BRK - thoughts on interesting stock

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james22
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Re: BRK - thoughts on interesting stock

Post by james22 » Tue Jan 31, 2017 11:18 am

Do you consider Vanguard's Wellington and Wellesley funds diversified, Ketawa?
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

avalpert
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Re: BRK - thoughts on interesting stock

Post by avalpert » Tue Jan 31, 2017 11:57 am

james22 wrote:‹ Choosing the right CEO is all-important and is a subject that commands much time at Berkshire board
meetings. Managing Berkshire is primarily a job of capital allocation, coupled with the selection and
retention of outstanding managers to captain our operating subsidiaries. Obviously, the job also requires the
replacement of a subsidiary’s CEO when that is called for. These duties require Berkshire’s CEO to be a
rational, calm and decisive individual who has a broad understanding of business and good insights into
human behavior. It’s important as well that he knows his limits. (As Tom Watson, Sr. of IBM said, “I’m no
genius, but I’m smart in spots and I stay around those spots.”)

Character is crucial: A Berkshire CEO must be “all in” for the company, not for himself. (I’m using male
pronouns to avoid awkward wording, but gender should never decide who becomes CEO.) He can’t help
but earn money far in excess of any possible need for it. But it’s important that neither ego nor avarice
motivate him to reach for pay matching his most lavishly-compensated peers, even if his achievements far
exceed theirs. A CEO’s behavior has a huge impact on managers down the line: If it’s clear to them that
shareholders’ interests are paramount to him, they will, with few exceptions, also embrace that way of
thinking.

My successor will need one other particular strength: the ability to fight off the ABCs of business decay,
which are arrogance, bureaucracy and complacency. When these corporate cancers metastasize, even the
strongest of companies can falter. The examples available to prove the point are legion, but to maintain
friendships I will exhume only cases from the distant past.

In their glory days, General Motors, IBM, Sears Roebuck and U.S. Steel sat atop huge industries. Their
strengths seemed unassailable. But the destructive behavior I deplored above eventually led each of them to
fall to depths that their CEOs and directors had not long before thought impossible. Their one-time
financial strength and their historical earning power proved no defense.

Only a vigilant and determined CEO can ward off such debilitating forces as Berkshire grows ever larger.
He must never forget Charlie’s plea: “Tell me where I’m going to die, so I’ll never go there.” If our noneconomic
values were to be lost, much of Berkshire’s economic value would collapse as well. “Tone at the
top” will be key to maintaining Berkshire’s special culture.

Fortunately, the structure our future CEOs will need to be successful is firmly in place. The extraordinary
delegation of authority now existing at Berkshire is the ideal antidote to bureaucracy. In an operating sense,
Berkshire is not a giant company but rather a collection of large companies. At headquarters, we have
never had a committee nor have we ever required our subsidiaries to submit budgets (though many use
them as an important internal tool). We don’t have a legal office nor departments that other companies take
for granted: human relations, public relations, investor relations, strategy, acquisitions, you name it.

We do, of course, have an active audit function; no sense being a damned fool. To an unusual degree,
however, we trust our managers to run their operations with a keen sense of stewardship. After all, they
were doing exactly that before we acquired their businesses. With only occasional exceptions, furthermore,
our trust produces better results than would be achieved by streams of directives, endless reviews and
layers of bureaucracy. Charlie and I try to interact with our managers in a manner consistent with what we
would wish for, if the positions were reversed.

‹ Our directors believe that our future CEOs should come from internal candidates whom the Berkshire
board has grown to know well. Our directors also believe that an incoming CEO should be relatively
young, so that he or she can have a long run in the job. Berkshire will operate best if its CEOs average well
over ten years at the helm. (It’s hard to teach a new dog old tricks.) And they are not likely to retire at 65
either (or have you noticed?).

In both Berkshire’s business acquisitions and large, tailored investment moves, it is important that our
counterparties be both familiar with and feel comfortable with Berkshire’s CEO. Developing confidence of
that sort and cementing relationships takes time. The payoff, though, can be huge.

Both the board and I believe we now have the right person to succeed me as CEO – a successor ready to
assume the job the day after I die or step down.
In certain important respects, this person will do a better
job than I am doing.

