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Berkshire puts its 50past/50future year letter out tomorrow and I'm guessing Uncle Warren will be very optimistic about Berkshire's next 50 years. The stock has been flat for 3 months but did have a very strong 2014 including expansion of P/B which limits its P/B expansion prospects going forward. It's trading at 1.5x book which is lofty for the last 5 years but I think 1.5-1.6 is reasonable and book is growing even if it is sitting in cash. Sitting on cash seems prudent and while his business doesn't have killer growth prospects he doesn't do stupid things with the cashflow very often so book should go up this year baring a big drop in stocks. I don't think IBM, WFC, AXP are grossly overvalued but they'll be correlated with a market decline with most of his holdings. I think there will be a ton of press and a halo effect b/c of the letter and the annual meeting coming up. It will help that he had a killer 2014 so I'm hoping for some momo. MKL and FFH both had nice insurance reports so I expect BRK insurance results to be similar. Paid 147.52

Sold an equal amount (plus a smidgen more) of my S&P 500 in my 401k (which is really a 403b.) In the last 3 months Brk has been flat while the general market was up 2.5% plus divy. I will get the market close for this.

So mostly swapping Berkshire for S&P but it does limit me by using up most of my accessible non-403b cash.

Paint a pretty picture, Warren.

Have a great weekend everyone.
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No. of Recommendations: 1
I'm amazed I'm up like 28% or whatever in BRK since last Feb.
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Well, I didn't think Warren painted a very pretty picture in his 50 year letter and the lack of pop/momo did not surprise me after I read it.

That said, I liked the letter and think BRK is a perfect core holding for my limited stock picking skills (that's an oxymoron isn't it?).

I bought more yesterday at 143.43 despite wanting to diversify away from this. He keeps buying stuff and using up his cashflow. And every dollar he piles up instead of deploying is going to get at least 1.2x book value for a long while. So seeing the stock price go up a conservative $1.20 for every $1 saved in cash is a pretty neat trick. Instead of buying $1 for $.80 he is creating $1.20 out of $1. That will work for a while at least and if buying back at 1.2x is a discount he will do so which should be a good use of funds when the day comes that he can't deploy it easily. And he thinks he can deploy cashflows reasonably well for 10-20 more years which was nice to hear. I think the next bunch will know the ideal way to deploy cashflows in buybacks or dividends or growth going forward to come very close to maximizing shareholder value. In fact he assures they will know what to do and I believe him. Granted there is a risk of BV compression from today's ~1.5 ish to 1.2 ish which will sting but BV is growing and 1.3-1.4 seems very reasonable for a long while out if you can trust the asset allocators to follow Buffett. And with the right dividend policy they should be able to maintain higher than 1.2 BV for what they do retain.

Almost all value investors on dataroma sold this in 4q2014. I faded their actions and have been sitting on a loss for the year to date but every month it adds to book and very little of it is frittered away. There will be companies growing faster that will return more but this one seems to be run well enough to do well. I think it is still a wealth generator and I expect it to double my money every 8-12 years that I am alive. Good enough for a passive investment with no stress.
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