Berkshire Hathaway - Warren Buffett - Anyone own the stock?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.

Do you own shares of Berkshire Hathaway?

Yes
80
39%
No
125
61%
 
Total votes : 205

Berkshire Hathaway - Warren Buffett - Anyone own the stock?

Postby abuss368 » Fri May 03, 2013 3:09 pm

Most Bogleheads on this forum, including us, do not own any individual stocks. However, if their is one stock I constantly come across where the individual investor may own some shares, it is Warren Buffett's Berkshire Hathaway.

In fact, unless I am mistaken, I believe Rick Ferri posted an article on his blog a while back disclosing he owns shares in Berkshire Hathaway!

I would like to get some feedback if anyone on the forum owns this stock (and if you would like to respond about other stocks that is fine too) in addition to their low cost, diversified, index holdings?

If you own the stock, do you hold the Class A or Class B shares?

The company does not pay a dividend, but investor demand may someday result in a dividend being declared considering the impressive, ever increasing cash holdings (yes I did read Mr. Buffet's letter this year discussing why a dividend is not paid).
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Norris » Fri May 03, 2013 8:18 pm

I've owned both A and B shares and made money on both. I no longer own shares. I like Buffett, but like a fellow Boglehead stated some time ago: at the end of the day Berkshire is an insurance company, no more and no less. I just feel that owning the entire stock market through Vanguard Total Stock Market Index Admiral Shares and some REIT Index with 20+% Vanguard International is really all I want or desire on the equity side.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby StormShadow » Fri May 03, 2013 8:30 pm

A single share of Class A exceeds my entire investment portfolio. 8-)

So, no.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby pennstater2005 » Fri May 03, 2013 8:51 pm

I did own a little bit of the class B shares but sold to go all index funds. The amount I owned was too small to have any meaningful effect on my portfolio anyway.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby abuss368 » Fri May 03, 2013 9:00 pm

I thought Rick Ferri noted once that he has attended the Berkshire Shareholders meeting? Perhaps Rick will see this posts!
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby baw703916 » Fri May 03, 2013 9:01 pm

Norris wrote: at the end of the day Berkshire is an insurance company, no more and no less.


I can't think of any other insurance companies that own railroads. My point being that BRK is significantly less of an insurance company than it was 15 years ago.

I do own some BRK stock, but not a significant part of my portfolio. I reduced my holdings a few years ago, partly because a portion of my human capital is tied up in an indirect way to the company's fortunes.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby bottomfisher » Fri May 03, 2013 9:03 pm

Re: "Selling" Berkshire now while deferring capital gains ta

by Rick Ferri » Tue Apr 09, 2013 7:13 pm

I own BRK also. It's the only stock I own.

When I sell it, I'll do it in the first or second year in retirement - before collecting Social Security or taking distributions from my tax deferred retirement account. This will leave my taxable income at a very low level and thus I won't have to pay capital gains on the BRK sale.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Calm Man » Fri May 03, 2013 9:21 pm

I wouldn't invest a penny with that clown. Even if you did like him, how long do you think he will be around? I think the guy is almost 85.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Rick Ferri » Fri May 03, 2013 9:26 pm

I've owned the B shares since it was issued in 1996. Been to one meeting. When Buffet dies, people who don't understand the company will panic, the price goes down much lower than it should, and I will buy more. :D

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby MarkNYC » Fri May 03, 2013 9:31 pm

I think it's a mistake to view Berkshire as just an insurance company. Buffett doesn't view it that way. He views the collections of companies that Berkshire owns as comprising 4 separate businesses, of which insurance is one. The other 3 non-insurance "businesses" in 2012 had pre-tax earnings of over $9 billion.

