No. of Recommendations: 5
My goal is to compound my wealth, ideally to beat inflation. I am not looking for the highest amount of return I can get, I don't want to work 'hard' to find it, I want ease and simplicity.
I am 40% Berkshire. 2/3rds of it are in IRA accounts.
I went backwards to see how Berkshire has performed starting from various times when the SPX was demonstrably overvalued, I picked the 2000-02 period, and 2007/08, I also looked at fall of 2011. I didn't look at every single date, I just took some arbitrary points in time from memory that I knew, March of 2000, September of 2000, March of 2001, etc. There were many times in 2000 that one could have plunked down cash into Berkshire and if held till today beaten the market by a couple of percentage points. As the years move from 2000, it gets harder to find those spots where buying Berkshire was a much better bet than the index. Obviously one has to be comfortable holding the cap weighted index, etc.
On a go forward basis, do I think from this level of Berkshire and the SPX that Berkshire beats the index? No. Do I feel that Abel/Ted/Todd/Farmer/Ajit (how long do we really have with him) can manage this hodge podge, let's face it this is what it is, of businesses to beat the market? I do not.
Can I sit with this through the eventual mistake Abel makes? I hope I could, but I am not sure.
With a younger and very engaged Buffett/Munger from the early 2000s till now they have amassed a very nice record, but even them, they couldn't really find places for the money.
With all this said, my thoughts are to begin a plan to sell down the IRA assets at a rate of 10% per year, which I realize may not dent it all that much if it can grow at 8% per year for a while.
This is what I am thinking about on a Sunday AM.
No. of Recommendations: 3
As the years move from 2000, it gets harder to find those spots where buying Berkshire was a much better bet than the index. .... do I think from this level of Berkshire and the SPX that Berkshire beats the index? No
Many people agree, but I'm curious, what are your assumptions behind that prognostication? BRK and the S&P have had similar results in stock price, but with different underlying parameters. BRK has grown earnings and at a better rate, but the S&P has increased it's P/E multiple enough to keep up with or exceed BRK. Going forward, do you see the S&P increasing earnings growth or a continued rise in multiples? Or do you see a slowdown of BRK's growth in earnings and assets?
No. of Recommendations: 5
To be completely honest, I’m not much of an analyst. I bought Berkshire for the first time on 12/31/2012 which was shortly after Buffett repurchased stock and raised the threshold from 1.10x book to 1.2x book. My thought process was, ‘the next time I saw Warren do a repurchase I would buy some’, that was the extent of my analysis. And since then, I have added when it got toward the 1.25x plus level, and added a lot after 2020/21 when Warren bought back a ton, I bought at similar prices. I am coat-tailing what I considered to be the best insider of all time.
My reasoning from today onward is that with its size, Berkshire is unlikely over the next very long period of time outperform the index, it may match it. I really have no idea. If Buffett were 80 and I had perfect knowledge that he would live for another 15 years, likely I wouldn’t be as concerned, throughout my holding period I always had a warm comfy feeling that Warren was there so ‘I’m good’.
So, this is what I have come up with, selling ‘some’ each year and it still may be a big part of my portfolio in 5 years too.
