....... BRK S&P
--------------------
1YR **30%** 14%
3YRS 56% **62%**
5YRS 83% **99%**
7YRS 113% **133%**
10YRS **300%** 283%
15YRS **341%** 315%
11 Likes
Divi,
Thanks for the performance summary.
Fortunately for me, my weighted avg holding period is beyond 10 years.
Likewise, I intend to slowly unwind this to meet the needs of retirement.
Based on current relative valuation, what would you expect over the next 5,10 & 15?
Iād certainly be interest in your return numbers, but especially your rationale.
Cheers!
2 Likes
This is always the key question ā for the past two years, weāve debated the value gap between Berkshire and the market broadly. Now that gap is a bit smaller, the question is whether it has flipped.
1 Like
For those of us who have been around a bit longer, does anyone have the 20 year comparison?
For those of us who have been around a bit longer, does anyone have the 20 year comparison?
https://stockcharts.com/freecharts/perf.php?SPY,BRK/B&n=ā¦
Look at that endpoint! 
3 Likes
weāve debated the value gap between Berkshire and the market broadly. Now that gap is a bit smaller, the question is whether it has flipped.
Nope.
Any other questions?
: )
Jim
Berkshire isnāt expensive on any metric. The broad US market isnāt cheap on any metric.
23 Likes
Thanks for sharing. Does the S&P return include dividends?
āBerkshire isnāt expensive on any metric. The broad US market isnāt cheap on any metric.ā
Jim, do you have a current opinion on BRK LEAPS ?
I have used these in the past to add some āPartyā to the āBowling-Allyā you referred to in the ref.post.
https://discussion.fool.com/in-this-respect-kelbon-is-right-therā¦
I Shirt-tailed your comments last week on the BRK/B 01/19/2024 140.00 Calls,
definitely owe you a bottle of your finest! 
ciao
Does the S&P return include dividends?
Yes, the Perf Charts are total return.
https://support.stockcharts.com/doku.php?id=other-tools:perfā¦
Q: Does the Percent Change value displayed reflect the āTotal Returnā for each stock?
A: In general, yes, as long as you are not using āunadjustedā ticker symbols (i.e. ones that start with an underscore).
2 Likes
Jim, do you have a current opinion on BRK LEAPS
Executive summary: āMehā
I own a bunch of them.
But Iām not buying any at the moment.
The valuation multiple is pretty good, and the short term market prices risks pretty substantial,
so the chances seem pretty good that there will be a better time to load up some time in future.
My magic 8-ball suggests one might reasonably expect a one year return of perhaps inflation + 4.0%.
The actual result will be very different, but the odds of something better or worse seem to be about 50/50.
(range inflation + 0.7% to inflation + 7.5%, depending on which inputs I use)
Clearly 4% is a pretty modest return number for the short term.
Calls give leverage, and leverage makes the most sense when a short term good result seems pretty likely.
That might not be right now.
For those like me who have to raise a little cash for living expenses from time to time, now probably isnāt such a bad time to do so.
Jim
4 Likes
thank youā¦ thought so but wanted to check.
material outperformance over 20 years. Hard to argue with. Of course, many BRK investors here go heavy in periods of cheapness and lighten up when more fully valued.
The Index growth, future cash generation is superior to Berkshire. Just sayingā¦
1 Like
The Index growth, future cash generation is superior to Berkshire. Just sayingā¦
That would be an extremely good point if it had any basis in fact.
Iām unable to find any that would lead to that conclusion. Perhaps you have other figures?
Jim
21 Likes
Isnāt it all really about buying Apple with one wrapper versus anotherā¦?
OK OK kidding but we know Appleās about ~7% of the S&P, a giant piece of Berkshire also. iPhoneās a plenty!
I have a bunch of tax lots since 12/31/12. Theyāre all ahead of the SPX Total return index. The oldest one, 12/31/12, 15.3% annualized. Held in a taxable account. No tax consequences. Thatās with all the āinferiorā businesses and management at Berkshire. Of course Iām being facetious. Nuff said.
2 Likes
That would be an extremely good point if it had any basis in fact
Probably I may not be alive, but in the next 10, 15, 25 years the Index will continue to grow and outpace Berkshire.
Berkshire will slow down to GDP growth or even below, while index because the components are refreshed will continue to outpace GDP. It doesnāt require genius to figure this out.
Even If I give facts, and data you are going to smear them. We have seen that movie thousand times here.
the Index will continue to grow and outpace Berkshire.
ā¦
Even If I give facts, and data you are going to smear them. We have seen that movie thousand times here.
As I expected, you donāt have any facts to support your assertion.
Not a big surprise, since itās wrong. That often makes it hard to find support for the idea.