I originally bought the A shares 23 years ago, then later converted the A's to B's so I could gradually cut back as Buffett got older, which is what I have done over the past 5 or 6 years. I think it's likely that Berkshire will continue to do well, even after Buffett is gone, but not significantly better than the overall market since Berkshire's size makes that very difficult. My Vanguard investing pre-dates my Berkshire ownership, so I would not be unhappy to transfer my remaining Berkshires shares to Total Stock Market if I could do so without tax cost.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby nodenuff2 » Fri May 03, 2013 9:36 pm

I don't have any but I help my MIL and I bought her B's about 10 years ago. Been good for her.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby TomatoTomahto » Fri May 03, 2013 9:41 pm

I own one A share and some number of B shares. I'm not sure that I would buy any today if I had none, but I'm somewhat reluctant to sell. It is the only individual stock that my wife and I own, other than restricted shares that she gets from her employer, which we sell as soon as they vest (in order to avoid the anti-diversification of owning shares of your employer).

As an aside, since I own both classes of shares and track my portfolio in Quicken, I notice that sometimes one will go up on a day and the other down. Since they're "identical" in the same sense that 5 pennies and a nickel are identical, I find it amusing.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Grt2bOutdoors » Fri May 03, 2013 10:16 pm

baw703916 wrote:
Norris wrote: at the end of the day Berkshire is an insurance company, no more and no less.


I can't think of any other insurance companies that own railroads. My point being that BRK is significantly less of an insurance company than it was 15 years ago.

I do own some BRK stock, but not a significant part of my portfolio. I reduced my holdings a few years ago, partly because a portion of my human capital is tied up in an indirect way to the company's fortunes.

Brad


They may have ownership in a railroad and other interests, lest we forget the money to make those purchases are derived from insurance and finance operations. It would only take a couple of major "events" for you as a shareholder to realize what business they are really in.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Grt2bOutdoors » Fri May 03, 2013 10:18 pm

Rick Ferri wrote:I've owned the B shares since it was issued in 1996. Been to one meeting. When Buffet dies, people who don't understand the company will panic, the price goes down much lower than it should, and I will buy more. :D

Rick Ferri


I'll join you, but we could be waiting a while.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Grt2bOutdoors » Fri May 03, 2013 10:23 pm

Calm Man wrote:I wouldn't invest a penny with that clown. Even if you did like him, how long do you think he will be around? I think the guy is almost 85.


Yep, after his commentary about how a certain gender is the key to leading the economy and country but he convienently left out the part about how he critizes the managerial style of a certain CEO who ran one of his "investments" and others along the way. He's losing it......
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby lethean46 » Fri May 03, 2013 10:27 pm

abuss368 wrote:Most Bogleheads on this forum, including us, do not own any individual stocks. However, if their is one stock I constantly come across where the individual investor may own some shares, it is Warren Buffett's Berkshire Hathaway.

In fact, unless I am mistaken, I believe Rick Ferri posted an article on his blog a while back disclosing he owns shares in Berkshire Hathaway!

I would like to get some feedback if anyone on the forum owns this stock (and if you would like to respond about other stocks that is fine too) in addition to their low cost, diversified, index holdings?

If you own the stock, do you hold the Class A or Class B shares?

The company does not pay a dividend, but investor demand may someday result in a dividend being declared considering the impressive, ever increasing cash holdings (yes I did read Mr. Buffet's letter this year discussing why a dividend is not paid).


Yes. I am invested in BRK.B. The stock has been very undervalued since the crash. However, there has been a big move in the stock price over the past year, May to May. And while it is no longer the "bargain" it was, it is still priced on the low side historically based on price to BV. That's a super simple metric to measure BRK price. Historically, 1.5 Xs BV was an average multiple, prior to 2009. It is currently at 1.35 Xs BV of $78/BRK.B share. (The price had been so low, for so long - that Buffett announced that BRK would buy back shares at 1.1 Xs BV and then a year later announced that BRK would buy back stock at 1.2 Xs BV. Those days are over.)

My advice. If you are interested in BRK. You need to start reading. You read one annual report? I read ALL of them from first to last, multiple times - before I bought my first shares of BRK.B in 1999. As the market soared and BRK tanked? I happily bought more and more BRK. I was thrilled that it tanked while I was buying. You HAVE to know the company to have that kind of conviction. March 2009? BRK tanked 55%. I considered THAT a test. I sold a 5 year CD ladder and bought more BRK.B. Then, BRK price lagged the market for 5 years? But the company was just fine. Price was lagging the fundamentals. I could go on and on ......

