Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 7
I think it is safe to say there is not much buying going on among the board members, but by definition of a trade, someone is. I doubt they are buying in anticipation of a decline, or a five year real return of 1%. I'm trying to get inside their heads and can come up with few excuses... er umm, reasons.
Momentum? I know that people make money on pure momentum plays. I don't spend much time trying to figure that one out, but data people have shown that it can work with proper parameters.
Insurance pricing? Recent well publicized disasters have given insurance companies some great pricing power, and assuming they are good at risk analysis and not over-regulated, insurance looks to be a growing industry. Likewise in the auto sector, where filling the bumpers and windshields with various high tech sensors has driving the repair bills sky high. What looks like increased costs to insurers is also an opportunity to increase rates, and indeed, they are soaring. I don't know what percentage of BRK profit is insurance, but is it the perception that it can carry the entire stock?
Dumb money? In true Lake Wobegon fashion, we often hear about "the smart money". Everyone can't be the smart money, but no one confesses to being the dumb money. I've been there. I have to agree with Jim that the cold hard numbers are hard to deny, and that either things have to be "different this time" or people are buying with the Tinkerbelle approach, clap if you believe, no need for laying out your expected parameters.
Or am I missing something?
No. of Recommendations: 13
I think some of it goes back to this great quote from Peter Lynch......
"Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”
Like Charlie once said: "Timing the market is difficult. You have to be right twice - when to get out and when to get back in - in a game where it's difficult to be right once."
For me, it has always come back to just hold the damn stock!
No. of Recommendations: 5
Battleship going into stormy seas (diversified incomes, cash, management).
Do buyers expect it to produce returns over next 5 years. Maybe they are no longer comfortable with all their equities money in the S&P 500, Mag 7 but don’t want to get out of equities completely, so they find Berkshire a better option.
Valuation hasn’t mattered much to many groups of investors in a long time, so they might like the share price momentum. The cash optionally must be the main attraction though I would have thought.
Any rotation out of index and Mag 7, however small, might be having a big effect on Berkshire (one company and stubborn sellers…generally).
No. of Recommendations: 2
I'm not confident about a correction, but I have a hard time seeing much shorter term upside. I'm comfortable holding a big chunk of the damn stock, but I would be hesitant to buy more right now.
No. of Recommendations: 11
"A smart young man is said to have approached Mr. Rockefeller with the question, “Mr. Rockefeller, what do you think Standard Oil stocks will do?” After ponderous deliberation, the reply was, “Young man, I think they will fluctuate.”" -- Washington Post, 1924
Apparently the story is apocryphal, but still a good reminder : )
Sometimes it just isn't worth trying to figure out why prices are doing what they're doing. In the case of this bull market for Berkshire, all but 10% of the ~55% price rise in the last 3 years is simply tracking the S&P.
Jim
No. of Recommendations: 3
Most financial websites confidently list Berkshire Hathaway as having a P/E ratio of 12.x (almost 13 after the rally!)
It's, like, value, man.
No. of Recommendations: 11
<< but no one confesses to being the dumb money. >>
I'll raise my hand to that one.
I often try to think of myself as the "dumbest guy in the room" and
attempt to devise a survival strategy based on that premise. ;-)
-Rubic
No. of Recommendations: 1
“ Or am I missing something?”
Could it be that Mr. Market has decided to price Berkshire based on price to earnings rather than price to book? It sure looks that way. If so, this has a long way to go before the market decides it’s fully valued.
No. of Recommendations: 1
I think there have been a number of stories about how BRK stock has done this year vs SP500 so that is likely causing a lot of buying. You know people are always chasing the latest hot thing.
No. of Recommendations: 24
For me, it has always come back to just hold the damn stock!
For those that don't need to sell for living expenses and are still in the accumulation phase of life, I think Buffett's "think like an owner" is easier advice to follow than above, although Munger I am sure meant the same thing. All the hand wringing will melt away and clarity will dawn if you simply "think like an owner". Selling will not even occur to you as long as the business is thriving and long term prospects remain good.
