would you buy BRK today?

dnaumov · Post by **dnaumov** » Tue May 10, 2011 9:05 am

No, not as a main (or even big) part of your portfolio, but as say, a maximum of 3-5%? Yes, the best days of BRK outperformance are most likely behind us, but still, BRK is a rather diversified company and does continue to outperform. Then again, there is the risk of Buffett and Munger dropping dead. Then again, even though they eventually will (and a large hit to stock price is bound to happen), there is a good chance the culture will live on. There is also a lot of sentimental value in holding stock of the biggest capitalist "story" ever, but arguably emotions are something best left out of investing.

pauliec84 · Post by **pauliec84** » Tue May 10, 2011 9:10 am

Yes.

1) Tax Efficient.
2) Diversified holding with lower cost then Index fund (granted not to long).
3) Has produced alpha per FF 4 Factor almost every conceivable time period.
4) Not more then 3-5% percent per previous post. Much to much idiosyncratic risk (R^2 is 33%).

yobria · Post by **yobria** » Tue May 10, 2011 9:31 am

pauliec84 wrote:Yes.

1) Tax Efficient.

It is actually quite tax inefficient, and Buffett often describes the additional tax hurdle you face owning it vs an index fund.

Nick

pauliec84 · Post by **pauliec84** » Tue May 10, 2011 9:40 am

Nick. Can you send me something (ie article, Buffet passage etc) on it being tax efficient?

My feeling is that if it is tax inefficient internally that the price should reflect this as it is shared by all investors. Conversely if it is tax inefficient externally (ie dividend etc), the price will adjust less to reflect as it penalizes each owner differently and clientele effects will emerge.

frugalhen · Post by **frugalhen** » Tue May 10, 2011 10:35 am

I've owned it for over 10 years but I wonder about buffets health. His age concerns me less than his coca cola, sees candy, steak loving diet!

jmbkb4 · Post by **jmbkb4** » Tue May 10, 2011 10:39 am

I'm curious how BRK could be considered tax INefficient.

No dividends. No distributions.

Somebody please learn me.

fishndoc · Post by **fishndoc** » Tue May 10, 2011 11:03 am

jmbkb4 wrote:I'm curious how BRK could be considered tax INefficient.

No dividends. No distributions.

Somebody please learn me.

Same here.
In keeping with my resolution to simplify things, I sold my remaining shares yesterday. But don't believe I ever paid taxes on the stock before now (obviously, some capital gains due next year).

yobria · Post by **yobria** » Tue May 10, 2011 12:01 pm

B/c BRK is not a pass-through entity like a mutual fund. When Coca Cola pays a dividend, it gets taxed once at KO's tax rate, a second time at BRK's tax rate (35%), and I assume would be taxed a third time at your tax rate, if BRK paid it out to you.

When KO pays a div in your mutual fund, it's passed through to you at your lower personal div tax rate.

If you own BRK, investment taxes were just paid (at a higher rate) a level up from you. If you recall in 2003, for example, BRK paid 2.5% of the entire corporate tax bill in America.

Nick

jmbkb4 · Post by **jmbkb4** » Tue May 10, 2011 1:32 pm

Assumption is that Buffett does more with those said dividends than others could.

Bruin · Post by **Bruin** » Tue May 10, 2011 3:04 pm

Yes, and I just did a few days ago.

chaz · Post by **chaz** » Tue May 10, 2011 3:34 pm

No, buying individual stocks is stupid, only index funds for me (with a little CapOpp mixed in).

yobria · Post by **yobria** » Tue May 10, 2011 6:32 pm

Personally I can't/won't sell my BRK for tax reasons, but wouldn't buy it today. While I've enjoyed the performance over the past 11 years, mustn't confuse strategy with results.

Nick

pauliec84 · Post by **pauliec84** » Tue May 10, 2011 7:17 pm

B/c BRK is not a pass-through entity like a mutual fund. When Coca Cola pays a dividend, it gets taxed once at KO's tax rate, a second time at BRK's tax rate (35%), and I assume would be taxed a third time at your tax rate, if BRK paid it out to you.

When KO pays a div in your mutual fund, it's passed through to you at your lower personal div tax rate.

If you own BRK, investment taxes were just paid (at a higher rate) a level up from you. If you recall in 2003, for example, BRK paid 2.5% of the entire corporate tax bill in America.

Nick, do not disagree that with these facts that they have a large tax burden. My point is that this part of the tax should already be factored into the price, and thus does not concern investors.

What concerns investors is how the returns of BRK effect their own tax bill. In this regard BRK is very tax efficient.

lethean46 · Post by **lethean46** » Tue May 10, 2011 10:11 pm

yobria wrote:B/c BRK is not a pass-through entity like a mutual fund. When Coca Cola pays a dividend, it gets taxed once at KO's tax rate, a second time at BRK's tax rate (35%), and I assume would be taxed a third time at your tax rate, if BRK paid it out to you.

When KO pays a div in your mutual fund, it's passed through to you at your lower personal div tax rate.

If you own BRK, investment taxes were just paid (at a higher rate) a level up from you. If you recall in 2003, for example, BRK paid 2.5% of the entire corporate tax bill in America.

Nick

I believe that BRK is effectively taxed at 15% on its dividends from KO, i.e, it gets the dividend received deduction available to corporations.

If BRK had originally been set up as a partnership, it would be more tax efficient. But then, it wouldn't be available to the rest of us.

Notwithstanding, Buffett has said that he is satisfied with the corporate structure for BRK.

ML

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would you buy BRK today?

Would you consider buying BRK for a small portion of your porfolio in 2011?

would you buy BRK today?