BRK will NEVER pay a dividend based on shareholder "pressure". I sell enough shares each year for living expenses. Simple.

I also believe in indexing. Buffett himself believes in indexing. I just happen to KNOW and really like BRK. So BRK is my investment of choice.

Good luck.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby nedsaid » Fri May 03, 2013 10:27 pm

I have sure thought about owning Bershire Hathaway. I think of it as a very successful but quirky company built around Warren Buffett's genius. I am not sure his successors will be able to keep it all going. Somewhere down the road, you have to think the company will be broken up.

It would be an interesting long term hold. A breakup of the company I think would unlock a lot of value at some point.

I still have my stocks, since 2000 I pretty much lost interest in trying to be a stock analyst. I don't want to put in the time and it was doubtful that I beat the market. Have been de-emphasising individual stocks in order to have more of my assets in mutual funds, ETF's, and index funds. I index more and more.

What do I know about Berkshire Hathaway that everyone else doesn't? I don't think I would have an edge here.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby newtonc » Fri May 03, 2013 10:33 pm

I own the B shares, and will add to them as I can..
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby lethean46 » Fri May 03, 2013 10:39 pm

nedsaid wrote:I have sure thought about owning Bershire Hathaway. I think of it as a very successful but quirky company built around Warren Buffett's genius. I am not sure his successors will be able to keep it all going. Somewhere down the road, you have to think the company will be broken up.

It would be an interesting long term hold. A breakup of the company I think would unlock a lot of value at some point.

I still have my stocks, since 2000 I pretty much lost interest in trying to be a stock analyst. I don't want to put in the time and it was doubtful that I beat the market. Have been de-emphasising individual stocks in order to have more of my assets in mutual funds, ETF's, and index funds. I index more and more.

What do I know about Berkshire Hathaway that everyone else doesn't? I don't think I would have an edge here.


The misinformation re Berkshire Hathaway is HUGE. I see it all the time on THIS board. That saddens me and surprises me, too.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby nedsaid » Fri May 03, 2013 10:50 pm

It is not misinformation. Berkshire Hathaway is a conglomerate.

Over time, most conglomerates fail to achieve the promised synergy. GE has had some success with this strategy but for the most part, conglomerates are forced to break themselves apart. Even GE has spun off or sold parts of itself.

Mr. Buffett has been an excellent allocator of excess company funds and it remains to be seen if his successors can keep this up. Many companies find that the best use of excess cash is to return it to the shareholders. They find that buying new businesses eventually distract from returns and not add to them.

Buffett is successful because he makes sure that the companies owned by Berkshire have great management and he does not micro-manage the managers of the Berkshire companies. Buffett mainly allocates the excess cash of the company either in stock of other corporations or buying them outright.

My point is that Buffett's successors won't have his reputation, may not be able to resist micromanaging the subsidiaries, and may not be able to allocate the company's capital as well as Buffett.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby gerrym51 » Fri May 03, 2013 10:53 pm

i own 10,000 shares. OH wait. that Berkshire Booties. sorry :mrgreen:
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Jake46 » Fri May 03, 2013 10:57 pm

I have a very small position in BRK.B which I bought in 11/2008. The stock is up 67% since then. Hard not to be satisfied.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby baw703916 » Fri May 03, 2013 11:02 pm

Grt2bOutdoors wrote:
Calm Man wrote:I wouldn't invest a penny with that clown. Even if you did like him, how long do you think he will be around? I think the guy is almost 85.


Yep, after his commentary about how a certain gender is the key to leading the economy and country but he convienently left out the part about how he critizes the managerial style of a certain CEO who ran one of his "investments" and others along the way. He's losing it......


Not sure why trolling is required, as opposed to just not buying the stock and leaving it at that.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Random Musings » Fri May 03, 2013 11:15 pm

Almost everyone on this board owns some via index funds. Since I have been with Vanguard since the early 80's, I did purchase some actives along with index funds before I became mostly index in the 90's. Actives I bought were Windsor II, Int'l Val and Gr (those funds were moved to index funds) and Primecap and Healthcare which are my only active equity funds.

