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Author: lngtrmcptlgns Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8754  
Subject: Re: please critique my simple-minded... Date: 1/22/2011 2:41 PM
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The questions were posed more in terms of a DCA perspective.
Let's use BRK-B as an example. Currently trading around $80/sh. A single transaction would be
60 shares @ $80/sh = $4800
Suppose one purchased 20 shares @ $80, @ $75, @ $70, or
(20*80 + 20*75 + 20*70) = $4500
I think the OP suggested $8/trade, but let's use $10/trade, or $20 for the additional transactions.
That's $280 additional capital available for investing in one account.
Would the inefficiency occur every
year? Probably not. But it is still 5.8%



Your hypothetical assumes that the price will drop.

How can anyone assume that?

I believe in buying into a stock when it is undervalued (at the right price and with a "margin of safety", as Ben Graham would say) as much as the next guy.

But with a well-known, heavily followed stock like BRK-B, what are the odds that it is ever going to be seriously undervalued?

My guess is that when Mr Buffett passes, the price will drop significantly and we might see it undervalued for a time.

The only other time it will become undervalued is if the stock market as a whole takes a dive, at which point everything is undervalued and relatively speaking BRK won't be undervalued any more than any other stock.
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