The price squiggles are a mirage. The only thing that matters is whether the business stays on track to generate 5-7% Real value annually for decades to come, and that's the main thing to keep an eye on. The price will more or less keep up with the value and everything will be fine in the end.
No. of Recommendations: 2
The price squiggles are a mirage. The only thing that matters is whether the business stays on track to generate 5-7% Real value annually for decades to come, and that's the main thing to keep an eye on. The price will more or less keep up with the value and everything will be fine in the end.
Exactly. I’m much more interested in how Berkshire management is thinking about and dealing with the current political and possible economic chaos in the US, rather than be obsessed with the price squiggles.
No. of Recommendations: 9
"Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”
Like Charlie once said: "Timing the market is difficult. You have to be right twice - when to get out and when to get back in - in a game where it's difficult to be right once."
I have to admit, I tire of this pithy quote. It may be true for Berkshire, which bounces up and down within a fairly well defined range.
It is surely not true for stocks which are so far out over their skis that any minor tremor can amount to a landslide in price, returning them to earth. The (so called) Magnificent Seven stocks got a bump over the past few months, putting them pretty squarely in the stratosphere, and with the rumblings of inflation, recession, instability and uncertainty looming, look to be coming back to earth. (Mostly, anyway.)
Now they may be fine companies, they may prosper going forward, but if you’re looking at the market and the (already existing) correction, then standing pat and hoping for a quick rebound may not be the path to paradise. Frankly, I’d hate to be a big holder of Ford or GM right now, and there are lots of others where the not-so-obvious effect of tariffs and disrupted supply chains is probably not putting a smile on certain CEO faces.
But if you want to just sit and watch, great, you do you. Some of us have been talking correction for months, a few even hazard a guess that it could be worse than that.
Berkshire is different. There are some others, but the most of the market is a little tipsy at the moment.
No. of Recommendations: 2
In the past 25 years, I have experienced 3 times when the overall market drops about 50%. Right now, I would say the chance that may happen again in the next 4 years is about 30-50% (pure guess). It is true that going back to the market after it has dropped is not as easy as it sounds and sometimes you may miss the whole cycle, and end up worse off than not doing anything at all. Treating it as a probability and taking certain actions by percentage is better than betting for sure one way or the other.
No. of Recommendations: 9
“If you can’t stomach 50% declines in your investment, you will get the mediocre returns you deserve.” --Charlie Munger
I believe Charlie is right, and indeed, in 2008 I watched my IRA go down 50%. I sat tight, bought some things like BRK, and now it has rebounded more than ten fold. But that was 2008 and at my current age I really don't want to sit out a 50% decline, and mediocre returns will let me live out a better than mediocre life. I'm not too concerned about being right twice. I hit it right in 2009, and I've done a lot of selling recently, which will be close enough to right for me. Not that I'm out of BRK, I'm still sitting on a big chunk of it and my cash holdings are very close to what WEB himself is allocating.
No. of Recommendations: 10
Buffett said something subtle during last year’s annual meeting. I’ve been thinking of the 300+ billion cash on hand but Buffett quietly said that they’re allocating capital to 3 month treasuries. As he often has said, all decisions are made in relation to the next best idea. IOW, “Nothing measures up to the risk free 3 month stuff at the present moment.”. I wouldn’t call it cash!
No. of Recommendations: 5
I’ve been thinking of the 300+ billion cash on hand but Buffett quietly said that they’re allocating capital to 3 month treasuries. As he often has said, all decisions are made in relation to the next best idea. IOW, “Nothing measures up to the risk free 3 month stuff at the present moment.”. I wouldn’t call it cash!
It's the closest thing to cash as there could possibly be. Unless maybe something like $20 bills in a storage unit like in Breaking Bad.
He can't exactly open a savings account at FNBO (the largest bank in Omaha) and deposit $300,000,000,000.
