Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 52
In order of importance.
1) Charlie says that any time you have a situation where your money is compounding, you would be a fool to interrupt it.
2) I don't want to pay massive taxes on stock I have owned for decades
3) Over those decades I have made millions but also lost more potential millions by trying to be smarter than I am. I have sold BRK when I thought the stock was "over valued" and had BRK stock called away on covered calls I have written. I'm still smarting from the errors and promised never to repeat them.
4) Warren already "lightened up" for me and all shareholders by moving a third of market cap into cash.
5) Warren's the person I want handling my money and navigating these uncertain times.
6) Over the past decades I have watched so many assets trade not for 20-25% more than what I thought they were worth, but for numbers that to me are insane. Think $100,000 BTC, multi million dollars for a single baseball card or comic book, stocks with no earnings trading for multi-billion dollars, and even Walmart at a recent PE of 60. The idea that Warren is a buyer at 1.4 x BV, and that at 1.75 BV it's grossly overvalued - and we should head for the hills and take a huge tax hit - to me is folly.
7) I don't understand the logic that "this time is different" due to the changing current political climate and therefore I should sell holds any more water than "this time is different" and that after 30 years of watching BRK plod along at a steady rate and reasonable valuation, why it can't have it's moment in the sun as the rest of the world catches on to what us on the board have known all along are the positive attributes to BRK ownership and trade for 2x BV or more for a period while the underlying business continues to compound.
One final note...I truly love this board and being able to "congregate" with like minded value oriented folks. I highly value the different opinions shared and I'm appreciative for them. But sometimes I can't help but think of what Charlie says about people that try to belabor a point or belief. Often it's really just an attempt to convince themselves they are taking the right action. Which, by the way, is why I greatly hesitated to lay bare my current stance here. But I guess I wanted to present another view and maybe keep people from selling in regret as described in #3 above.
No. of Recommendations: 15
1) Charlie says that any time you have a situation where your money is compounding, you would be a fool to interrupt it.
There is a difference between completely selling out of a position and selling a bit to reduce dependence on a single business over which the investor has no operational control. Adjusting portfolio weights is just prudent risk management in my view. It is no different to what Buffett did with Apple when he took advantage of high prices to substantially reduce the holding which had grown to 50% of the public equity portfolio. It still remains Berkshire's largest holding. Buffett has expressed regret that he didn't act similarly when Coke was very richly valued in the 1990s as well.
In my case Berkshire is still 33% of my portfolio but I find the rational way to act is to take occasional action when market conditions are favourable and dial the position size up or down. That is not interrupting compounding and indeed may be a way to improve the compounding characteristics of the portfolio as whole.
No. of Recommendations: 29
I could not agree more with everything you wrote, because it’s what Buffett and Munger have taught us. No one wants to believe what Buffett and Munger have repeatedly professed. But it’s exactly what you have shared.
The stock is relatively expensive as it’s been several times in the past, though not nearly as expensive as it was around the Gen Re stock swap—but in almost all cases it’s not wise to sell businesses that regularly and consistently grow intrinsic value. Buffett also says it’s a big mistake “to be in a rush”. Timing, leverage, options, etc…Munger is more colorful in condemning such behavior.
Everyone it seems wants to engage in what Buffett suggests is a foolish attempt to outguess Manic Mr. Market. Rationalized by a little extra time: “but hey, I’m buying LONG dated options”. Or “ the stock was overpriced I thought Id buy it back cheaper in 6 months, and don’t tell me this is wrong—I’ve done it before”. Just hold the stock…..because…..
And then some folks here understandably went HEAVY cash not long ago when the stock was only 5% under IV vs it’s “normal” 10-20% below IV because you see these nice charts that clearly demonstrate “it’s worked that way before several times in a row”. Well, perhaps not this time…it’s just run away from you and NOW it’s Trump’s Fault or Putin or High Frequency Traders…or, what I’m seeing a lot—the world is a mess has macro problems worse than the Depressions , recessions, World Wars, Famines, nuclear detonation, 9/11…that have defined “normality” the past single century. It’s worse with 2% GDP, stubborn 2.8% inflation, and 4.1% unemployment. And Tariffs! It’s a disaster. Get out! Classic. Textbook.
The numerous biases that Munger warns us about are alive and well sometimes here…and everywhere
Charlie: just hold the g.d.stock.
Warren: if you have an IQ of 160, sell 30 points you don’t need them.
It’s simple. But it’s not easy.
No. of Recommendations: 1
<<I have sold BRK when I thought the stock was "over valued" and had BRK stock called away on covered calls I have written. I'm still smarting from the errors and promised never to repeat them.>>
When come close to the expiration day and you think the stock is not overvalued, or in a upward trend, you could buy back the calls. I did that a few months ago when the brk.b is about $460, lost $1000-$2000 per call, now I'm selling the calls again.
No. of Recommendations: 2
Occasionally a post deserves my next 7 or 8 recommendations. Very well said, sir.
No. of Recommendations: 10
I could not agree more with everything you wrote, because it’s what Buffett and Munger have taught us. No one wants to believe what Buffett and Munger have repeatedly professed. But it’s exactly what you have shared.
I get such a strong yearning to sell when it got to the absurd price of 500. But today it hit 530.
I played a little mental game. What if I don't sell today, what might it be in 10 years?
Well, what was it 10 years ago?
$141
Oh, what was it today? 530?
What was it when I retired in 2006?
$64
So if we go by past history, what is it likely to be in 10 years, 2035?
Low end maybe $1165.
High end maybe $2000.
Yeah..... $2000 is what BRK (now BRK-A) was when I had $2000 in my IRA and passed it because it was crazy to buy one share of a stock with everything in the IRA.
No. of Recommendations: 9
<<Yeah..... $2000 is what BRK (now BRK-A) was when I had $2000 in my IRA and passed it because it was crazy to buy one share of a stock with everything in the IRA.>>>
I hear you! I bought an A share (BRK then) for $6,950 after it rallied a lot from the $3500-$4000 range. And, yes, people told me I was crazy to spend as much as it cost to buy a good condition used car for ONE share of stock. One person told me I was buying a collectible not a rational stock investment at that price.
There were times I was seriously tempted to sell when it was clearly overvalued. It ran from $9,000 to $16,000 I recall pretty quickly—going from 25% undervalued to 25% overvalued in short time. How do you think THAT felt? Over time it didn’t matter at all. Same with the run up that prompted Buffett to swap a large chunk of Berkshire in return for Gen Re. If Buffett’s swapping his overvalued stock out—why should I hold? We’ve had periods like this one before. The lesson is it rarely, if ever, makes sense for LONG TERM holders who plan to own for many years in the future—to sell years early.
Not to be confused with what many here, including me, engage in: periodic “name your lumpy dividends”. Money you live off—you might peel off 2 to 3 years or more of “dividends” at these prices.
No. of Recommendations: 14
I don't understand the logic that "this time is different" due to the changing current political climate and therefore I should sell holds any more water than "this time is different"
I think you make an excellent point. By the stock, put the certificates in a drawer, and check every 10 years or whatever.
This is LTBH. Studies show that individual investors trading to goose returns by selling when they think it is high-ish and buying it back when the think it is low-ish typically lose out on returns by doing so.
We happen to have some interesting discussions here about HOW to try to beat the averages by trading in and out. But this is definitely not LTBH anymore, and it is not at all clear we are doing ourselves any favors by "knowing" all this extra stuff.
Cheers,
R:)
