No. of Recommendations: 23
[Re: The hedge fund segment of brk] continues to underperform, is THAT on topic here? WHY brkb trades so strong is a total mystery?
Very much on topic, yes. And it may well be true that Berkshire-owned minority shareholdings slightly underperform the overall market, especially in a year/decade when the market is up sharply. So why might brkb trade so well, nevertheless?
It’s because brk is a lot more than a low-fee hedge fund of public stock investments. It’s an insurance conglomerate with uncallable leverage from insurance float, for one thing. It’s rational capital allocation by one of the best allocators, ever. Its a company repurchasing its own shares when they are cheap, but holding off from repurchasing when they are dear. It’s a company that makes investments with a margin of safety, which will tend to underperform riskier investments in bull markets, but will outperform in bear markets (which we may have again, some day.)
In other words, Berkshire can grow and has grown much faster than the value of its stock portfolio. It’s hitting singles and getting walks, not homeruns, but it gets to play innings with five outs every time it’s at bat, not three, so there’s less drama but it wins more games.
dtb
