euphoria and depressive states?
It is an option and it works. And it keeps the mind far-far-far away of non-productive daily focus on price to book or price to value...unless of course you plan to constantly buy and sell.
No. of Recommendations: 7
do you recall what year it was when the SEC wanted brk to mark to market its ibm position, and Buffett was opposed to marking?
Was that perhaps the discussion of how to book the ConocoPhillips position, rather than IBM?
If so, the issue there was not whether it should be marked to market or not--it was. Rather, the question was which line it should be booked on.
A hit to current income, or a reduction in accrued other comprehensive income.
Both methods result in the same book per share, and both use the market price as the valuation. They had different connotations about impairment being permanent.
Jim
No. of Recommendations: 0
Was that perhaps the discussion of how to book the ConocoPhillips position, rather than IBM?
HC has made it pretty clear that he is definitely not mistaken on the facts. But on the outside chance this is a first and he is slipping and you are correct - would it not be PSX, Phillips 66, that you are thinking of? Berkshire never owned such a large percentage of COP that I remember.
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link to recent SEC letter to '' Berkshire, opens a PDF:'' thanks for the link. I guess it's comforting to know that brk doesn't get a free pass. I would love to find someone who knows how to retrieve old sec comment letters from 1992 on a nasdaq stock?
No. of Recommendations: 0
Thanks Jim and Nola but I'm guessing it was 2014 or so. Buffetts position was, we aren't selling ibm, it's a temporary weakness in the stock, long term there will be no loss, therefore, why mark it? When I get home I'll look in my brk files. Rw doesn't remember this either. I'm 73, I hope I'm not losing it? It was ibm , I'm certain, 🙏
No. of Recommendations: 7
Berkshire never owned such a large percentage of COP that I remember.
It was a pretty big position.
Berkshire owned about 85 million shares of COP in 2008, about 5.7% of the company, purchased for about $7bn.
They took an other-than-temporary-impairment charge on it in Q1 2009, and sold it for a loss shortly thereafter mainly to fund deals like Dow and Swiss Re.
Jim
No. of Recommendations: 1
I will have to sell a bit by end of 2024 for RMDs...with that in view, I have a limit order in at 390. Perhaps overly optimistic...
No. of Recommendations: 1
Fair warning: Today I will sell a bit of my Berkshire stocks. As that was always a mistake which I did regret latest 1-2 years later, with Berkshire having been clearly higher then: Do not copy me, you will regret it!
No. of Recommendations: 2
The ones I just sold for $369.01 were bought 2008 for $84.92 = Profit of 334%. I wonder what friend Divi would say, our former Berkshire versus S&P comparison expert.
No. of Recommendations: 1
I started out in 2012 at $78-80 so there must have been a 4 year flat stretch! Anyway at today's prices that equates to roughly 15%. Not bad.
No. of Recommendations: 0
You could buy BRK.B in 2012 for the same as in 2006, interesting to note.
No. of Recommendations: 2
' I started out in 2012 at $78-80 so there must have been a 4 year flat stretch! ' blackswanny , since you became a partner in 2012, I can give you some material history from my notes. Buffett wrote the donation letter in 2006 to the Gates Foundation. You should read it. NOTE,Buffett stipulates that the agreement is, irrevocably committed , a huge mistake. I have no idea if the agreement allows Buffett to cancel based on, poor behavior, or for any other reason? Buffett loves Melinda too so I'm sure they, worked it out like adults. Around 2008 I started to post my FSFE, posts on the Fools board. Foundation Sales Forever Effect and the moves Buffett should make to increase demand for brk common, to help absorb the selling from Buffett and other old timers who had 100s of millions and billions of brk that would have to be sold as partners passed etc. When I suggested a 50 for 1 stock split to increase the liquidity required to be included into the major indexes, of course I was attacked by others. Jan 2010 Brk announced the 50 for 1 split. Brk was added to the spy 3/ 2010. Rk was added to other indexes in 6/2010. March 2010 was the Sokol gate disaster, brk dropped from 85 to 75 in that time period. Sept 2011, brk finally authorized a buyback. The stock rose 5.7 to 72 on the news on 15 million shs. However, he stipulated he wouldn't buy back stock above 1.1 xs BV. That was the give away, imo, Buffett had little interest in actually buying back shares. He finally got tired of watching his life's work sold off via the foundations near BV. The 1.1 limit made sure the stock traded above the price buffett would pay, hence the foundations received ten percent or more from their sales. 12/2012 , Buffett realized he could goose the stock again, by raising the buyback limit to 1.2 xs BV, and be expected to buyback very few shares. He had several opportunities to buyback below 1.2 xs BV but he was never really that motivated. Raising the limit raised the stock 2.25 that day to 89.50. Recently he finally agreed to buyback at, material discounts to IV. In 2009 or so I argued that buybacks above BV, were dilutive to BV, but, accretive to IV, therefore IV should be the hurdle. Buffett said he and munger were consistently within 5 percent of each other on their IV estimates. That was good enough for most of us. Buffett never had an interest in buying back brk shs, he used those buyback limits to goose the stock, imo. Now you see why I was attacked, vilified, and cancelled back then, no one agreed with me. I even received email threats, that I saved, to stop posting my, crazy ideas questioning Buffett, I'm serious. If you have the searching skills to go back to the fools board 2008 to 2011 you might read some interesting posts. The good old days, Jim was there, rational walk, David Rolfe, toddfinances, dividends, webrules, salty, hbird, beach Laywer , and many other fine people. That should get you up to date, plus those are my opinions of buffetts true intentions, I have no idea if any old timers agree with me even today? Take care and good luck, partner. Btw, I'm not proof reading this, which is scary, I gotta go. Peace.