‹ Investments will always be of great importance to Berkshire and will be handled by several specialists.
They will report to the CEO because their investment decisions, in a broad way, will need to be
coordinated with Berkshire’s operating and acquisition programs. Overall, though, our investment
managers will enjoy great autonomy. In this area, too, we are in fine shape for decades to come. Todd
Combs and Ted Weschler, each of whom has spent several years on Berkshire’s investment team, are first rate
in all respects and can be of particular help to the CEO in evaluating acquisitions.

All told, Berkshire is ideally positioned for life after Charlie and I leave the scene. We have the right
people in place – the right directors, managers and prospective successors to those managers. Our culture,
furthermore, is embedded throughout their ranks. Our system is also regenerative. To a large degree, both
good and bad cultures self-select to perpetuate themselves. For very good reasons, business owners and
operating managers with values similar to ours will continue to be attracted to Berkshire as a one-of-a-kind
and permanent home.


http://www.berkshirehathaway.com/letters/2014ltr.pdf

I think it’s appropriate that I conclude with a discussion of Berkshire’s management, today and in the future. As our first owner related
principle tells you, Charlie and I are the managing partners of Berkshire. But we subcontract all of the heavy lifting in this
business to the managers of our subsidiaries. In fact, we delegate almost to the point of abdication: Though Berkshire has about
360,000 employees, only 25 of these are at headquarters.

Charlie and I mainly attend to capital allocation and the care and feeding of our key managers. Most of these managers are
happiest when they are left alone to run their businesses, and that is customarily just how we leave them. That puts them in charge of
all operating decisions and of dispatching the excess cash they generate to headquarters. By sending it to us, they don’t get diverted by
the various enticements that would come their way were they responsible for deploying the cash their businesses throw off.
Furthermore, Charlie and I are exposed to a much wider range of possibilities for investing these funds than any of our managers
could find in his or her own industry.

Most of our managers are independently wealthy, and it’s therefore up to us to create a climate that encourages them to choose
working with Berkshire over golfing or fishing. This leaves us needing to treat them fairly and in the manner that we would wish to be
treated if our positions were reversed.

As for the allocation of capital, that’s an activity both Charlie and I enjoy and in which we have acquired some useful
experience. In a general sense, grey hair doesn’t hurt on this playing field: You don’t need good hand-eye coordination or well-toned
muscles to push money around (thank heavens). As long as our minds continue to function effectively, Charlie and I can keep on
doing our jobs pretty much as we have in the past.

On my death, Berkshire’s ownership picture will change but not in a disruptive way: None of my stock will have to be sold to
take care of the cash bequests I have made or for taxes. Other assets of mine will take care of these requirements. All Berkshire shares
will be left to foundations that will likely receive the stock in roughly equal installments over a dozen or so years.

At my death, the Buffett family will not be involved in managing the business but, as very substantial shareholders, will help in
picking and overseeing the managers who do. Just who those managers will be, of course, depends on the date of my death. But I can
anticipate what the management structure will be: Essentially my job will be split into two parts. One executive will become CEO and
responsible for operations. The responsibility for investments will be given to one or more executives. If the acquisition of new
businesses is in prospect, these executives will cooperate in making the decisions needed, subject, of course, to board approval. We
will continue to have an extraordinarily shareholder-minded board, one whose interests are solidly aligned with yours.

Were we to need the management structure I have just described on an immediate basis, our directors know my
recommendations for both posts.
All candidates currently work for or are available to Berkshire and are people in whom I have total
confidence. Our managerial roster has never been stronger.

I will continue to keep the directors posted on the succession issue. Since Berkshire stock will make up virtually my entire estate
and will account for a similar portion of the assets of various foundations for a considerable period after my death, you can be sure
that the directors and I have thought through the succession question carefully and that we are well prepared. You can be equally sure
that the principles we have employed to date in running Berkshire will continue to guide the managers who succeed me and that our
unusually strong and well-defined culture will remain intact.


http://www.berkshirehathaway.com/2015ar/2015ar.pdf


Thought to be Ajit Jain (reinsurance) or Greg Abel (energy).
So basically relying on his completely untested ability to hire his successor - exactly as people were with Welch...

You can pretend like there is no single company risk there - but you are mistaken.