So, I have some legacy active in my portfolio which is no different than others including Rick F (which surprised me). I guess he likes BRK management, and I have stuck with my two active fund manager teams for 20 plus years. Too bad I didn't have a crystal ball and bet the farm on those funds, then again, I could have bought US Growth. With respect to Healthcare, it has had far better total return with less volatility compared to BRK since I purchased many moons ago (same case since inception). If only Warren understood health care stocks better :wink:

Anyway, that's my walk on the wild side. No plans to get any wilder.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby goldendad » Sat May 04, 2013 12:13 am

I have owned the B shares for about 5 years.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby zaboomafoozarg » Sat May 04, 2013 1:15 am

I own a single share of BRK.B. That's all I need to get 8% off my Geico premium!
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Sunny Sarkar » Sat May 04, 2013 4:38 am

Jake46 wrote:I have a very small position in BRK.B which I bought in 11/2008. The stock is up 67% since then. Hard not to be satisfied.

"The market" is up 100%+ since 11/2008, and that's only for those who didn't re-balance into stocks through the crash.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Rick Ferri » Sat May 04, 2013 8:30 am

Sunny Sarkar wrote:
Jake46 wrote:I have a very small position in BRK.B which I bought in 11/2008. The stock is up 67% since then. Hard not to be satisfied.

"The market" is up 100%+ since 11/2008, and that's only for those who didn't re-balance into stocks through the crash.


I would call that diversification.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby YDNAL » Sat May 04, 2013 9:02 am

Jake46 wrote:I have a very small position in BRK.B which I bought in 11/2008. The stock is up 67% since then. Hard not to be satisfied.

BRK.B went from $94.72 at 12/31/2007 to $51.28 at 2/27/2009 (drop 46%). If you bought in November 2008 nearing the bottom, a 67% increase over 4.5 years is significantly worse than Vanguard Total Stk VTSMX.

Code: Select all
$10,000 investment
10/31/2008      to 5/3/2013
VTSMX           $18,911.94
BRK.B           $14,145.43

No, abuss368 (OP), I don't own BRK.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby baw703916 » Sat May 04, 2013 9:38 am

If we're playing the retrospective returns game, then we all should have put our entire portfolios into RZV ($13 in March 2009, $47.50 today). Or, put everything into TBM since 2000.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Rick Ferri » Sat May 04, 2013 9:45 am

baw703916 wrote:If we're playing the retrospective returns game, then we all should have put our entire portfolios into RZV ($13 in March 2009, $47.50 today). Or, put everything into TBM since 2000.


We're not playing that game. We're talking about perhaps 10% of a portfolio that I call Bingo Money.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby baw703916 » Sat May 04, 2013 9:52 am

BRK is about 2-3% of my portfolio.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby bhughes1001 » Sat May 04, 2013 9:58 am

I have owned BRK-B in the past. My only current individual stock holding is Markel (MKL);
5% of portfolio. I hold it in the taxable account of my portfolio.
I do always read the Berkshire annual reports as well.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby lethean46 » Sat May 04, 2013 10:04 am

Sunny Sarkar wrote:
Jake46 wrote:I have a very small position in BRK.B which I bought in 11/2008. The stock is up 67% since then. Hard not to be satisfied.

"The market" is up 100%+ since 11/2008, and that's only for those who didn't re-balance into stocks through the crash.


The price graph of S&P 500 index, insurance index, and BRK is on page 102 of the annual report. From YE 2007. BRK price is trailing. (Personally?, I'd be very reluctant to buy BRK when it's price is OUTperforming the index.) And, by Buffett's own measurement standard - growth in BRK BV/share vs S&P returns - BRK has underperformed in 4 out of the last 5 years. His measurement time period is 5 years re whether or not BRK should pay a dividend. So, we shall see. He can always alter his own written policy, or not.

