Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 0
Are we done with picking mediocre stocks yet? Like Bank of America, in particular.
The next Berkshire CIO will do spectacularly better by just buying the top 1000 market cap stocks in equal amounts and holding them. Maybe put 90% of investment portfolio in those, and pretend you can pick stocks with the other 10%, still tens of billions of dollars so some real money.
Whatever past calculations they did, they missed the non-tech stock I bought, which compounded at 24.4% over the last 14.5 years. I am sure a lot of the upside is due to luck, but some of it, without bragging, due to skill. ie foreseeing that it was dirt cheap and safe(ish).
I won't even mention the tech stocks which have been, are, and will be multi baggers that Berkshire, out of fear and ignorance, will continue missing out on. Oh well. I can live with that.
No. of Recommendations: 2
I won't even mention the tech stocks which have been, are, and will be multi baggers
Re the "and will be": Which ones, in your opinion?
No. of Recommendations: 0
" I won't even mention the tech stocks which have been, are, and will be multi baggers that Berkshire, out of fear and ignorance, will continue missing out on. Oh well. I can live with that." Good morning, with all due respect, if you own brk expecting Buffett to make big bets in tech , you might own the wrong stock, no ? Since we own SEE's and so much KHC, I was hoping they might buy a small basket of pharma companies fighting obesity, since we have done our share in causing it, but who knows? Maybe the secret stock is Lilly, lol, I can dream right?
No. of Recommendations: 0
I share your view on BAC but we gotta give it up for the Apple stake. Especially the sizing
That said, putting a hunk of the cash in an index isn;t the worst idea.
No. of Recommendations: 10
The next Berkshire CIO will do spectacularly better by just buying the top 1000 market cap stocks in equal amounts and holding them.
It would be hard for Berkshire to buy that portfolio in meaningful quantities, as the 1000th biggest firm has a market cap around 1/500th the size of the largest by market cap.
There is a case perhaps to be made for "rank weight".
$1 worth of the 1000th biggest company, $2 worth of the 999th biggest, $3 worth of the 998th biggest, up to weight 1000 for the biggest.
(or maybe add a small constant: using weights 10 through 1010 gets you about the same ratio of 10th-largest firm to smallest firm by both market cap and this rank weight)
But I agree it would not be such a bad investment strategy*, provided (and only in the case) that it was rebalanced to the target weight from time to time. If you let it be for too long, it gradually becomes more like cap weight strategy, which has a huge disadvantage: whenever anything is overvalued, you have a disproportionate number of dollars allocated to it, and vice versa. And Berkshire would never be in a position to rebalance, neither in practical terns nor philosophically, so maybe that's out.
Jim
* The S&P 500 has done extremely well in the last few years, so it has been a hard target to beat.
But for whatever it's worth, imagine someone buying all the Value Line stocks in equal weights every January, then holding them all for a year and repeating the process. Requiring only that each stock have a domicile in the US, and that it have known market cap and ROE figures. (The last two checks eliminate investment funds). This gives an average of 1279 stocks. Performance including dividends and after trading costs but before tax would have beat the S&P by 2.41%/year in the last 27 years. That's probably a very slight underestimate, as this one year hold test assumes that any bought-out or delisted company is held as cash until the next anniversary.
Taxes for this are quite a bit lower than you might guess. Things get sold for two reasons: no longer in the eligible list, which on average means they have not done well, meaning often a loss. And things that have done well and you're merely trimming the positions size. The gains and losses from that churn cancel to a certain extent.
