Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 10
I ran some numbers for returns of brk.b vs indexes from the inception of B shares (May 1996 26 years) to today... only because I've been looking at the Nasdaq vs S&P.
S&P500 7.35%
BRK.b 10.2%
Nasdaq 10.4%
No. of Recommendations: 0
Take a 0.2% management fee for a Nasdaq index and it's identical to BRK. I found that interesting.
No. of Recommendations: 5
Have you analyzed the sources of Berkshire's outperformance? Here are just a few contributors:
1. Berkshire's equity portfolio, which makes up around half of IV, has outperformed the S&P by about 2 percentage points per year since 1996.
2. Float is about 29% of BV, which adds about 2 percentage points to the growth of BV and IV.
3. Berkshire's P/B has declined by about 1%/yr since 1996. The P/E on the S&P has increased by about 2%/yr.
4. Other contributors?
These are just rough numbers.
No. of Recommendations: 2
"Float is about 29% of BV, which adds about 2 percentage points to the growth of BV and IV."
The low cost float makes me optimistic that Berkshire will continue to outperform the S&P by about 2 percentage points. Even if Berkshire's stock holdings and wholly owned subsidiaries perform only the same as the S&P, Berkshire still has the advantage of low cost leverage.
No. of Recommendations: 6
"Even if Berkshire's stock holdings and wholly owned subsidiaries perform only the same as the S&P, Berkshire still has the advantage of low cost leverage."
If we're trying to predict Berkshire's future performance relative to the S&P, we also need to predict the return of the S&P. During the go-go years 1996-1999 the S&P 500 returned 26.4% to Berkshire's 15.0%, but durning the period 2000-2022 the S&P returned 6.3% to Berkshire's 9.6%. My guess is that over the next decade the S&P will have a relatively low return, maybe 5% or so, and that Berkshire will outperform the S&P by 3 percentage points or so. That's just a guess, but the point is that value stocks, and Berkshire, tend to outperform the S&P when the return of the S&P is low and underperform the S&P when the return of the S&P is high.
No. of Recommendations: 0
"S&P500 7.35%
BRK.b 10.2%
Nasdaq 10.4%"
You might want to double check the returns. I could be wrong, but I get
S&P 500, 9.1%
BRK-B, 10.1%
Nasdaq, 9.6%