No. of Recommendations: 1
He's always talked about his canvas and that it's about growing it and it being his life's work,
Personally I'm happy with this approach. Go out and find another Apple if you can.
There are a few opportunities I've been left scratching my head over in recent times, he could've loaded up on Alphabet at sub 100 he could've bought Meta at scale in the 100's, they seemed like two obvious examples to me. Two I purchased (no bias) yet he was buying HPQ etc.
No. of Recommendations: 1
The secret sauce at brk has always been the fact that Buffett and munger have generously worked for their partners for 50 years, free!! No dilution, no options , no huge salaries etc. Not that I try to be the most popular poster in Brkville, but the notion that Buffett has been a great capital allocator the past 25 years is folly. When he bought ibm, I argued he should be buying and promoting brk not ibm. Toddfinance and others weren't too happy with my opinion, I'm laughing just thinking about it. I'm curious, what do you see as a catalyst, to generate new demand, for brkb, going forward? Thanks.
No. of Recommendations: 5
Sir, this is a Wendy's.
No. of Recommendations: 11
Well IMO it's exactly as you've just stated, you get Warren Buffett and CM for free. However I consider that recent demand and popularity in Berkshire is because of the Apple investment "his best ever".... this likely also having brought a new generation of investor interest.
You're also correct that his asset allocation has been mixed but it's a few winners that have produced the stellar returns, like apple, Coke, Geico. Mohnish Pabrai has a good lecture on YouTube discussing this where he states that after talking to Charlie he said something like out of the 200 or so investment decisions, take out the the best 12 and performance would be so so.
Some additional thoughts.
It used to be the case that there was a greater discount to Berkshires valuation due to Warren and Charlie's age, all the succession stuff that was dragging on for years. This was still present after the succession discussion was resolved however the valuation (demand) has been bolstered by the buy backs and popularity of the stock through the Apple story in my opinion, the buy backs though are a token gesture IMO, he'll not undertake a material amount as he'd rather add to his canvas.... the buybacks keep people happy and valuation propped up somewhat.
When you think about those 12 decisions, the opportunities going forward for stellar returns are less as it'll be hard to find anything like Apple again to move the needle, (caveated by saying, in the current market) there'll be a sell off and bargain prices again but they may not longer be with us.
I would still like to hear a lot more from T&T, all I've really heard is one 45 min talk at the Nebraska furniture mart, id also be interested to see the breakdown of their portfolios and returns in the annual letter. Also will their mantra be growth or merely preservation of wealth going forward and how they do they see investing globally vs Buffett eg would they be picking opportunities in China right now?
Personally Berkshire is still my largest holding but I've diversified away into other stocks Alphabet is my second largest, Meta,DIS and China (Tencent, BABA and JD) and some UK house builders. I'm perfectly happy with this I was having more sleepless nights thinking about Berkshire and single company risk (having 95% invested). The reason being on the old motley fool UK boards there was a guy called Jim Susan
who used to post on the lloyds board, his equity portfolio was entirely lloyds banking group (he liked dividends) being retired etc. He would write long rambling posts with stories about how it'd been around for 100 years and was a dividend champion etc etc, the motley fool would always push high dividend portfolios but there was no analysis about the underlying company, I realized out and about talking to people about stocks that everyone thought like this if they were interested in the stock market. Anyway, during the GFC lloyds were bailed out and shareholders wiped out. I never saw another post from that guy again, he would regularly get 100 plus likes so I assume he had many followers who did likewise. All those boards have gone now, lost to history but I still have the memory!
