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Maybe interesting or entertaining for one or the other.

An Indian friend is a daytrader. I once told him about my observation especially this and last year that market down days are often up days for BRK and vice versa. He downloaded daily S&P and BRK price data for the last 3 years, let it analyse by one of his employees, and sent me the resulting spreadsheet which seems to strongly support my thesis. I had a look at it, found a dramatic logical error and analysed the data myself. First result was that in 2/3 of days BRK moved in the same direction as S&P, in 1/3 in the opposite direction.

Then I tested my main thesis, that as more expensive the S&P gets as measured by TTM P/E ratio as more pronounced this "BRK moves in the opposite direction" is.

I sliced his 3 years of data into brackets of 100 days. Unfortunately it doesnīt support my thesis that as higher the P/E of the S&P gets as more often on a given day BRK moves in the opposite direction than the S&P.

But while itīs not as simple as that, it nevertheless is very interesting because 3 slices/times stand out: Times when the S&P did "shoot" up, became quickly more expensive (in my random 100 day brackets that were 15.Febī23-11.Julī23 & 26.Aprī24-18.Sepī24 & 10.Julī25-28.Novī25 (end of his data). During those times on 1/2 of the days when the S&P did fall BRK did rise instead (not true for the opposite direction though).

So this "BRK often rises when the market falls" seems to be not so much dependend on the absolute P/E of the market, on how expensive it is, but on how steep itīs rise is. If it rises strongly for weeks then a down day very often for BRK is a day up.


So my only conclusion at the moment:
1. BRK in general often moves in the opposite direction of the market (1/3 of days).
2. This "moving opposite" does not increase in general with the market becoming more expensive.
3. It increases though in strong bull markets, and only in one direction: A market down day then for BRK in 50% of cases is a down day too, but in the other 50% for BRK itīs an up day.

This was more or less to be expected ("Flight to Safety") but that it is that strong I find interesting.

Digression...

There is a different feature comparing BRK's price to that of the broad market. It has been very prominent in recent years, which is not the same as saying it will continue.

My observation:
If Berkshire has had a strong trend of either outperforming or underperforming the average US large cap in the last part of the year, 2-6 months say, then that relative-to-market trend tends to exactly reverse in the new year.

Check this chart carefully, ratio of Berkshire price to S&P equal weight, see if you see the same thing.
https://stockcharts.com/sc3/ui/?s=BRK%2FB%3ARSP&p=...

One might go considerably further out on the limb and say that if there hasn't been such a trend (BRK has been tracking the market very closely around Q4), one will start shortly after the new year. e.g., end 2015/2019/2024, maybe this year?

This sounds like astrology, but there is a good explanation. Money managers are almost always evaluated on calendar years. Their only risk is not loss of money, as it's not their money, but career risk from underperforming their index. They like to take on more such "risk" early in the year when they optimistically think they're smart and can beat the market. That's after being very averse late in the year when they don't want to risk hurting their year-to-date relative-to-market performance--they've already estimated their bonuses and in their heads it's already their money.


Is it actionable? Speculation: market tracking has been strong just lately (though not the perfection of late last year). If that continues to year end, look for a new strong over- or under-performance trend early in the year. If you see it, jump on board for 2-3 months.

Jim

I think recent BRK comparisons to the SP are less meaningful as BRK held a huge bushel of AAPLs. ;-].

I added AAPL at the bottom of Jim's chart.

https://stockcharts.com/sc3/ui/?s=BRK%2FB%3ARSP

Well I guess that didn't work. The link shows a different chart. Sorry about that.

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