Dividend discussion is on page 20? or so. Buffett contrasts a hypothetical dividend policy with a 3.2% yearly sell off policy. His example. He shows that a sell off policy is superior.

http://www.berkshirehathaway.com/2012ar/2012ar.pdf

I highly recommend to those interested in BRK that they read the 2012 Shareholdholder Letter. It'll run about 40 pages. If the Letter "speaks to you", then I'd recommend calling BRK headquarters. You can order ALL past Shareholder Letters (bound) for $35. Read them all from first to last. The result? Thereafter, you will have a pretty good idea if this is a company you want to own.

And Buffett himself has written and said 100s of times that "most people" should just own the S&P index.

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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby jon-nyc » Sat May 04, 2013 12:45 pm

Calm Man wrote:I wouldn't invest a penny with that clown.


Hmmm, he's arguably the most successful investor in the last 50 years.

Where can I take clown lessons, anyone know?
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby ogd » Sat May 04, 2013 12:57 pm

I am tempted to buy some Berkshire, actually, because it seems to be much like a value-tilted actively managed fund, with at-cost expenses (you get all the profits), which does not pay any dividends or distribute any capital gains. In other words, the ultimate tax-managed fund. The question is, is +0.5% or so from taxes worth the loss of diversification? And the worry that if Warren retires the market will punish Berk? That's the only thing holding me back.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Jake46 » Sat May 04, 2013 1:19 pm

Rick Ferri wrote:
baw703916 wrote:If we're playing the retrospective returns game, then we all should have put our entire portfolios into RZV ($13 in March 2009, $47.50 today). Or, put everything into TBM since 2000.


We're not playing that game. We're talking about perhaps 10% of a portfolio that I call Bingo Money.

Rick Ferri


Yep. BRK.B is less than 1% of my portfolio. Bingo money it is & quite fun.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby RenoJay » Sat May 04, 2013 5:15 pm

The only individual stocks I own are BRK-B and AAPL, and both are in my "funny money" portion of my portfolio just to help me deal with the occasional stock-picking/market-timing urge. As it turns out, my timing on BRK-B has been very good. (I owned it for about 10 year, then sold right as it was starting it's multi-year underperformance, then bought again toward the end of 2012 as it began it's recent out-performance.) With Apple, I'm not quite so luck just yet. I think I'm slightly above break-even.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby abuss368 » Sun May 05, 2013 12:44 am

Great thoughts from everyone.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby rgb73 » Sun May 05, 2013 5:13 am

Yep, i own some brk.b. I own some other individual stocks but the only one I've added to over the last few years has been brk.b - everything else is indexing.

The reason I like berkshire is that its a fairly diversified (admittedly with a large insurance bias) group of well run businesses with a strong culture of rational, efficient capital allocation. Buffett's priority is the shareholders which i don't consider to be true of a lot of other companies.

Its my funny money home.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby jwillis77373 » Sun May 05, 2013 6:45 am

I own the BRK "B" shares through sharebuilder.

And I'll continue to buy them with my taxable money, mainly because they don't produce a dividend and the stewardship has been relatively stable over a long time. Prior to BRK "B" I invested in Vanguard Total Stock Market and Dodge & Cox in my taxable accounts but the dividends just don't suit my purposes for a taxable account. I see all dividends not as "free" money, but lost opportunity kind of like a "tax refund" (an oxymoron if there ever was one).

If Berkshire ever issues a dividend, I will sell all my shares and "that will be that". They will have lost their minds.

In my non-taxable account Vanguard Funds rule supreme and will continue to do so. They're simple to understand, low cost and easy to maintain. Everything else is noise and seems designed to make money for everyone else but the investor. [Why] would I spend money to advertise to other people to buy the fund that I own? Among other ridiculous propositions in Fees. And worst of all, obfuscation is the goal, not an option for holding other funds.. if they can't explain the fees or ER to me.. why would I ever.. ever.. invest with that Fund? Don't own what you don't understand. "It's a Trap!"

Warren may be an investment philosopher, but there is some truth to the fact that his company has done well with him or in spite of him. When he moves on the value that remains will still be there. The side show may be gone, but as Rick pointed out.. it will make for a great buying opportunity.