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Ketawa
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Re: BRK - thoughts on interesting stock

Post by Ketawa » Tue Jan 31, 2017 2:51 pm

james22 wrote:Do you consider Vanguard's Wellington and Wellesley funds diversified, Ketawa?
These hold 98 stocks and 60 stocks, respectively. That is probably enough to get rid of most diversifiable risk in the large cap space, but why stop there when you can have 327 through Vanguard Value Index? Regardless, being diversified is a necessary but not sufficient condition for me to invest in a fund.

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james22
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Re: BRK - thoughts on interesting stock

Post by james22 » Wed Feb 01, 2017 12:59 am

Do you fear the turnover of those managing your index fund, avalpert? Why not?

"Buffett’s Alpha" shows all any Buffet successor need do is consistently adhere to some relatively simple principles and factors.


And of course there is single company risk, but it is not that of others less diversified/more leveraged/swimming naked:

First and definitely foremost, I believe that the chance of permanent capital loss for patient Berkshire
shareholders is as low as can be found among single-company investments.
That’s because our per-share
intrinsic business value is almost certain to advance over time.



I can also follow Buffet's advice and buy only when attractively valued and with some confidence of a price floor:

This cheery prediction comes, however, with an important caution: If an investor’s entry point into
Berkshire stock is unusually high – at a price, say, approaching double book value, which Berkshire shares
have occasionally reached – it may well be many years before the investor can realize a profit. In other
words, a sound investment can morph into a rash speculation if it is bought at an elevated price. Berkshire
is not exempt from this truth.

Purchases of Berkshire that investors make at a price modestly above the level at which the company
would repurchase its shares, however, should produce gains within a reasonable period of time.


http://www.berkshirehathaway.com/2014ar/2014ar.pdf

Today, the large – and growing – unrecorded gains at our “winners” make it
clear that Berkshire’s intrinsic value far exceeds its book value. That’s why we would be delighted to repurchase
our shares should they sell as low as 120% of book value.


http://www.berkshirehathaway.com/letters/2015ltr.pdf


I can also take advantage of the perceived successor risk by buying if BRK drops after Buffet passes, knowing the premium lies not with him but the strategy.
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

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Nate79
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Re: BRK - thoughts on interesting stock

Post by Nate79 » Wed Feb 01, 2017 1:05 am

I asked above if Brk is truly diversified and I still believe people way over estimate how diversified it is. It is highly concentrated in 5 companies. The fact that it owns many companies or stakes in companies is irrelevant if those stakes are a very small portion compared to its top 5 holdings.

If Wells Fargo is the next Lehman Bros in a future financial crisis what happens to Brk?

avalpert
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Re: BRK - thoughts on interesting stock

Post by avalpert » Wed Feb 01, 2017 1:17 am

james22 wrote:Do you fear the turnover of those managing your index fund, avalpert? Why not?
If I had any active funds I would most certainly be worried about manager turnover. With index funds I don't because they make no strategic decisions in managing the fund.
"Buffett’s Alpha" shows all any Buffet successor need do is consistently adhere to some relatively simple principles and factors.
Sure, that is why so many others have successfully followed those simple principles and factors to similar success...
I can also take advantage of the perceived successor risk by buying if BRK drops after Buffet passes, knowing the premium lies not with him but the strategy.
Ahah, that has never failed anyone in the past - the strategy is unassailable absolutely Buffet is just the caretaker and anyone else could do it just as well.

Listen, you don't need my okay to do whatever you want - but your attempts to justify it to yourself come off as quite naive and ignorant of the history of so many 'can't miss' strategies.

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james22
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Re: BRK - thoughts on interesting stock

Post by james22 » Wed Feb 01, 2017 2:08 am

Wells Fargo is BRK's second largest holding at 16% of it's stock portfolio.

BRK's stock portfolio is 25% of its market cap.

Wells Fargo failing would cost BRK 4%.
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

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james22
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Re: BRK - thoughts on interesting stock

Post by james22 » Wed Feb 01, 2017 2:40 am

Did you read the linked paper/articles, avalpert?? There is reason to believe in BRK's strategy rather than luck or chance.

And give others time to follow Buffet's success, now that the strategy has been defined for them (40 years later, lol).