No. of Recommendations: 1
Hi Blackswanny,
Since you write about UK stocks, I assume you are based there. Many UK stocks are very cheap compared to US peers.
One stock that I have a small position (0.5%) in is Legal and General, the insurance, pension and asset manager with a home builder thrown in. It is growing its US life insurance business, which I am not sure is a good thing. Higher interest rates should help it. Dividend yield is over 8% and looks safe and growing. Some of the terminology and accounting they use in their financial reports is too complex for me to follow.
Share price seems stuck in a range for years even when underlying trading results are good. Is this all Brexit related or is there more to it? British stocks don't get much respect these days. Even Buffett seems to have stopped hunting there sfter his Tesco missteps.
Would love to here your opinion on L&G. Thanks.
No. of Recommendations: 6
UK based.
Truthfully I have no view on Insurers or bank stocks and I just put them in the too hard pile. The only reason I'm invested in Berkshire is because of Warren Buffett, I have no handle on the insurance risk or operations which IMO could easily be mismanaged if WEB and AJ depart..... I have a very small holding in BOA purchased at $28 (tracking Li Lu and looking at valuation)
I deal with Cala and Inspired Villages Group in a business context (owned by L&G), they also had L&G homes which was their new modular housing division, (this disbanded and merged into Cala after modular building didn't really take off here in the UK and their factory had issues). They also have a build to rent arm. They've pumped a lot of money into these business and have been aggressive in the land market buying new sites but have no ideas on ROE and ROI. I just transact with them. The British Government have an obsession with the UK property market and it's a vote winner, they seem to like to work hand in hand with large British insurers and pension funds to invest. Eg BTL market encouraging institutional BTR and propping up the market with help to buy etc etc but it creates artificially high pricing IMO. Everytime the government meddle it creates inefficiencies. Now we have overextended first time Buyers and negative equity, sky high rents and limited supply. (I also have BTL and rents have jumped 30% but I have higher mortgage costs to service) landlords are selling up and homelessness is now increasing,
Other than that I bought a basket of housebuilders at recent 5 year lows partly because of valuation but also because I deal with them all and can say I'm part owner.
Other than that I generally avoid investing in the UK, it's a basket case as far as I'm concerned I get much more excited about opportunities in the US and China.
Being in property I've jumped in and out of a few commercial property companies from time to time based on price to Net Asset value, I usually keep an eye on British Land, Land Secs and Shaftesbury but don't currently own any.they're all reasonably attractively priced IMO atm however they keep writing down their asset values year on year so one to watch out for. If you are to invest in house builders on NAV also beware of them writing down their land banks. I learnt a lot about them watching during the GFC.
No. of Recommendations: 10
"There are a few opportunities I've been left scratching my head over in recent times, he could've loaded up on Alphabet at sub 100 he could've bought Meta at scale in the 100's, they seemed like two obvious examples to me. Two I purchased (no bias) yet he was buying HPQ etc."
I am not commenting on the rightness or wrongness of those purchases/non-purchases, but I am willing to bet the reason Buffett made the decisions he made at those times had a lot to do with how the share counts of those companies were growing or shrinking at that time. Buffett likes to see his stake in a company grow (or at least stay stable), he doesn't like to see his stake in a company get diluted due to an ever increasing share count.
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No. of Recommendations: 0
Keep something in mind. I doubt anyone here would argue that brk is crazy cheap today. However, Years ago when brk often traded close to BV or below BV, every Buffett investment should have been judged , in part, with respect to the, opportunity cost, vs just buying back brk. Buying 13 billion ibm vs buying brk 13 billion brk , may have been a 20 billion dollar plus , opportunity cost, error. Did you have an opinion of the Tesco buy? Their stores in America were a disaster, another huge miss. In 2006 when Buffett disclosed the donation to the Gates Foundation I immediately posted brk should have the, right of first refusal, on all Gates F sales. That would have presented an opportunity to invest tens of billions in brk, without having any impact on the markets. Those shares never would have seen the public market and would not have increased the float. Buffett was getting heat for lagging spy, finally agreeing to split the stock and authorize a buyback was a tactic used to, goose the stock higher. He never wanted to buyback brk, his mindset was larger canvas, not higher stock price. Eventually a bell went off, hey, I'm the largest seller of brk every year, WHY should the foundations enjoy proceeds from sales at BV, if they can get 1.3 xs BV, with a few, shareholder friendly moves? I'll never understand why Buffett was so resistant to buying back brk , which offered near certain risk free acceptable long term returns ?
