I told myself if we ever get over 1.5x last known book value again, I will pare down our ludicrously large position in Berkshire. Maybe to only ridiculously large.
Now it’s here I’m having a spot of trouble acting on it. I’ve never sold Berkshire in quantity before. Feels weird, unnatural.
Maybe I’ll just sell the bunch I bought in the $270-280’s recently. They make my cost basis look bad anyway.
Let’s assume you think it’s rational to sell a bit.
One of the simplest tricks for outwitting your emotions:
Sell half what you think you ought to sell.
After a little while, sell the other half of what you think you ought to sell.
The price will change between those two dates.
If it rises, you’ll feel like a genius for having waited to sell the second half rather than doing it all at once.
If it falls, you’ll feel like a genius for having sold some early and snagged that great price that didn’t last.
Lately I’ve been selling a few little dribs on days with fresh highs.
The justification is this: the higher the valuation multiple of any asset, the lower the prospective return and the higher the risk.
Assuming a tax-sheltered account, anything with slightly lower return and slightly higher risk should be a slightly smaller position.
The real reason is that I really went overboard topping up the position a while back, and that can’t last forever : )
Jim
I also struggle with selling even when I make rules on when to do so. However, I recently sold some in an IRA account to raise my cash level to my target amount. That makes it easier for me to sell than to just make a rule to sell at 1.5 book. So my new rule has TWO qualifiers: sell at 1.5 book but only IF I need to do so to get to my standard/required cash position.
The justification is this: the higher the valuation multiple of any asset, the lower the prospective return and the higher the risk.
I tried to explain that to some of my buy and hold friends. They don’t understand why I rebalance my portfolio every quater with a % target depending on how much I think à stock is undervalued. They said that I sell my winners and buy in my loosers. Sure if I had not sold a single Apple share I would have more money but it is in hindside view. That way I often bought shares after a decline in price because I made room for it two quaters ago. I’m retired so I can’t buy if i don’t sell in excess of lunch money
% target depending on how much I think à stock is undervalued. They said that I sell my winners and buy in my losers.
They’re right…but only if it’s a discussion of doing it once.
If you do it repeatedly over time, you’ll have a higher long run return.
“Buy low, sell high, repeat” wins.
You don’t sell out of (say) Apple because the price is high and call it quits.
You sell some of it, for now, and put that money into something with better prospects.
Either something good that’s cheap now, or Apple later when it’s cheaper.
The other thing to remember is that you don’t want to sell when the price goes up a lot (selling your winners),
you want to sell when the valuation level goes up a lot…beyond what seems sustainable.
I see no merit in selling some or all of a stock that’s doubled in price if the value has as well.
Conversely, I sometimes sell some or all of a stock whose price has gone nowhere if I consider the true value to be impaired.
That’s the other way valuation multiples can rise.
Jim
I always say the same and end up sucking my thumb
Like everyone else the rapid run up of price has triggered thoughts of selling and I did sell some, and immediately regretted it.
Here are my rules going forward
Don’t sell when Warren is buying
Buy when he’s buying. If I have the funds.
When he’s not buying, just sit on your a$$
Please, please don’t sell to Buffett. iD10t!
And oh, wait until Feb 15, May 15, August 15 and November 15 to act. Hardly a calamity to lose out a potential selling opportunity between those dates.
Screw the Xx times Book Value!!
If you don’t need the money for 10-20 years, and it’s in a tax deferred account, do you still sell to rebalance? BERK is currently a 15% position. Cash is 20% as I’m unwilling to go all in on BABA and QRTEA. I’ve been wading into 2% positions in stocks that show up on a value screen I run, but opportunities pop up rarely and I don’t like committing more that 2% to each idea from a mechanical screen.
Of course, I could go all in on Saul’s stocks.
PP
Like everyone else the rapid run up of price has triggered thoughts of selling and I did sell some, and immediately regretted it.
Well, here’s a maverick view for all of you. Maybe it’s just my own patient temperance, but I’ve never sold a single share of my BRK position since I acquired my first shares back in 98 or so. I have religiously piled in along the way during a number of significant downdrafts. I don’t employ any leverage or use any of the sophisticated option strategies discussed on here, but was tempted to play around last year with long dated DITM calls, but decided against it. I don’t do it enough to have a real feel for it, or a comfort zone as to when to call or roll the thing. I’d need to school myself a bit on it, and I guess I’m just also a bit lazy to begin educating myself at this stage of life.
I retired a couple years ago, so, I’m all done accumulating BRK. Except for a tiny position in DLTR, (thanks Jim), that I picked up at the lows, I’ve liquidated virtually all other stocks and index positions a few years ago (probably too early). Yes, I do now have a “ludicrously” sizable position in BRK, most of it in a taxable account, and the rest in my 401k. I have what I would consider a very respectable return, which I’m elated with, but nothing like Jim, with his use of options. I’m 80% BRK, 20% cash….pretty simple. I don’t need the money. I have several pensions. It’s all going to charity at the end. I faced the same dilemma as you, and have thought about it……for a few seconds. Then, I asked myself, “what would Charlie do?” 
" Then, I asked myself, “what would Charlie do?” "
Buy Baba?
Buy Baba?
Well, you got me there! 
My comeback was going to be, “well then, what would WEB do?”
But I’ll stop while I’m ahead, because any moment now someone like divs will answer, “WEB would say put it the s&p500 for the next fifty years.”
Sorry…we’ve had our decade of underperformance…the pendulum has swung and I look forward to a reversion to the mean and all that stuff. Now, it’s our turn. This is Berkshire’s decade. See ya in 2030!
Maybe I’ll just sell the bunch I bought in the $270-280’s recently
Once I read, Many investors think they are not worthy of gains, and feel guilty and sell. Initially I thought the author is bit arrogant, but over the years I learned what he is talking about.
Don’t do anything, just sit quietly.
One of the simplest tricks for outwitting your emotions:
Sell half what you think you ought to sell.
After a little while, sell the other half of what you think you ought to sell.
The price will change between those two dates.
If it rises, you’ll feel like a genius for having waited to sell the second half rather than doing it all at once.
If it falls, you’ll feel like a genius for having sold some early and snagged that great price that didn’t last.
I’m a genius!
But now we’re back under my sell target - currently 1.49x last known.
No problem. I’m just tinkering around the edges to make me feel like I’m doing something 
The price will change between those two dates.
If it rises, you’ll feel like a genius…
If it falls, you’ll feel like a genius…
…
I’m a genius!
Finally, a prediction I felt confident of!
Jim
Sorry…we’ve had our decade of underperformance…the pendulum has swung and I look forward to a reversion to the mean and all that stuff. Now, it’s our turn. This is Berkshire’s decade. See ya in 2030!
This last few years, growth was the place to be. When people pour into growth, BRK takes a hit. You can see this by pulling up a chart from the late 90’s into 2000’s. Internet buildout rose, BRK fell. Then BRK rose while the internet buildout stocks were falling.