Listen, Taylor still isn't convinced of any factor other than beta even after all this time, so I don't expect to convince you of anything.

The great thing is, we'll both make our bets and suffer the consequences.
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

Valuethinker
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Re: BRK - thoughts on interesting stock

Post by Valuethinker » Wed Feb 01, 2017 3:45 am

Nate79 wrote:I asked above if Brk is truly diversified and I still believe people way over estimate how diversified it is. It is highly concentrated in 5 companies. The fact that it owns many companies or stakes in companies is irrelevant if those stakes are a very small portion compared to its top 5 holdings.

If Wells Fargo is the next Lehman Bros in a future financial crisis what happens to Brk?
Which 5 companies?

- the insurance cluster around GEICO

- Netjets?

- railroads

- electric utilities?

- Precision Castparts? (they paid about $20bn for that, from memory)

I think you are looking at just the listed portfolio whereas BH is increasingly in effect a conglomerate of private businesses

https://en.wikipedia.org/wiki/List_of_a ... e_Hathaway

inbox788
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Re: BRK - thoughts on interesting stock

Post by inbox788 » Wed Feb 01, 2017 4:11 am

james22 wrote:Wells Fargo is BRK's second largest holding at 16% of it's stock portfolio.

BRK's stock portfolio is 25% of its market cap.

Wells Fargo failing would cost BRK 4%.
Seemed high at first. Where are you getting that from? Doubt WF will pull a Lehman, but you never know. I'm seeing a market cap of just over $400B at google finance. My estimate from CNBC is around $140B listed, so more like 33% and 6.7% if these figures are accurate.

http://www.cnbc.com/berkshire-hathaway-portfolio/

As far as concentration, Kraft is more at $29B or 7%. For their wholly owned businesses, it cost them $44B to buy Burlington, and I'm guessing it's worth a lot more now. http://www.marketwatch.com/story/berksh ... 2009-11-03 Same with the $32B paid for Precision Castparts. https://www.wsj.com/articles/berkshire- ... 1439205293

Behind a registration wall there is a sum of the parts analysis. Puts the rails at over $60B, energy (MidAmerica) at $30B, and over $75B for the manufacturing/retail busineses.
http://seekingalpha.com/article/1937081 ... b-discount

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james22
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Re: BRK - thoughts on interesting stock

Post by james22 » Wed Feb 01, 2017 6:25 am

Used dataroma's instead, inbox: http://www.dataroma.com/m/holdings.php?m=BRK

But ever changing, of course. If use current price, Wells Fargo is second largest holding at 19%.

$27B holding value / $406B market cap = 7%

Point is, BRK is diversified: Insurance, 90+ subsidiaries (of which 6 dominate: Berkshire Hathaway Energy, Marmon, Lubrizol, IMC, Precision Castparts), and 50+ stock holdings (of which 5 dominate [70% of portfolio]: Kraft Heinz, Wells Fargo, Coca Cola, IBM, AMEX).

Sum of parts something like:

Insurance 20% ?
Subsidiaries 25% ?
Stocks 35%
Cash 20%


Another point: TSM's greater diversification didn't help it 1/2008-3/2009 when it fell 50% (BRK fell 45%).

Another: BRK currently holds $60B (15%) in dry powder (after setting aside $20B for insurance claims). It can use that to good effect (as it did in 2008-2009) in the next correction/crash (buying up a failing Wells Fargo on the cheap, for example).
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

misterno
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Re: BRK - thoughts on interesting stock

Post by misterno » Wed Feb 01, 2017 11:46 am

random_walker_77 wrote:I think BRK is a nice quality stock, and am happy to own quite a bit of it (but indirectly, via the total stock market fund). Berkshire is the 5th largest holding in Vanguard's total stock market index, and if I'm doing the math right, represents about 1.8% of the total market. I am mildly curious as to what it's going to be like after Buffett retires.

You could certainly overweight it, subject to the standard caveats. Just remember, if the market is correct, then more reward always means more risk. If you can handle more risk, then feel free to stretch for more reward.
I am confused here

I just checked finance.yahoo.com to compare SP500 and VTSMX and 5 year returns are same to the penny

10 year is very close

So exposure to BRK did not make a difference if you ask me.