No. of Recommendations: 5
Didn't he say he wished he'd never bought Berkshire and just kept investing privately with clients and he'd be better off? Maybe it's not his top priority and prefers his "project" of acquiring companies eg Burlington because he likes trains etc.
If I was in his position it'd be much more fun acquiring and owning more rather than just buying back stock. The share buybacks thing is a token gesture and keeps the share price propped up somewhat but he's not all in he prefers to acquire and sit on cash waiting for an opportunity, perhaps.
Yes I owned Tesco, I've also previously been to their head office and met their property team when they were acquiring and developing new sites. They had that period in the 90's where they swept past Sainsburys with massive growth on the back of clubcard, they kinda maxed out it the UK (saturated) and started going overseas, (China US) and it didn't work out, then at home Aldi and Lidl started expanding across the UK and taking market share, Tesco had to lower margins and stopped expanding and had to sell off loss making divisions. They also diversified into restaurants, garden centers, banking and property portal websites. You kinda know they're "lost" when they start doing that. I sold out at break even taking dividends after a few years. They've never recovered and won't do either.
Studied retail quite in depth and I'm not a great fan overall.
No. of Recommendations: 0
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Seems to me he left out a major reason to be bullish brk. The days of easy cheap money are over. IF a whale becomes available, not that many other buyers can put together 40 billion that quickly or that cheaply. The RISK, is he makes another, questionable buy decision. Obviously, he isn't going to buyback brk aggressively at these valuations.
No. of Recommendations: 2
My view on companies / management after observations for years is if you don't like what you see, sell and move on. There are plenty of other opportunities.
No. of Recommendations: 0
This is from John Mauldins weekly letter. Those of us who are long brk, hope he and Buffett are very right. '' The Future of Energy
Long-time readers will know that I am bullish on energy (oil and gas in particular), precisely because the ESG movement, including numerous governments, is limiting both the amount of money and places that can be drilled for oil and gas. Economics 101 says that if you reduce a supply of something that has an increasing demand the price is going to rise. Felix Zulauf and others at my conference were talking about $120-$150 oil next year. In a normal world, that shouldn't happen, yet it is. I am taking advantage by becoming a partner in an oil operating program'a rather large change for me, as I had to close my broker-dealer firm in order to do so.
As you have seen above, my risk tolerance is likely higher than most. Even for those who share my views on energy, a less risky path is probably more appropriate for most people. You can invest in high-quality, dividend-paying energy stocks and focused ETFs. Rising oil prices, if I am right, should benefit those investments.
For those with true risk capital, I would invite you to see what we are doing at King Operating. We are physically drilling for oil and gas in older, underdeveloped fields planning to improve their value. Typically, the older fields were all vertical wells, but you can improve the value of that old field by using modern technology and doing horizontal drilling and fracking. It is similar to buying an older apartment complex in a great neighborhood, upgrading and renovating it, raising rents and then selling it to someone who wants to be in the apartment management business.
Our goal is to increase the proven and probable reserves in these older fields using modern technology, demonstrating the potential for the field. Let's say there are 100 potential wells in a field, we might drill 5‒10, creating proven and probable reserves and taking some of the risk of drilling in older fields. Larger companies are quite willing to pay for that reduced risk plus proven reserves and that is what their shareholders want. (Oil and gas is a risky business and past performance is not indicative of future results.) It's more complex than that, but that is the essence.
I am putting the finishing touches on the first sections of what is a series I now call 'The Future of Energy,' in addition to several other papers I have done and one where I explain why I am working with King Operating.
Starting next week, I will be doing 1‒2 webinars a week that you can join and plans are being made to visit multiple cities over the next few months where you and I can sit down and talk energy (and some macro of course!).
You owe it to yourself to understand the changes that are coming to the energy sector and to explore how you can benefit from them. In this and other papers my complete intention is to give you a fuller understanding of the multiple ways that you can invest in the oil and gas industry, and why I have chosen this particular approach.''
