No. of Recommendations: 10
'Will Buffett's Berkshire Continue To Compound Money Robustly?'
https://seekingalpha.com/article/4628599-will-buff...Always a great read imo. Excerpt:
'Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is both my largest investment and the company I know best. It's also a very safe stock. Whatever you need to watch as a Berkshire owner, you don't need to worry about its survival during hard times. As Buffett himself has often said, nothing short of nuclear war could do critical damage to Berkshire. This is in part because it's a diversified conglomerate drawing earnings from disparate sources and partly because its pieces all focus on quality. Berkshire is ideally constructed to compound your money. In operational terms, it's one of the most decentralized companies that exist, with its units interacting with the small headquarters in Omaha (about 30 people) only if something is going wrong. When it comes to capital allocation, however, it's highly centralized with all cash not needed in its various subsidiaries returned to Omaha to be allocated to other subsidiaries or new investments by Warren Buffett and his lieutenants.
I have owned a position in Berkshire through thick and thin for about 25 years. It has retained its sturdy performance during tough market declines, slow periods without acquisitions, and the periods when acquisitions like Burlington Northern and large stock positions like 5% of Apple (AAPL) were proving to be transformative. I also paid close attention to the way Berkshire performed during the dot.com and Mortgage Backed Securities crashes, the two major crises of the last three decades. Short answer: Berkshire did well and protected your capital as I wrote in this piece which amounted to a stress test for Berkshire. In the dot.com crash, Berkshire stock went down briefly then turned up on the exact day the Nasdaq 100 topped out and kept going up until 2008. During the MBS crash, it followed other financials down but rallied vigorously to new highs as the market realized that its operating earnings were holding up. Buffett, meanwhile, was doing lucrative deals that shored up various deeply troubled companies - Bank of America (BAC) was the one with which he exercised his options and built a large position. He also acquired the untroubled Burlington and Northern Railroad a year after the bottom of the crisis.
Berkshire does not pay a dividend. Instead, it buys back its own stock over periods when the stock price makes it rational to do so. That makes Berkshire an ideal place to compound your money without the IRS raking its share off of the top. I'm one of the more than 95% of Berkshire shareholders who have no desire to receive dividends, my estimate is supported by a 2014 vote in which 97% of Berkshire shareholders voted no to dividends. Shareholders can easily manufacture their own dividends by selling small amounts of stock, and they retain their share of Berkshire ownership up to the amount of cash buybacks done in a given year''