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Re: BRK - thoughts on interesting stock

Post by misterno » Wed Feb 01, 2017 11:52 am

I don't understand why anyone would invest in BRK

checked the returns and SP500 beats BRK in 1 year and 5 years

BRK beats SP500 only on 2 years and 10 years

Remember only 87% of the mutual funds and the like is returning less than the market with a higher volatility

So why bother?

inbox788
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Re: BRK - thoughts on interesting stock

Post by inbox788 » Wed Feb 01, 2017 1:06 pm

james22 wrote:Used dataroma's instead, inbox: http://www.dataroma.com/m/holdings.php?m=BRK

But ever changing, of course. If use current price, Wells Fargo is second largest holding at 19%.

$27B holding value / $406B market cap = 7%

Point is, BRK is diversified: Insurance, 90+ subsidiaries (of which 6 dominate: Berkshire Hathaway Energy, Marmon, Lubrizol, IMC, Precision Castparts), and 50+ stock holdings (of which 5 dominate [70% of portfolio]: Kraft Heinz, Wells Fargo, Coca Cola, IBM, AMEX).

Sum of parts something like:

Insurance 20% ?
Subsidiaries 25% ?
Stocks 35%
Cash 20%


Another point: TSM's greater diversification didn't help it 1/2008-3/2009 when it fell 50% (BRK fell 45%).

Another: BRK currently holds $60B (15%) in dry powder (after setting aside $20B for insurance claims). It can use that to good effect (as it did in 2008-2009) in the next correction/crash (buying up a failing Wells Fargo on the cheap, for example).
BRK is a strange animal. No doubt it's diversified, but it's also concentrated. It's like a mutual fund, but it's also a bunch of private companies, which is a nice way to invest in areas not easily accessible to public markets.

It's an insurance company. It's a small bunch of big companies. It's a big bunch of smaller companies. It's a part of many big and little companies.

They have substantial bond holdings in addition to the cash they have around to pay insurance claims and use for acquisitions (are you including those bonds that in the 20% cash?). It's also leveraged! They use the insurance float (borrowed money) and invest it in bonds and stocks.

One thing that bothered me is that I feel like it's skewing my TSM holdings. If I hold TSM, it has a market weight of Kraft Heinz which is around $100B, but I also hold market weight of BRK, which is holding on to $29B more of Kraft Heinz, so I'm essentially holding on to 30% more weight of that company. Similar overweight/tilt on their other biggies WFC, KO, IBM, and AMEX.

Now strange things happen, like when I used to hold a market cap weight of Precision Castparts, but when BRK took over, I think I still hold a market cap weight hidden inside BRK, no? So if BRK were to ever take over Kraft Heinz, my 130% holding goes back down to 100%. On the other hand, if a foreign company or one not listed in the SP500 takes over a company (like Allergan), my market cap weighing goes to zero.

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james22
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Re: BRK - thoughts on interesting stock

Post by james22 » Thu Feb 02, 2017 1:29 am

I bother with BRK because I've a significant fraction of my portfolio in taxable, misterno, and really appreciate it's tax efficiency.

That, and:

1/1997-1/2017

BRK.B CAGR 10.46% ($10,000 to $73,804)
Vanguard 500 Index Fund CAGR 7.65% ($10,000 to $43,925)

https://www.portfoliovisualizer.com/bac ... sisResults

From the Vanguard 500 Index Fund's return you'll also need deduct the annual expense ratio and dividend taxation.
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

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Ketawa
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Re: BRK - thoughts on interesting stock

Post by Ketawa » Thu Feb 02, 2017 12:12 pm

james22 wrote:From the Vanguard 500 Index Fund's return you'll also need deduct the annual expense ratio and dividend taxation.
Fund returns are always reported after the expense ratio.

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Re: BRK - thoughts on interesting stock

Post by nedsaid » Fri Feb 03, 2017 11:59 am

Mr. Buffett made an impressive statement about CEO succession at Berkshire-Hathaway but good intentions don't always translate into good outcomes. There is a natural entropy that occurs in even the best of business cultures, the natural progression is from good to bad. I have just seen too many selfish CEOs who put their own interests in front of the interests of the company and who let their oversized egos get in the way. No matter what Buffett and Munger set up in advance, they will not be able to control Berkshire-Hathaway from the grave. Things will change after they depart the scene. My guess is that B-H will break up at some point and that should unlock value for shareholders.
A fool and his money are good for business.

