No. of Recommendations: 7
The other answers are good.
* Today seems to be a below-average moment to enter a position.
* But 20 years from now it will still look like a good entry price.
Here is the reason that I and others note that it's not a great moment to buy: the price seems to be somewhat higher than you'd usually expect given what the company is generally deemed to be worth.
Compared to the average valuation ratios seen in the last 15 years, using the price at the moment of $444.15 per B share:
Based on price-to-book value, you'd expect the price to be 13.7% lower
Based on ratio of price to peak-to-date book-per-share (a slightly better metric), you'd expect the price to be 14.7% lower.
Based on my own metric of fair value per share, you'd expect the price to be 17.5% lower.
In round numbers, at the valuation multiples typical of the recent era, you'd expect the price today to be something more like $368-383.
Maybe the old market values will not be typical of the present and future, but it's not a bad starting guess.
As you might expect, Berkshire's stock price also spends around half its time BELOW the average valuation level. Such a day will probably happen again soon enough. It's pretty much a sure thing that the stock price will one day be lower than today's level. And probably (but at all not certainly) it will get enough lower that it makes a difference you'd notice. What I mean by that: If you managed to buy at (say) $395 instead of $444, you'll be 12% richer even 20 years later. But only if today's purchase represented a lot of your future wealth.
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FWIW, it might be an OK time to start a covered call position in Berkshire.
But that's pretty elaborate way to go about life, for people who think they are smart. (not to be confused with people who are actually smart)
Jim
