No. of Recommendations: 1
A) Valuation: Having been out of favor during the .com mania BRK was strongly undervalued during the .com crash. Not so during the GFC (and not so now).Berkshire was strongly undervalued (about 1.2x book?) during the .com crash because...well, never mind :-)
B) Limited vs. Systemic risk: The .com crash was limited to the dramatically overvalued parts of the market, of which BRK was not a part. The GFC represented a systemic risk, a risk for the whole financial system.This Morningstar piece (trying to explain 2025) has a nice chart of "Cumulative Returns (%) During Market Drawdowns":
Why Berkshire Hathaway’s Stock is Beating the Market in 2025morningstar.com - Reasons berkshire hathaways stock has been faring wellQuote:
Moreover, Berkshire Hathaway has often (though not always) held up better than average during market drawdowns. As shown in the chart below, the firm’s shares actually rose during the tech-stock meltdown that started in early 2000. The stock also held up well in 2022 thanks to its energy operations, cash reserves, and emphasis on lower-risk business lines such as insurance and consumer staples.Though perhaps the chart is a bit misleading. Berkshire did have an over 50% drawdown in the GFC. Start and end points...
We all hope Berkshire will hold up better or at least recover quicker. Different beast now, though.