No. of Recommendations: 34
Umm [ on Berkshire not purchasing Google and Meta sub 100 ]
I am not commenting on the rightness or wrongness of those purchases/non-purchases, but I am willing to bet the reason Buffett made the decisions he made at those times had a lot to do with how the share counts of those companies were growing or shrinking at that time.The reason might be even more straight-forward. Buffett doesn't have confidence about the durability of Google's earnings, and Buffett has even less confidence about Facebook's earnings, one the very long-term. I'll focus on Google as it is the firm they are more likely to purchase of the two. Charlie has expressed that he believes Google has an extremely strong moat, which is to say that it has durable earnings, but I cannot recall any comment by Buffett himself about Google having a strong moat. If you have a reference to it, please let me know. He has made repeated comments about how excellent the business model is, but he is very specific with his words and if you listen closely it is always referencing that it would have
been a good investment in the past, and he admits missing it, but he does not express an opinion about how the business will be in the distant future. Conversely, he has made many comments about this being difficult to predict (in his view).
In the way I define Steadfastness, Google is Steadfast for many people, but not for Buffett. Steadfastness is a function both (i) the fact of how earnings ensue, (ii) and the observer themselves. In particular, Steadfastness requires:
1. No reasonable chance of the business going away completely in 40 years. A well made bridge continues to be useful after 40 years, but high tech data centre ('now' it is high tech) might not be after 40 years.
2. The earnings remaining above
some lower bound that you can write down today (even if using some low bar) after 20 years. This lower bound (not the central expectation) is also used for the IV10/price calculation.
3. The above being appraised by the particular person in question. This is sometimes the most overlooked part of the definition but is equally as important as the first two. When the quote halves, such as the atmosphere of DG now, you want to be sure that you appraised the Steadfastness (not only intellectually, but internally and viscerally - you really understand the business) so that you do not change your opinion about the longevity of the business as a section to the market's behaviour itself rather than any significant change in the business's long-term audience and earnings durability.
When Google was quoted with a market cap of $200 billion, Buffet remarked: "It is not hard to see that Google is phenomenal company. Google is valued at $200 billion in the market so to make 14% per year it has to be worth $400 billion if 5 years. It may very well be, it may be valued at 5 or 6 hundred billion, but I'm not smart enough to figure that out. In tech you get change and the question is who is the best at predicting change, and I'm not very good at that". He then continued to remark at length how he cannot predict whether other companies will take business from them.
https://www.youtube.com/watch?v=B8594aLZgRo (the above quote from 2:00).
If Charlie managed Berkshire's capital allocation alone, it would not surprise me if Google was not purchased earlier, or even in recent years. My impression is that they question each other as litmus tests and whilst they have a sense of autonomy, in the end they tend to make the large purchases pretty much only on consensus.
- Manlobbi
No. of Recommendations: 0
Yes, regularly discussed. I've watched a few Bill Ackman interviews recently where tech and disruption was discussed.
As it's hard to predict this is where metrics come in for me, identifying increasing revenue, eps, cashflows, decent roe / roi without too much debt. On a 3 to 5 year basis, then looking at the cash flow / EPS on a last 3 year average basis as a starting point and investing on the basis of projecting those forward 3 to 5 years.
That's how I invested in Alphabet and Meta.
The old days of looking out 40 years are long gone and value investing has changed (as Howard Marks says)I also plot 10 years as id ideally like to hold that long but a decade nowadays is like a century pre modern day era.
Same applies to Apple 🍎🍏 IMO.
No. of Recommendations: 7
'The reason might be even more straight-forward. Buffett doesn't have confidence about the durability of Google's earnings''
I agree, Manlobbi. WEB seems to really value near certainty over 10+ years, and he sets such high filters, processes, patience and discipline prior to building a large position.
Interesting, I'm totally fine with WEB not building a position in Alphabet even though I have, like many here, been adding to a personal position for years. It was WEB himself that actually facilitated me to add to a few positions when he commented years ago about the 'Big 5' back then having incredible business models and necessitating relatively small recurring reinvestment unlike the old steel, railroads, oil and other industrial businesses.
META's market price, for instance, was freefalling over 75% a year ago and I for one was glad he had never built a position, for many reasons. His high hurdle and enormous position of Apple has made me more reluctant to trim the position (despite relatively rich valuation) given his vision of its ultimate birds in the bush, and WEB has much more clarity than I do. Really appreciate his incredible discipline, risk aversion and nearly always staying well within his circle of competence. Will be interesting to see how future management compares wrt these qualities.