The reason to sell will be if things change significantly [after] Warren is gone. As they would be with any stock or company. When fundamentals change, then its time to re-evaluate. Obviously there will be tax consequences if and when that day comes, but I hope that it will coincide with (a) a market down turn and I can offset the profits with losses in other investments to move to Vanguard Total Stock Market (b) i'll be of retirement age and in a lower tax bracket (c) i'll be of an age or in a job market that discriminates such that the time between jobs will artificially reduce my tax burden (d) some other event or wisdom will come my way to leverage the situation..
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby dhodson » Sun May 05, 2013 8:09 am

i own a little of B

its gambling and i do it with a small percent of my portfolio. i particularly like the gamble for taxable accounts bc of the lack of dividend.

when i go to the casino (every few years), i play craps. i play craps bc it has the best odds and i like gambling. I dont gamble a lot of money.

Same thing here.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby YDNAL » Sun May 05, 2013 8:43 am

baw703916 wrote:If we're playing the retrospective returns game, then we all should have put our entire portfolios into RZV ($13 in March 2009, $47.50 today). Or, put everything into TBM since 2000.

This is as much an informational Forum as anything else, and information should always be embraced. I don't know where you got this idea in the quote, but here is how it goes.
    1. Poster 1: I own BRK.B that returned x% in 4.5 years -"what's not to like."
    2. Poster 1 fails to recognize that UNdiversified individual stock risk has gone uncompensated.
    3. Poster 2: BRK.B has trailed the Total US Mkt, represented by Vanguard VTSMX, over this period.
You are free to make any other assumption, right or wrong, that you wish - and you have done so.

ps. Poster 1 afterwards says BRK.B "is <1% of portfolio - bingo money & quite fun." Personally, my bingo money & fun-seeking investment would be placed in some Micro cap with extreme & potential reward/risk - but that's just me.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Valuethinker » Sun May 05, 2013 9:06 am

There has been good, recent, academic analysis of the success of Berkshire Hathway.

It appears that Buffett has discovered (or intuited) the 'low volatility anomaly'. Low volatility stocks outperform high volatility ones, in the long run (that corresponds to his dictum to buy good franchise businesses).

He also makes massive use of leverage-- as an AA rated insurer, he can in effect borrow from policyholders and capital markets at very low rates of interest-- low cost of funding means positive 'spread'.

For example electric utilities typically have an allowed rate of return of 8-9% on new investments. Buffett owns electric utilities, and is funding them from capital borrowed from the markets at 3%. A 6% spread-- that will grow your book value, even without further leverage. Something similar with railways (which are utility like but largely unregulated as to returns).

Similarly he lent money to the likes of Goldman Sachs and GE at 10% PLUS equity conversion rights, during 2008-09. He was a 'provider of liquidity'-- again investing in high quality business franchises when market sentiment was against them. Think the Washington Post Corporation ( I believe he is now over 10x book cost on that investment).

From the point of view of shareholders he does not charge the '2% and 20%' management fee + carried interest typical of Private Equity funds (which BH increasingly resembles). Studies show if he had charged hedge fund fees through his career, investors would have made something like 1/10th (from memory) of what they did make. Instead the management fees (central HQ costs) for BH are de minimis-- I believe head office has a stafff of something like 20? (might be 100-- most probably dealing with shareholder queries).

He has also minimized taxes for shareholders eg by avoiding dividends.

Now the thing about Buffett is he is unique. The autodidact of his era, a man who cared only for investing, his personal life has remained basically constant (same house, desk, old car, cherry Coke etc.) for his entire investing career. In some senses a high functioning autistic (now that we understand that autism is likely simply one end of a spectrum of human behaviour, rather than a pathology-- I recall working in an office where a woman, one of the most talented programmers, could only be communicated with through her teddy bear). Or as Benedict Cumberbatch (Sherlock Holmes in the brilliant recent TV series 'Sherlock') put it to a policewoman who called him 'a freak' : "high functioning autistic. Do your homework" ;-).

