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At the right price ratio between the price of Berkshire and the price of (say) Alphabet, I'd ditch Omaha in a New York heartbeat.

I don't know how fast hearts are beating in NY but hope your calculations include non-material value factors (management, culture).
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No. of Recommendations: 27
Berkshire has been left behind over the last decade. In fact, obliterated, by the likes of Amazon, Apple, Google, Tesla and more. Unreal how far WEB has fallen. Really just sad that I’ve held on to the stock for so long merely due to capital gains from far in the past.


If you're making the amount of money you expected to make from Berkshire shares, which I expect is
the case because Berkshire has risen at a double digit rate in both value and price, what's your beef?
It wasn't exciting enough? Your lucky neighbour is laughing at you?

Jim
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No. of Recommendations: 7
Jim -

BRK YTD is 2% compared to S&P 15%.

S&P was "expensive" at starting point and still smoked BRK which was "cheap".

How is this hard to understand ?
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Atta boy Divi! That's all you gotta do!

jk
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No. of Recommendations: 47
BRK YTD is 2% compared to S&P 15%.
S&P was "expensive" at starting point and still smoked BRK which was "cheap".
How is this hard to understand ?


Beats me, but you seem to manage it!

Prices fluctuate.
Over the long term they track value.
If you pick a short interval carefully, you can self-validate almost any misconception, no matter how silly.
I'd have thought all that wasn't too hard to understand.

Did Berkshire rise in value per share 20% in the last 5, 10, 15, 20 years? Nope.
Did they manage 15%? Nope.
Over 10%/year compounded? Yup.
Did it do it with utter predictability and low risk? Yup.
Did the market return do just as well as the rise in value in the last dozen years? Yup.
I assume the rate of return is slowing a bit over time, but the numbers don't really show any change yet--about the same since 1998 so far.

Seems simple---if a totally safe and predictable return in the range of (say) 9-11% isn't enough for you, buy something else.
That's fine...lots of people want returns higher than that and are willing to risk losses to have the chance.
Fair enough...but maybe it's better to sell out or stop whining about making all that money.

Here's an exercise that would be a very worthy use of your time.
Consider it very carefully.
Using a variety of sensible metrics of your choosing, how much has the S&P 500 risen in true cyclically adjusted value (not price) in the last dozen years?
Sales, smoothed profits, book, non-smoothed profits, GVA, pick a few you like, grab a coffee, and spend an hour with Excel.

But hey, that would be work. So here's a cheat sheet.
Smoothed S&P 500 real earnings: up 3.08%/year, probably the best metric of index value.
Non-smoothed real earnings: up 4.10%/year.
Real dividends: up 4.82%/year.
Real sales: up 0.5%/year, but that's an unlucky endpoint...a couple of quarters ago it was the 1.0%/year typical of endpoints in the last three years.

But real price: up 10.27%/year.

All of the above metrics exclude the dividends of about 2%/year, so it's fair to compare them with each other.

So, we can be pretty sure that about half the rate of return you quote for the S&P was achieved merely by getting more expensive.
The facts are the facts.

So, your numbers are not a demonstration of the superiority of the S&P 500 over another investment, but rather a demonstration that somebody doesn't know that prices fluctuate : )

Jim
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Beats me, but you seem to manage it!

Because it is simple. No need to overcomplicate it.

BRK has executed poorly in last 15 years (exception of Apple).
Cash, OXY, KHC, DAL, WFC, BAC, IBM, Furniture, Precision, Lubrizol, Gold on and on....

Also whiffed on the biggest elephant compounding stories of last 20 years
and shrank when the big moment came and market crashed by 40%.
So much for quick decisive action.
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No. of Recommendations: 12
What about Burlington Northern , BYD , RH , STNE ? the winners have outpaced the losers . Also BAC has been a good purchase considering the average cost is $ 14.00 . Some "losers" that were mentioned above have either made money overall (WFC & IBM were sold above the cost average)or are above the cost average (KHC)The airplane purchase did cost Berkshire 1.5 billion but the BYD purchase was for 230 million and is now worth 5.3 Billion. Berkshire 's largest buyback at the time was around 174 which if you think about wasn't that far from the bottom 159.00 Berkshire was below 170 for a total of 10 days overall.
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No. of Recommendations: 36
Because it is simple. No need to overcomplicate it.
BRK has executed poorly in last 15 years


Well, with that one small exception--
The $366 billion in retained earnings that caused book per share to rise 10.62%/year compounded.
Gosh, I certainly hope we have another 15 years of that kind of terrible execution!

Maybe that rate of return is disappointing to some, but did anyone rationally expect much more than that?
That's book/share growth of inflation + 8.6%/year in the 15 years from from Q3/05 to Q3/20.
In the prior 7 years from Q3/98, starting around the time of the Gen Re acquisition, Berkshire managed only inflation+6.9%/year.
So, the pace picked up by 1.7%/year.

It's certainly true that a share of Berkshire isn't growing in value at 20%/year, and there are other companies that are, and many will likely continue to do so for a fair while longer.
The real value depends on how long the high growth period lasts, and with what degree of certainty, but those can be estimated.
The thing is: the faster growers may or may not be better investments. It depends on the price.
If something is worth twice as much based on its likely future, I'm happy to pay 1.5-2 times the price, but not 3-10 times the price.
At the right price ratio between the price of Berkshire and the price of (say) Alphabet, I'd ditch Omaha in a New York heartbeat.

Jim
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No. of Recommendations: 0
At the right price ratio between the price of Berkshire and the price of (say) Alphabet, I'd ditch Omaha in a New York heartbeat.

I don't know how fast hearts are beating in NY but hope your calculations include non-material value factors (management, culture).
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No. of Recommendations: 10
At the right price ratio between the price of Berkshire and the price of (say) Alphabet, I'd ditch Omaha in a New York heartbeat.
...
I don't know how fast hearts are beating in NY but hope your calculations include non-material value factors (management, culture).


Yes, but personally I mostly use that sort of thing for a first step filter for things I might be willing to consider.
I don't bother estimating the fair value of a share in a company making (say) medieval torture devices, because I don't want to own it at any price.
I'm probably a lot more strict that many people...I avoid buying an index fund, for example, because I rule out some of the things in it.

Then, from among only those I'm willing to consider at all, I want little more than the most value (future purchasing power) I can get for my outlay today.

For any purely financial asset, value is nothing but future money versus cost today, but there are lots of things that go into that.
A lot of those "fuzzier" seeming considerations feed into predictability and longevity of the business model, for example.
Trustworthiness of management factors into the reliability of the company's statements (verbal and numerical), which again is a big input to predictability and reliability.
Various investments are suited to quite different time frames, too.

Jim
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