6M 1Y 5Y
BRK +10% +29% +85%
SPY 0% +12% +85%
tecmo
…
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Reminder that my “alamanac” suggests this should be good luck day to buy.
We’re starting a stretch that has, in the past, been a stretch of outperformance for Berkshire’s stock price.
https://discussion.fool.com/so-this-year39s-almanac-if-you39re-3…
Berkshire’s performance has in the past tended to be quite good relative to market for the week before, and 8 trading days after, the Friday before the annual report release date.
This year that’s from around now to around March 8-9.
Average/typical gain has been 2.1% in that stretch in the last 18 years, beating the S&P equal weight total return by about 2.5%.
Something like an 80%/yr annualized rate. Briefly. On average. In the past.
(obviously not to be taken seriously)
Unrelated—the other “Berkshire alamanac” observation remains weirdly strong.
Berkshire’s share price does very well in the days around the end of the month, and does net nothing in the mid month stretch.
Being generous, the lucky days are from market close on the 5th-last trading day of the month through to market close on the 7th trading day of the next month.
That’s 11 trading days, leaving the other (average) 10 trading days as the unlucky ones.
Since Jan 2000, annualized rate of return in the 53% of the time “lucky days”: +29.8%/year.
Since Jan 2000, annualized rate of return in the 47% of the time “unlucky”: -8.2%/year.
Go figure.
Jim
12 Likes
“Berkshire’s performance has in the past tended to be quite good relative to market for the week before, and 8 trading days after, the Friday before the annual report release date.
This year that’s from around now to around March 8-9.”
My explanation for this phenomenon is “share of mind of investors”.
My simple rule was 2 weeks before and 2 weeks after earnings there tends to be outperformance
because more investors are focused on the company and it helps that it is a wonderful company:
The nature of a wonderful business is that it works very well.
I think the biggest outperformance was really around the annual report, because more investors
are focusing on the company.
Sometimes studying charts can be helpful. 
1 Like
Berkshire’s share price does very well in the days around the end of the month, and does net nothing in the mid month stretch.
Being generous, the lucky days are from market close on the 5th-last trading day of the month through to market close on the 7th trading day of the next month.
This “almanac” fact reminds me of the Douglas Adams quote:
“It is a curious fact, and one to which no-one knows quite how much importance to attach, that something like 85 percent of all known worlds in the Galaxy, be they primitive or highly advanced, have invented a drink called jynnan tonyx, or gee-N’N-T’N-ix, or jinond-o-nicks, or any one of a thousand variations on this phonetic theme.”
He goes on to write, paraphrasing from memory, “what can be done about this fact?” (Followed by the tragic trajectory taken by young etymologists excited by it.)
That is a question that I would like to ask about the above fact. Is anyone proposing a trading strategy of selling all of your Berkshire holdings near the close of the 7th trading day of each month, and buying them back near the close of the 5th-last trading day of that same month?
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Is anyone proposing a trading strategy of selling all of your Berkshire holdings near the close of the 7th trading
day of each month, and buying them back near the close of the 5th-last trading day of that same month?
“Proposing” a strategy…well, that’s a bit strong.
It’s a thought experiment.
Imagine you had the current stats on the strategy, and a time machine, and a broker that charged virtually nothing.
(the latter, at least, is not so hard to achieve)
Since Jan 2000, the buy-and-hold guy would have made 10.05%/year with a risk metric of 9.85%.
(using a risk relatively reasonable metric, not monthly standard deviation of returns.
I use annual downside deviation: basically, the probability of your portfolio not making 10%/year
in a given rolling year, with a squared penalty on the size of the shortfall)
A portfolio using a switch between holding the stock in the lucky days, and cash earning zero, would
have made 14.66%/year (4.62%/year more for 22 years), with a risk metric of 4.43%, about 45% of the risk of buy-and-hold.
So, over 4%/year more returns for under half the market exposure risk.
(half the risk makes some sense, by the way, since you’re in cash almost exactly half the time)
For example, the buy-and-hold fella would have had a worst rolling year of -50.1%.
The crazy monthly timer had a worst rolling year of -12.7%.
The buy-and-hold guy had a probability of a positive rolling year of 75.1%.
The “lucky days” timer had a probability of 90.7%.
Am I seriously proposing that you do this? No.
But hey, if you’re thinking of buying some BRK some time soon, you might as well do it at the start
of the next “lucky” stretch rather than at the start of the next “unlucky” stretch.
Can’t hurt.
The strange thing is, I’ve been looking at and commenting on this effect for Berkshire for a very long time now.
It hasn’t gone away.
Jim
16 Likes
6M 1Y 5Y
BRK +10% +29% +85%
SPY 0% +12% +85%
```
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BRK +12.0%
SPY total return -6.9%
Still early days, but it’s nice to be out of the Rodney Dangerfield zone.
FWIW
The result so far on my 7-year prediction from June 29 last year, which was outperforming SPY by 4%/year over 7 years, using a smoothed endpoint.
https://discussion.fool.com/7-year-prediction-34863782.aspx
So far, BRK up 13.8%, SPY total return 2.5%, in 0.64 years.
Outperformance of 4%/year for 7 years amounts to total outperformance of 31.6% (not annualized).
So far it’s outperformance of 11.3% (not annualized).
A third of the way there, on a relative basis!
Jim
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The interesting part of this, given any amount of Grantham-esk thinking, is whether the outperformance by Berkshire will be via an increased stock price, flat, or slightly declined.
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In other words, the Verizon stock purchase may eventually make sense.