No. of Recommendations: 7
FWIW here's a response I sent to a friend today on a somewhat similar question:
I'm not concerned about the equity portfolios of WEB, Todd, and Ted compared with the S&P 500. Berkshire is following WEB's game plan.
There is a study that I read long ago that appears to have reappeared and to have been updated. Professors loudly announced that Buffett was no genius stock picker. Analysis of his past results showed that a combination of leverage from float and primarily investing in cheap, safe stocks were the reasons for his success. He never lost significant money. My emphesis.
What they didn't say is that he figured this out over a half century ago. And that the combination of retaining all earnings, and growing them through acquisitions, permitted the magic of compounding to produce Berkshire today.
If you back out the impact of the Apple purchases I think T&T and WEB's performances would be very similar. And T&T led WEB to open his eyes that Apple was not a technology stock subject to sudden collapse due to other technology breakthroughs. That's the event that even permits BRK to stay close to the SPY. That's what separates T&T and WEB.
In my view, WEB, Ted, and Todd are all still following Rule 1 - Don't Lose Permanent Capital - and Rule 2, reread Rule 1. As such they've viewed the high flying stocks that dominate SPY returns as being more risky than they wish to accept. So they remain on the sidelines. As a percent of BRK assets, cash and fixed income are still at about the same percent of assets as they've been in history. The absolute amount is larger but the share hasn't changed much. Warren believes another financial crisis will permit him to deploy this - hopefully in his lifetime. And he promised in the current meeting to do a better job of deploying it than he did in 2008-09. Back then he largely made temporary investment rather than long term one. BAC is the major exception. This time he'll focus more on lasting investments.
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