BRK vs. AMZN vs. SPY

Just taking this year and extrapolating is not the right way.

1 Like

Berkshire performance gained significant boost from Apple. Now, think about that, what are the chances that anyone, leave alone Berkshire folks, can generate $100 B unrealized gains on an investment. That required Buffett brilliance and a happy market. If you think without the above two, somehow Berkshire can beat SPY is to be seen. Berkshire may perform along the lines of SPY or few %age +/- on a given year, but a sustained outperformance is questionable.

2 Likes

"Disintegrate? That’s a helluva adjective.
Can you give a scenario where Berkshire Hathaway would disintegrate?

BRK is a Buffett creation over last 60+ years by handpicking companies. BRK does not have a core competence like MSFT or AAPL. It is more like a Doctor’s office with a single specialty. Mr. Buffet’s is the doctor and capital allocation is his specialty.

So the questions you need to introspect are - What happens if post Buffett BRK Abel is not able to perform and stock moves sideways for years ? What happens if there is a 2008 or Soloman like crisis including at BRK ? What happens if the CEO of BNSF or Ajit Jain want to exit, why should they report to Abel and get dragged ? Progressive (Geico’s competitor) and UNP (BNSF’s competitor) have done much much better for their shareholders. This is not isolated. From Candy to Groceries, BRK umbrella provides too much security and very little risk taking.

What we know is Buffett will leave BRK in a good place but with a very large size which is hard to compound fast. His successor has 0% chance, (yes 0%) being better than him. He has to find 2-3 Apple kind of investments in next 5-10 years. 15-20 years is a very long time and things WILL CHANGE and Buffett loyalist shareholders will dwindle and a new class of shareholders will come.

On the other hand, S&P500 index is resilient, adaptable and has a long history of outperformance. It is a 1 inch hurdle.

Dollar cost average (especially now given the rising rates), sleep well, get rich slowly, enjoy life.

1 Like

Divi, i get it and appreciate your argument…

“BRK umbrella provides too much security and very little risk taking.”

For a guy on the edge of hanging it up…i’ll take that trade-off.

“15-20 years is a very long time and things WILL CHANGE and Buffett loyalist shareholders will dwindle and a new class of shareholders will come.”

Again, for someone retiring sooner than later with a plan to sell off the position for income…i resemble that remark. :wink:

It’s definitely not a one size fits all situation for BRK shareholders. My guess is a regular dividend will eventually get paid because I do agree there is too much cash for the new management team to intelligently deploy. Future buy-backs are a hit or miss scenario as we’ve seen. Not something to be counted on.

m

2 Likes

BRK generally falls with the market so not a safe haven.

US treasuries are offering 4.5%. Capital one is offering 4.4% 5 Yr CD.
If your time horizon is short, the above are attractive options with much lower risk.

1 Like

I don’t equate volatility with risk, but thanks.

4 Likes

I don’t equate volatility with risk, but thanks.

Volatility and Risk are different.
BRK is not safer than US treasuries.
If your time horizon is shorter than 5 years, you should not be in stocks.

Agreed! Then, why did you say, “BRK generally falls with the market so not a safe haven.”

1 Like

Thanks for making your case divi. I think here is an alternative, Berkshire opportunistically liquidates some of its equity investments, reduces its cash hoard to the required level, and uses its operating profits to continue to reduce the share count and invests in some select operating units (for ex: MidAmerican, Insurance) and becomes a somewhat smaller, thriving conglomerate. If you can buy at right price, Berkshire can provide decent returns. Whether it will beat SPY is a function of market multiples. If one’s view is SPY is expensive or just want the stability of Berkshire, why not Berky?

1 Like

If your time horizon is short BRK is not a safe haven when market falls down. BRK will go down as well. You will be force to sell.

1 Like

Yes we are all aware of the things that you continue to post. I am truly curious why you continue.

Jk

2 Likes

I thought he said he was retiring soon. Not dying soon.

1 Like

Buffett could have sacrificed size for higher returns decades ago. Egos will not allow that.