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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch 🐝🐝🐝 GOLD
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Number: of 21938 
Subject: Re: Getting Defensive?
Date: 02/06/24 12:23 PM
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No. of Recommendations: 22
I've seen a few posts here talking about BRK's stock price getting a bit lofty...
Any good suggestions?


The valuation level is a bit higher than usual in the last 15 years, enough that the most likely outcome for the price change in the next year isn't great.
But that doesn't mean it's a bad thing to have in your portfolio. A person can live through a flat spot. And if you're OK with that, there's nothing to do. Laziness is fine.

I don't have anything else that I find has more attractive returns in the short to medium term that I would put nearly as much money into, so the main obvious alternative is cash.
One year T-bills are yielding 4.87%, six month is at 5.25%, my broker is paying me 4.83% on my cash balance. All of those are above what I expect for monetary inflation in the next year, so they mean a positive real return.
My sundry pretentious Berkshire price forecasting models are predicting slightly negative real returns in the next year on average, median model inflation-2.0%. So sure, it might be possible to make a case for selling some stock and moving to cash. (no, not doing that).

I'm doing a little fancy option stuff too, but that's mainly just to keep my fingers busy, the ultimate financial outcome won't have a meaningful impact either way.

Here's some back of the envelope.
Mr Buffett was buying Berkshire B shares at an average price of $357.22 in September.
With an inflation adjustment, that's like $357.71 in today's money.
The value of a share goes up at a rate of inflation + 7%/year, so if the intervening time has been typical, the value is up another 2.7% or so since September, so maybe he might be a buyer at $367.60 today?
The price right now is $392.70 per B, only 6.8% above our notional buyback threshold. Looked at that way, we certainly aren't looking at overvaluation sufficient that action is really required. Sometimes a stock price moves that much in a day.

Jim
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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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