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No. of Recommendations: 35
The interesting question is to ask why the market price has gone nowhere for such a long period of time starting from a point it was not overvalued and in a period where the business performance has been ok.

My theory is that the market is now discounting Berkshire's capital allocation capability based on the last 5 years of allocation performance.

The re-investment of earnings in the last 5 years has been generally mediocre and ultimately that is the key to compounding. Since end of 2014, Berkshire has earned $126b and cash equivalents have swollen by $87b.

PCP - Not a great use of $33b to acquire an earnings stream of $1.5b
OXY - So far a disaster. The entire market cap is currently less than the sum Berkshire invested
KHC - Ditto
Airlines - Ditto
Banks - Jury is out in a zero interest world

On the other side of the ledger, Apple was a home run.

There were signficant opportunities in the stock market in Q4 2018 and early 2020 when Berkshire did not deploy capital at all. I think these were big signals to the market.

Buybacks have been 3.2% of the shares outstanding so far in the 2 years the program has been active and during a time when the stock has been flat and cheap by historical standards.

The overall assessment is of a misfiring recent capital allocation function and the market valuing it on that basis since superior allocation has been the raison d'etre for the whole enterprise in the past.

With a different ownership structure this would typically attract activists who could force value to be unlocked but this is not possible. Till succession or some other catalyst like an unexpectedly aggressive action on buybacks, I don't see the multiple changing much. Growth from here on should really be expected to be in line with value growth rather than multiple expansion.
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