No. of Recommendations: 15
Why not trade the stock? Time is the friend of the owner of an excellent business. We should not forget that Berkshire reinvests all of its earnings and has historically compounded book value per share (and intrinsic value per share) at very attractive rates.
This would indicate a modest overvaluation of 8.7%. You could sell your share today, hoping to buy it back at a lower level in the future. But within a year, it is highly likely that Berkshire’s intrinsic value will have “caught up” to today’s “overvaluation” and you could very well never have an opportunity to buy back your position at a lower price.
Some people have a trading mentality while others do not. Personally, I find trading unappealing even when it works out well, as it did for me last summer. It is too mentally taxing to try to jump in and out of a stock simply because its value seems a bit on the high side. The situation would be different if a stock is trading at a level that could plausibly result in no return for five or ten years, but that has never really been the case for Berkshire Hathaway. As a result, it seems better to just hold the stock unless there is a need to raise cash or some clearly superior opportunity comes along that carries reasonable levels of risk.
https://substack.com/@rationalwalk/p-157992850Rational Walk’s usual excellent commentary on the AR. I wonder if he was reading this board and responded to the long recent discussions on options and lightening up on rallies etc etc etc.
