Just added to ownership of BRKB @310. Feels like a reasonable discount to value and Jim’s projections are always helpful as well. Whatever the weather, we seem well positioned on many fronts.
NO BRAINER
BUYING LEAPS TOO
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My issue is I have to sell something to buy it. I’d be interested in an opinion regarding likely results from switching some BRK to LEAPS. I like to leverage up a bit when the valuation looks low.
My issue is I have to sell something to buy it. I’d be interested in an opinion regarding likely
results from switching some BRK to LEAPS. I like to leverage up a bit when the valuation looks low.
I’ve made a lot of money doing that exchange, adding leverage when it seemed prudent, but the best time to add to one’s position is when the stock is cheaper than average.
It doesn’t seem to be at the current quote of $312.43.
Using my “two and a half column” valuation metric, it has been cheaper than this 47.6% of the time since the start of 2008.
And using P/B, cheaper than this 47.1% of the time.
So…basically it’s average for the modern era.
Of course, average market valuation corresponds to somewhat undervalued in real terms.
But it’s not cheaper than average within rounding error.
By construction, it’s cheaper than average somewhere in the vicinity of half the time, so such opportunities aren’t rare.
Price has been lower than 1.3 times peak-to-date book-per-share 29% of the time since the big drop in average valuation multiples in 2008.
I don’t know if that will be typical of the future. But I don’t think price fluctuation is dead.
Since then, current valuation levels have historically been consistent with one year forward returns of around inflation + around 8.1%.
So, to the extent that the future resembles the past, a fine return might be a reasonable expectation.
Just not an unusually good one.
Jim
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So, to the extent that the future resembles the past, a fine return might be a reasonable expectation.
Just not an unusually good one.
Which means that in the current wild and unpredictable environment the prudent thing would be to stay with the stock.
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I keep telling myself ,“Patience is a Virtue”, when considering buying/selling a part ownership in Berkshire.
To help in the decision of being a larger or smaller owner, I stare at the chart Jim has shared in the past that shows 16+ yrs of history of what “Mr Market” will offer you relative to a fixed band of valuation measures. When the offer is nearing the upper limit, I consider lighting up & building cash and the opposite at the lower limit. This approach has worked nicely & allows me to sleep well. Moving between these limits may take yrs …and lots of Patience!
With the current price being near or above the upper valuation limit, I have been building cash since Feb and it may be yrs until I want greater ownership.
I do not have a link to the chart at stonewellfunds.com so maybe Jim would be so generous as to repost the link.
ciao
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I do not have a link to the chart at stonewellfunds.com so maybe Jim would be so generous as to repost the link.
Latest version, from March 30.
It doesn’t show the recent dip.
It does, however, illustrate why I was lightening up at that time.
http://www.stonewellfunds.com/BuybackChart2022.png
(“consensus value” on that graph is just a blend of 1.5 times price to peak book, and my “two and a half column” valuation metric)
Jim
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Not me. I am already overweight in BRK.A and have almost enough BRK.B to change to one more share of A.
“Since then, current valuation levels have historically been consistent with one year forward returns of around inflation + around 8.1%.”
I do like this tried and true batting average at this stage of life and would respond “thank you kind sir, may I have another” for a few decades.
We sold some BRKB…
We sold some BRKB…
That’s one of the nice things about having the stock trade at its usual valuation level.
People selling don’t have to feel foolish, and people buying don’t have to feel foolish.
I used to tell my friends that I’d whack them about the head if they sold below 1.5 times book (using peak to date book per share).
But in the “new era” of lower valuation multiples since the credit crunch, fewer people have the patience for that.
There was a stretch of 4.1 years that it didn’t trade that high ending in November 2014.
And 2.2 years ending this January.
Jim
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We sold some BRKB…
We bought a BRB.A on yesterday’s drop.
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