Post New

" That’s a real number. By any reasonable measure, holding that much cash during a sustained bull run costs Berkshire shareholders meaningful upside relative to a hypothetical fully invested alternative. The trailing 12 months tell the same story. Berkshire’s Class A shares have lagged the S&P 500 by a meaningful margin over the past year as the index has continued to grind higher, and Saturday’s earnings reaction was muted despite the operating beat.

Comparing Berkshire to the S&P 500 understates what a strict value framework actually missed during this cycle. The S&P is a blended benchmark. The basket Buffett genuinely sat out was the mega-cap growth complex. The cleanest investable proxy for that basket is the Vanguard Mega Cap Growth ETF (MGK), a fund built around the largest US growth names. It captures the Magnificent Seven and the broader leadership in AI names that drove the bulk of index returns from 2020 forward.

Looking at the ten-year price-return comparison anchors the cost differently. Over the period from May 2016 through April 2026, BRK.B delivered approximately 237% in cumulative price appreciation, while MGK returned roughly 398%. That’s a CAGR gap of about 4.5 percentage points per year, compounded across a full decade."


https://realinvestmentadvice.com/resources/blog/bu...

" That’s a real number.“

But it’s not the right number. And what an odd comparison.

...holding that much cash during a sustained bull run...

The most rational portfolio construction method is to be heavily long equities when the upside is large and the downside small, and the reverse. Consequently the most sensible portfolio is one that is very cash heavy (and non volatile) at times of high valuation levels and all-in (and therefore very volatile) at times of low valuation levels. It's not emotionally easy, but it's the most profitable way to go.

So, "holding that much cash during a sustained bull run" is precisely what the smartest portfolio manager would do, particularly during what seems to be the later stages of a bull run. The seem to be complaining about management doing what makes most sense.

Of course, one could try to time the market, thinking "I'll ride it up into overvaluation and then sell before everyone else does". But just imagine trying to sell $100bn of equities when the panic starts and there's a huge crowd between you and the exit...

Jim

So, "holding that much cash during a sustained bull run" is precisely what the smartest portfolio manager would do, particularly during what seems to be the later stages of a bull run. The seem to be complaining about management doing what makes most sense.

And to be fair, Berkshire has only held much-more-than-usual cash for the last two years.

Consider this ratio:

(Cash + Fixed - Float)/Assets:

2010	1%
2011	-1%
2012	0%
2013	-1%
2014	0%
2015	0%
2016	0%
2017	1%
2018	1%
2019	2%
2020	2%
2021	1%
2022	-1%
2023	2%
2024	14%
2025	17%
2026-1	17%

Same ratio in 2000: 7%

Post New

Berkshire Hathaway FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.