Human genius is like that. Every generation there is a confluence of conditions that throws up genius: Mozart, Beethoven, Monet, Handel, Leonardo etc. There has to be the right conditions (stock picking wouldn't have helped him survive WW1 on the Western Front) societally and historically. Had he been black,for example, or a woman, born when he was, it is unlikely he would have been given the chance to attend Columbia, study under Ben Graham, become a corporate leader, etc.

Those pre conditions having been set, then a sufficiently large society, whose conditions are met, will throw up a genius.

It's easy to see, going back to tribal groups on the plains of Africa, how such genius is beneficial to the group. The half ape that sees over the mountains and the empty Mediterreanean into Europe, and takes the tribe there, and those who remain die, when the climate dries up. Of course many such migrations will fail-- but one will succeed. One did succeed, and Homo Sapiens began its long march out of its African birthplace to its domination of the world.

If we go back to the magnificent novel 'Watership Down' by Richard Adams, then for every Fiver, who can see the terrible future, there is a Hazel, who can lead the rabbits out of danger to safety. Consider the duality between Buffett and Munger. Or Michael Eisner and (?) Frank Wills at Disney. Between Satoshi Honda and his sidekick, who used to tidy up after his messes.

The problem with Berkshire Hathaway is simply this: Buffett is not young. Neither is Munger. Time waits for no man.

He is the investing genius of his era. In fact, any era, for which we have enough hard data. But don't count on him being repeated.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Calm Man » Sun May 05, 2013 2:13 pm

baw703916 wrote:
Grt2bOutdoors wrote:
Calm Man wrote:I wouldn't invest a penny with that clown. Even if you did like him, how long do you think he will be around? I think the guy is almost 85.


Yep, after his commentary about how a certain gender is the key to leading the economy and country but he convienently left out the part about how he critizes the managerial style of a certain CEO who ran one of his "investments" and others along the way. He's losing it......


Not sure why trolling is required, as opposed to just not buying the stock and leaving it at that.


I don't think our comments were meant as trolls. I have no need to get life pleasures that way. I was being serious. He has talked too much and only can because he has money. He is a hypocritical. For example he is the pioneer for the Buffet tax and complains that he pays low taxes because he has his income from investments but doesn't say in the same sentence that he takes a minimum level of pay which if at a level comparable to other CEOs would give him plenty of fully taxable income. And the guy is over 80 years old.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Calm Man » Sun May 05, 2013 2:15 pm

zaboomafoozarg wrote:I own a single share of BRK.B. That's all I need to get 8% off my Geico premium!


Is this true? I use GEICO for all my insurance.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Grt2bOutdoors » Sun May 05, 2013 2:20 pm

baw703916 wrote:
Grt2bOutdoors wrote:
Calm Man wrote:I wouldn't invest a penny with that clown. Even if you did like him, how long do you think he will be around? I think the guy is almost 85.


Yep, after his commentary about how a certain gender is the key to leading the economy and country but he convienently left out the part about how he critizes the managerial style of a certain CEO who ran one of his "investments" and others along the way. He's losing it......


Not sure why trolling is required, as opposed to just not buying the stock and leaving it at that.


There's a difference between trolling and speaking the truth - if you don't like the truth, then keep it to yourself. Calling me a troll after 6000+ posts is a bit ridiculous, don't you think?
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby TomatoTomahto » Sun May 05, 2013 2:23 pm

This is veering off into politics, which we all know is not acceptable here. Let's not get the thread locked unnecessarily.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby Grt2bOutdoors » Sun May 05, 2013 2:29 pm

TomatoTomahto wrote:This is veering off into politics, which we all know is not acceptable here. Let's not get the thread locked unnecessarily.


How is W.B.'s comments about gender and Irene Rosenfeld of Kraft veering into politics? I've made no mention of it nor was inferring anything about it.
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Re: Berkshire Hathaway - Warren Buffett - Anyone own the sto

Postby mmaguy » Sun May 05, 2013 2:45 pm

Funny how so many bogleheads own Berkshire. Never seen it mentioned until this thread. I'd guess many people do not take the same advice they give.
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