Berkshire no better than the S&P with

far greater risk, twenty years is more than enough time to make this conclusion. Even Buffett is putting his estate into the S&P over Berkshire. Yes, some of you have outperformed the S&P by opportunistically buying Berkshire. This is no different than opportunistically buying the S&P at depressed levels and then outperforming. Why have company-specific risk buying mature business that isn’t growing a whole lot faster than the economy, if at all?

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How about 22 years?

https://stockcharts.com/freecharts/perf.php?SPY,BRK/B&n=…

SPY +290%
BRK-B +607%

Start and endpoints matter a great deal.

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Start and endpoints matter a great deal.

What matters even more is the future rather than the past.
Opinions about the prospects of any investment can certainly differ,
but there is no doubt that it’s the forward prospects that matter to an investment decision.

It’s not hard to figure out what you need:
A conservative estimate of the growth rate in value, adjusted for a reasonable estimate of any likely one-time change in valuation levels.
Bob’s your uncle.

Jim

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“Even Buffett is putting his estate into the S&P over Berkshire.”

bmb,
Yes, but this decision was because it is easy for trustees, will provide a satisfactory outcome and Astrid will not have to make any decisions wrt investment choices or have people trying to advise her on these decisions. He also recommends the S&P for the “know nothing investor” which yes indeed, does beat active management 85-90% over the long run without the fees.

Yet he and Charlie have always preferred to own Berkshire and have advised their families to sit tight with it long term. Size has become somewhat of an anchor but go back to 1964 and his overall gains dwarf the index by 120x, including dividends. My returns with BRK have been 13% compounded since 2011 despite the size anchor. No options grants, no self interest , no accounting shenanigans, no significant earnings revisions, no obscene CEO pay ($100K/year) , just offering a shareholder owner the exact same proportionate benefits as he has. Returns matter but so does culture and integrity in my mind and BRK is the poster child. Good luck!

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Isn’t Berkshire trading at below 10 times true economic earnings ($55 Billion) excluding cash ($106 Billion) compared to S&P 500 at 18 times? Hard to say which group will grow earnings faster but even if it was the S&P 500, isn’t that priced in?

FWIW some think Berkshire can grow earnings faster than the S&P 500. Personally, I prefer the earnings today approach of Berkshire, rather than potential jam tomorrow of companies like Tesla. Just feels safer. If inflation and interest rates keep rising more and more may agree which could cause dramatic changes in the multiples of both options in Berkshire’s favour.

But off course both will bob along pretty close no matter what.

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“Far greater risk”? What parameters do you use to quantify your estimation of risk? Berkshire is a bit large and diverse to dismiss as “company specific”
or “mature business”. What I see is a defacto index of companies that actually turn consistent profits, available at a lower price than the S&P 500.

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I’ve had a go at a Conservative BRK valuation.

Fag packet.

Current BV 208 and 9% growth over 10 years equates to a BV of $492 x 1.4 = share price of $688

Present value calculation 688 Future value with a discount rate of 10% over 10 years equates to a share price of $265. So there or thereabouts atm.

Doubt the S&P will gain 10% pa at these levels. So BRK is a buy.

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The constant threads about BRK vs. S&P500 misses the larger point IMHO. I think both will be fine over the next 10 years and I really don’t know which performs better. My guess is that they will be very close.

I think everyone should invest in what they are most comfortable with because then they are most likely to stay invested for the long haul. I am much more comfortable with BRK , I like being associated with BRK as an owner, I admire and respect the ethos of the company and its owner oriented management. So that’s the answer for me but it is not because I think BRK will blow away the S&P 500 index.

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Mostly putting shy Astrid’s inheritance into the S&P 500, keeps the media from wanting to know when and if she draws down on her inheritance and “why”? She really would be bothered by that, as would most grieving spouses.

IIRC, WEB has donated actual B shares to his childrens’ trusts to provide for his children, grandchildren etc.

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EV,

Take a look at Tesla’s earnings today. Those earnings are pretty strong.

jan

:^)

I am much more comfortable with BRK , I like being associated with BRK as an owner, I admire and respect the ethos of the company and its owner oriented management. So that’s the answer for me but it is not because I think BRK will blow away the S&P 500 index.

Objectively evaluate the risks with BRK post Warren and Munger. There are many CEOs in the BRK umbrella and stay because Warren earned their trust. Will they stay with BRK/Abel when BRK runs into a prolonged bump ?

Additionally, don’t fall in love with the stock. It does not care about you or your family or this board. There are no points for making the hurdle higher. Warren learnt it with Berkshire (the textile mills).