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Re: BRK - thoughts on interesting stock

Post by james22 » Wed Apr 10, 2019 9:58 pm

Berkshire is uniquely situated to withstand any risks that might come its way – it is so diversified that problems in one of its big segments wouldn’t affect the intrinsic value creation to a huge degree, it avoids the biggest structural problems in incentivizing management, it has a culture of rational capital allocation will most likely have a cheap stock to repurchase over time, and it is so conservatively financed that even in a worst case scenario across all of its business units at the same time it would still have liquidity to spare and wouldn’t need to further destroy shareholder value to save the company.

Berkshire is probably one of the least risky companies in the world in each of these individual respects. When you combine all of these attributes together, you get a company that probably offers the lowest chance of having a lasting, permanent impairment of your capital, and you can buy it for a price obviously less than it’s worth. That’s pretty powerful. That’s the case for Berkshire.


https://concentratedcompounding.com/brk2/
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

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Re: BRK - thoughts on interesting stock

Post by spectec » Wed Apr 10, 2019 10:25 pm

nedsaid wrote:
Fri Feb 03, 2017 11:59 am
Mr. Buffett made an impressive statement about CEO succession at Berkshire-Hathaway but good intentions don't always translate into good outcomes. There is a natural entropy that occurs in even the best of business cultures, the natural progression is from good to bad. I have just seen too many selfish CEOs who put their own interests in front of the interests of the company and who let their oversized egos get in the way. No matter what Buffett and Munger set up in advance, they will not be able to control Berkshire-Hathaway from the grave. Things will change after they depart the scene. My guess is that B-H will break up at some point and that should unlock value for shareholders.
I hear this from time-to-time and I always react with a big question mark. How would breaking up BRK "unlock value for shareholders"? The vast majority of BRK shareholders are perfectly fine with value being "locked up" in the company. Otherwise why would they purchase a stock that pays no dividends on the first place? Any shareholders who wishes to "unlock value" can easily do so by simply selling shares, at their own pace and according to their own schedule. I know of no other company that offers this flexibility on the scale & reliability of BRK.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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Re: BRK - thoughts on interesting stock

Post by jbranx » Wed Apr 10, 2019 10:32 pm

I've been a Berkshire Hathaway stockholder since the early nineties and a long-time admirer of Buffet and Munger. That said, one of their unrecognized achievements has been to keep people from judging the enterprise to be a "conglomerate."

I agree with Nedsaid, the best laid plans of the best and brightest frequently unravel after they hit the grave. Just a few examples from the conglomerate era of Ling-Timco-Vought and ITT would make one a bit cautious that Berkshire will survive intact into the far future. ITT, for example, owned everything from Wonder Bread to telephones and was considered the ultimate in intelligent, advanced management.

Another example of a once heralded value buyer and manager of companies was Lord Hanson, who built up quite an empire at Hanson Trust, Plc. A small piece of it survives today.

Admittedly, Buffet has thought long and hard about the key ingredients of corporate survival. It's a very unique structure with a admirable culture. I have a goodly stake in him being right...tempered by knowing examples of other firms that were once judged to be exempt from whatever fates that are out there that don't leave many firms intact for more than a generation or two.

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Re: BRK - thoughts on interesting stock

Post by alex_686 » Wed Apr 10, 2019 10:47 pm

spectec wrote:
Wed Apr 10, 2019 10:25 pm
I hear this from time-to-time and I always react with a big question mark. How would breaking up BRK "unlock value for shareholders"? The vast majority of BRK shareholders are perfectly fine with value being "locked up" in the company. Otherwise why would they purchase a stock that pays no dividends on the first place? Any shareholders who wishes to "unlock value" can easily do so by simply selling shares, at their own pace and according to their own schedule. I know of no other company that offers this flexibility on the scale & reliability of BRK.
Um, no - your reasoning is off.

Does 2 + 2 = 4? Not in the investing world. Sometimes adding 2 companies together you get synergy, so 2 + 2 = 5.

