As I have said, I do not yet hold BRK and being 60% in cash am looking for a good entry point for a
significant sum of money, (for us anyway.) It sometimes is hard to resist the seemingly almost cult
like conviction to buy now, particularly after the stock went sub $300 and then rose again, making
me concerned that I had missed my window of opportunity. But only slightly concerned, because I have
strongly felt the market in general was over valued and that the macroeconomics indicated it was
poised for a strong correction. (Yes, market timing. I know you all disapprove.)
why should the BRK valuation escape a downward trending market?
It’s not that I disapprove of timing.
I have precisely 1063 spreadsheets in my “market predictors” directory. (honest)
Nor that I think that Berkshire will escape a market rout.
But, beware certainty. Market timing is very fallible.
Seeing a good entry price for a core position, but passing it up because you have a hunch it’s going to get better, is probably not optimal.
Even if the hunch is a very well informed one.
Berkshire is cheaper than it has been 90% of the time since the post-crunch cheaper prices have been the norm, give or take. Maybe 85, maybe 95.
That valuation level probably falls into the category of “good enough”. Heck, for a core position, it’s not really necessary to do better than any “cheaper than average”.
Using timing to give you a slight edge averaged across 1000 small trades makes some sense.
For one big move, perhaps a little less so.
One way to outsmart your emotions:
Buy half now, half when you think the market has bottomed. (which might be higher than now)
If the market falls between the two, you’ll feel like a genius for having waited to buy the second half.
If today is the bottom and the second half it bought at a higher price, you’ll feel like a genius for having bought half now at the bottom.
All that being said, my gut feel matches yours.
I very much doubt that Friday’s close for Berkshire’s stock will be the lowest that is ever again seen.
But I was buying anyway, on the reasoning above: it’s a good price.
Don’t let striving for perfection distract you from snatching the merely very good.
Berkshire’s market valuation is about 25% cheaper than it was at its peak in March, in round numbers.
So, for a ten year hold, you’ll do 3.1%/year better than you would have with a purchase then.