No. of Recommendations: 1
<"...In tech you get change and the question is who is the best at predicting change, and I'm not very good at that">
For example, if someday metaverse become the new Internet where most people would conduct business, communication and search, new search engine leader would emerge and google would be in trouble. Recent ChatGPT is another example although it's unlikely to take over search.
No. of Recommendations: 0
Or phones and tablets.....
No. of Recommendations: 3
No. of Recommendations: 1
...you get Warren Buffett and CM for free.
True, but I have to wonder how much Charlie has done at Berkshire in the last two decades or so.
Seems to me that Buffett has always done the work and made the big decisions.
Charlie has been a sounding board, perhaps?
"My idea of a group discussion is to look in the mirror" - Warren Buffett.
IIRC Buffett said he didn't consult Charlie before buying General Re.
No. of Recommendations: 3
Interesting. Berkshire's price is going through the roof - and nobody on the Berkshire forum is really interested in that, as if it's taken for granted. If I look at it's longer term (10+ years price performance/chart in relation to earnings/book value) I absolutely do not take it for granted but think it's unsustainable, having gone clearly ahead of itself and being 10-15% higher than it "should" be, with unavoidable consequences: Flat or falling price for quite some time, whether starting tomorrow, next week, next month or whenever - with resulting returns from here for the next 1-2 years being negligible.
Call me a pessimist (the future will show whether pessimist or realist :)
No. of Recommendations: 10
"and nobody on the Berkshire forum is really interested in that"
As a high eight figure holder of Berkshire, I'm keenly interested.
No. of Recommendations: 0
Talking of racking up gains.
Have you heard the story of Rakesh Jhunjhunwala? Turning 25k borrowed on credit cards into $7bn.
https://youtu.be/wz8N5CkTA2w?si=bmLyqnGOczQb3FnuMohnish vid time stamp 1m.58.
These are the sort of compounders I'm looking for!
Thought it's a fantastic story.
No. of Recommendations: 1
Flat or falling price for quite some time, whether starting tomorrow, next week, next month or whenever - with resulting returns from here for the next 1-2 years being negligible.
So would you recommend I sell non-txable interest and park it somewhere with non-negligible returns for the next 1-2 years?
No. of Recommendations: 0
No. of Recommendations: 1
"and nobody on the Berkshire forum is really interested in that"
As a high eight figure holder of Berkshire, I'm keenly interested.
Indeed. Count me as keenly interested.
Not doing anything about it, other than planning to send a few to our Donor Advised Fund (where they are sold).
No. of Recommendations: 3
'So would you recommend I sell non-txable interest and park it somewhere with non-negligible returns for the next 1-2 years?'
Good question which I am contemplating as well. Never sold a share in 12 years but considering a trim around $385 as I have recently entered the draw down phase and am on board with Jim's 'annuitization' and trying to time a more 'fully valued' draw down trigger if one has a large BRK position.
I think we had a poll last year when BRK was $360 whether it's price would ever dip under $300 again- I got it dead wrong as Mr. Market had it dip 25% from its high I believe. That being said, it will be painful to sell any!
No. of Recommendations: 4
As a high eight figure holder of Berkshire, I'm keenly interested.
High means at least 60,000,000, right?
If that's the number of A's you hold: Respect!
If you hold only 60,000,000 B's though: Don't worry, we all started small.
No. of Recommendations: 2
C'mon. You should know me well enough to know I don't recommend anything. I am and will stay an amateur in this investment game, but I like to play "catalyst" and hoped to ignite a more profound discussion with our luminaries* participating.
*We have many more than Jim and Manlobbi, but they are mostly quiet: DTB, Nola, bluehorseshoe, Oscar, Lear, Uwharrie etc. etc.
No. of Recommendations: 2
I chalk it up to being fortunate enough to be a top 100 exec at a tech company with options, performance shares and for the last 10 years an uncapped bonus plan
Smart enough to diversify into Berkshire opportunistically over many many years.
No. of Recommendations: 4
Just going from memory, Berkshire's stock price tends to outperform the market right before the stock market in general changes directions and goes lower. I remember right before the 2008 crash, Berkshire actually zoomed to a new high. It has happened similarly several times. Not a prediction - that would be worthless anyway - but it wouldn't surprise me if this time works out similarly.This appears to have been the case - this link shows a chart of BRK vs SPY recently
https://api.wsj.net/api/kaavio/charts/big.chart?no...