Random observation:
For the value generation of the S&P 500, it goes into dividends and increases in retained assets.
Any given yearās profits might be high or low, but over time thatās where the value goes.
Last 12 years, growth in book per share of the S&P 500 has been 5.89%/year.
Dividend yield has been almost precisely 2.0%/year, so a not-bad proxy for the rate of total value creation is 8.89%/year.
Berkshireās value per share progress is (so far) pretty well approximated by growth in book per share.
(a bit of an understatement due to buybacks, but thatās not a big issue yet)
Book per share has grown at 12.62%/year in the same stretch.
Advantage Berkshire: 4.73%/year.
You can pick any number of different metrics, but all of them give the same result:
A share of Berkshire has continued to increase in value quite a bit more quickly than a point of the S&P 500.
The S&P 500 market price total return has kept up with Berkshire in the last 5-10 years solely by getting progressively more expensive. Berkshire hasnāt.
Sure, the future might different. But it hasnāt changed yet, and itās unlikely to change dramatically overnight.
Another random metric: P/B of the S&P 500 varied only in the range 1.75 to 3.0 in the 16 years 2002 to 2017.
So, a reasonable definition of ānormalā might be somewhere near the middle of that range.
Itās about 4.4 now, down a fair bit from its recent peak. 85% above the middle of the prior range.
Tax rates are a bit lower, but thatās not enough to explain a gap that size.
It is flatly contrary to reality to suggest that the index results āwill continue to ā¦ outpace Berkshireā, because it hasnāt.
Donāt let the actual facts hit you on the way out. Sorry, itās a shame to ruin a personās favoured false meme.
Spend a few minutes to gather some data and try using those to support your assertions. Itās quite rewarding if you give it a chance.
Itās not complicated.
The key observations are simple and unequivocal:
- Berkshire isnāt any more expensive than it was 5, 10, 15, 20 years ago on any metric.
- The S&P is quite a bit more expensive than it was 5, 10, 15, years ago on every metric.
- Based on market prices, total returns for the two have been quite comparable.
- Therefore, the only reason the two market results are comparable is that the S&P has been getting steadily more expensive.
Needless to say, that is not a trend one would want to extrapolate.
Sure, Berkshireās business results might deteriorate tomorrow. They might stop generating value more quickly than the S&P 500 at any time.
But thus far observable facts offer evidence only to the contrary.
Yup, Iām predictable. I like to stay in touch with reality.
Jim
54 Likes
Last 12 years, growth in book per share of the S&P 500 has been 5.89%/year.
Dividend yield has been almost precisely 2.0%/year, so a not-bad proxy for the rate of total value creation is 8.89%/year.
Berkshireās value per share progress is (so far) pretty well approximated by growth in book per share.
(a bit of an understatement due to buybacks, but thatās not a big issue yet)
Book per share has grown at 12.62%/year in the same stretch.
Advantage Berkshire: 4.73%/year.
This argument and all these numbers are correct except one: S&P value creation has been 7.89% (not 8.89%), compared to Berkshireās 12.62%, for a difference of 4.73%/year.
And I might add, that is a very impressive number, for such a stodgy collection of assets in has-been industries. 1.0473^12=1.74, meaning that in 12 years, Berkshireās value creation has outpaced the S&P by 74%. I can live with boring, when it is beating the market by such a large margin.
dtb
8 Likes
As I expected, you donāt have any facts to support your assertion.
Let us talk about all the assertions presented as āfactsā that are plainly wrong but received 50ās and hundreads of recās?
Some qualitativeā¦
- AWS is a commodity provider, IBM is a premium margin business?
- AWS is taking shareholder capital and giving it to customers to gain revenue
- Tesla is just a car company, it is battery tech has no value
Plain simple accounting 101 - Debt is not part of Enterprise Value
- AWS doing sale lease back is a fraud?
ā¦
I could go on. It is useless.
* Berkshire isnāt any more expensive than it was 5, 10, 15, 20 years ago on any metric.
* The S&P is quite a bit more expensive than it was 5, 10, 15, years ago on every metric.
This conveniently ignores Berkshires $100 B+ value created in Apple is driven by Appleās multiple expansion. Also, Buffett has guided move away from BV. Of course, to do that requires lot more complicated valuation metrics. Sticking to BV works for Berkshire not for other businesses.
For ex: if you look at SBUX whose equity/ BV went down from $5B to -$5B. In your world SBUX is worth nothing, because all you have is hammer. If it is not a nail, then it doesnāt exist.
Good luck.
Kingran, like meā¦and Saulā¦your ideas are such that those in the āwhatās working gameā label us as a fossil.
Three letters is all you need to know:
OXY