Sometimes the opposite - so 2 + 2 = 3. A classic example was RJR Nabisco, a grand conglomeration of tobacco and cookies. You don't unlock value and get $4 when you sell off your RJR Nabisco stock - you get $3. The way you get $4, or even $5, is to break the darn thing apart.

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Re: BRK - thoughts on interesting stock

Post by spectec » Wed Apr 10, 2019 11:11 pm

I'm still not convinced, especially since the RJR Nabisco example misses the mark by a long shot. Comparing it to BRK is like trying to compare apples & bicycles, both in terms of leadership and also corporate structure.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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james22
Posts: 1346
Joined: Tue Aug 21, 2007 2:22 pm

Re: BRK - thoughts on interesting stock

Post by james22 » Thu Apr 11, 2019 2:19 am

alex_686 wrote:
Wed Apr 10, 2019 10:47 pm
Sometimes adding 2 companies together you get synergy, so 2 + 2 = 5.
I believe that's more and more likely.

The Berkshire Empire Is Quietly Collaborating More Than Ever

Rise in communication among senior leaders offers glimpse at future of conglomerate when Warren Buffett no longer runs it

The myriad companies of Warren Buffett’s Berkshire Hathaway Inc. have run completely independently of each other for decades. That isn’t always the case any longer.

Top executives from Berkshire units now gather regularly to share strategies and best practices.


https://www.fnlondon.com/articles/warre ... r-20190405
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

Topic Author
james22
Posts: 1346
Joined: Tue Aug 21, 2007 2:22 pm

Re: BRK - thoughts on interesting stock

Post by james22 » Mon Apr 15, 2019 11:55 pm

Warren Buffett: The Greatest Factor Investor Of All Time?

Why replicate Berkshire Hathaway's performance through factors rather than gaining exposure to Buffett's expertise by simply buying the stock?

...

More than $100 billion annually has been invested in factor-focused products in recent years. But selecting factors and combining them into multi-factor portfolios is a challenging endeavor.

So Berkshire Hathaway might be an alternative to multi-factor products. After all, the company is supported by a fund manager with a decades-long track record of skillfully managing factor exposure. The management fee is competitive compared to smart beta exchange-traded funds (ETFs) and Buffett's stake in the company ensures that his interests are aligned with those of his investors.



https://seekingalpha.com/article/425444 ... estor-time
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

Topic Author
james22
Posts: 1346
Joined: Tue Aug 21, 2007 2:22 pm

Re: BRK - thoughts on interesting stock

Post by james22 » Tue Apr 30, 2019 10:00 pm

Traditionally, Buffett’s basic thing is that he is an amazing stock-picker. There is a casual sense in which that is easily explainable in folksy ways — he spends all day reading 10-Ks, he picks companies that he can understand, that sort of thing — but those explanations don’t hold up in any deep way.

The market is supposed to incorporate all that information into prices; the investor’s job is not just to find good companies but to find good companies that the market undervalues. Lots of professional investors spend their time researching and trying to understand companies and do not have Buffett’s track record. If Buffett is better at it than everybody else it is not because of some folksy and easy-to-teach insight; it’s because of some mystical impossible-to-capture skill, or luck, or a combination, and even if it’s skill it could desert him at any time with no warning.

On the other hand, you know and I know and Occidental knows and, surely, Warren Buffett knows that he has certain specific things that he can offer to other companies. He can make giant investment decisions quickly and with a minimum of fuss, he can be more flexible on investing structure than other big financing sources, he can be pretty hands-off with the companies he invests in, and he can bestow that “world’s greatest investor” halo on a company’s stock.

These things are all pretty understandable, and they have an obvious value to companies, and those companies should be, and often are, willing to pay handsomely for them. And so one thing that Buffet can do is just go around looking for opportunities to harvest that value. The ability to spot stock-market value is hard to analyze and replicate, but Buffett actually has a fairly straightforward ability to create stock-market value. So he should use it, and get paid for it.


https://www.bloomberg.com/opinion/artic ... n-elephant
25% BRK l 25% BAM l 8% SV (VSIAX) l 8% EM (VEMAX) l 4% FNMA/FMCC l 4% FNMAS/FMCKJ l 25% Stable Value

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