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Tesla’s earnings today :slight_smile: don’t get me started on Tesla’s earnings.
. Probably fraudulent
. Under investment in R&D with no new models as competitors roll out new EVs daily while the 3 Tesla’s become ever more dated
. Insider share options abuse on an industrial scale. Pump and dump.
. Capital intensive industry
. Consumer switching
. Battery raw material supply constraints
. Loose cannon CEO that is capable of anything

All that priced like the best business that has ever existed X 10

Not that it will hugely effect an investment in the S&P 500 if the bears are right on Tesla.

If Tesla creates long term shareholder value from here I will be shocked to my core. That said, the world wants more EVs, so we will see what happens.

I may not be objective on Tesla and will admit to an overwhelming disdain for Mr Musk. He just seems like a stone cold crook that will harm a lot of people while feathering his own nest and puffing his ego.

Sorry this is nothing to do with Berkshire Hathaway and Warren Buffett, a firm and CEO I couldn’t admire more.

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Tesla’s earnings today :slight_smile: don’t get me started on Tesla’s earnings. …
I may not be objective on Tesla and will admit to an overwhelming disdain for Mr Musk…

Oooh, harsh post.
You said all the things that people seem to perceive that I say : )

Mr Musk is Mr Musk. His estimable merits and egregious flaws are obvious for all to see.
But some are unable to see one or the other, which I presume is the root cause of the usual disagreements.
He’s another Mr Trump in a truly amazing, remarkable variety of ways. But highly effective and a successful capitalist.

Jim

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Under investment in R&D with no new models as competitors roll out new EVs daily while the 3 Tesla’s become ever more dated

EVs are a tiny part of the car market and there are plenty of consumers still to be served with the few Tesla offerings. A small number of models leads to high manufacturing efficiency and nimbleness in a supply chain limited world. Look at Tesla’s growth while almost every other car maker shrank last year
The “ever more dated” Tesla models have had an increasing backlog of orders the last year even though the Tesla federal rebate ended years ago

Capital intensive industry
Which makes it more difficult for EV startup competitors. And the legacy car makers have to still try and show profits while doing both ICE and EV in design, factories, supply chain, service, etc.

Consumer switching
Good for Tesla. People can switch from ICE to Tesla who has the only viable long distance charging network, especially in the US. Tesla’s lead in fast chargers is actually growing while everyone else is talking about them.

Battery raw material supply constraints
All EV makers have this same problem. Legacy dealers will happily just sell you an ICE car, they don’t care. How did Tesla grow >50% the last couple of years? They have battery supplies ready and can adjust how much they put into Powerwalls and grid batteries as to what is needed or more profitable. Who else has this flexibility?

. Loose cannon CEO that is capable of anything
No arguments here.
If he only delivers half of what he says it is far more than the legacy car makers.

Mike

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Objectively evaluate the risks with BRK post Warren and Munger. There are many CEOs in the BRK umbrella and stay because Warren earned their trust. Will they stay with BRK/Abel when BRK runs into a prolonged bump ?

That’s a fair point and one I pay serious attention to. Of course the next guy can screw it up at any company, but there is also a chance the next guy may do better in some aspects (think Tim Cook after Steve Jobs). I am comfortable with Abel & Jain leading the company after Warren & Charlie. I don’t think it matters a great deal if a few CEOs of the subsidiaries leave. The bench is deep enough & large businesses are moaty enough that BRK will do fine.

Finally, unlike you pushing the index over BRK I am not trying to convince anyone else to buy or hold BRK. I really couldn’t care less if others decide otherwise.

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Isn’t Berkshire trading at below 10 times true economic earnings ($55 Billion) excluding cash ($106 Billion) compared to S&P 500 at 18 times?

How do you get to $55bn?

IIRC, Bloomstran gets something like that, but he adds on fictional earnings, as if the cash was put to productive use.

“Far greater risk”? What parameters do you use to quantify your estimation of risk? Berkshire is a bit large and diverse to dismiss as “company specific” or “mature business”. What I see is a defacto index of companies that actually turn consistent profits, available at a lower price than the S&P 500.

A couple of things come to mind:
Risk 1: Insurance. No real way for us shareholders to know the risk. We must trust management.
Risk 2: Huge concentration in Apple. 23% of Berkshire’s market cap. The S&P500 index is 7% Apple.

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All that priced like the best business that has ever existed X 10

I like how Elon has been kicking the shorts in the teeth for many years and has provided staggering returns for investors who are laughing all the way to the bank.

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EV, have you looked at Tesla’s earnings?

EV,

Both Tesla’s revenue and gross margins are growing exponentially.

The numbers are there for you to see, if you wish to look them up?

If you substitute the name of Trevor Milton for Musk and the name of Nikola for Tesla, your post would be accurate, IMHO.

In STL, sales are so strong that the entire showroom staff have been retrained and sent to work in service, because there are sooooo many new cars to be delivered.

Wish that you would sign up for testdrive.