BRK vs SPX

Period	BRK	S&P
---------------------
1	**4.8%**	-5.8%
3	38.8%	**39.9%**
5	67%	**74%**
10	237%	**249%**
15	**292%**	245%

After all the twists and turns, S&P still doing better over 10 years 
and poised to do even better in next 10 years.

Dollar cost average.
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“Poised to do even better over next 10 years”

What is your data to back up that assertion?

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“What is your data to back up that assertion?”

Where we are going we don’t need data!

love me some divs

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What is your data to back up that assertion?

The reasoning is the same. S&P is incredibly resilient and adaptable and has a strong track record over a long term.

Even after a bruising year, it is still outperforming BRK over last 10 years. No need for heroics or timing the market.

There is no CEO who is getting old and risk of disintegration and chaos that exists with BRK.

Dollar cost average, sleep well, get rich slowly.

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Oh snap. Disintegration and chaos. Thanks for the warning!

Do you think the SP500 at this time is more fairly valued compared to Berkshire? I see the earnings yield for Berkshire is around 13% vs 5% for the SP500.

I just quickly googled those EY numbers so not sure about the accuracy.
https://www.gurufocus.com/term/Earnings+Yield/BRK.B/Earnings…

https://www.gurufocus.com/economic_indicators/151/sp-500-ear…

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Do you think the SP500 at this time is more fairly valued compared to Berkshire?

Are you genuinely open to the idea of comparing SP500 vs Berkshire? or merely interested in posturing? Because, there are data points that clearly shows SP500 can outperform long-term but most here are interested merely talking their book.

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I have no book. My motives are pure.

Lay some data on me.

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Period	BRK	S&P
---------------------
1	4.8%	-5.8%
3	38.8%	39.9%
5	67%	74%
10	237%	249%
15	292%	245%

After all the twists and turns, BRK still doing better over 15 years…

There! Fixed it for you, because 15 years is longer than 10…and I can cherry pick data too! :wink:

Cheers!
Murph
(who notes that there is no one “right” way to invest; only the right way, given one’s specific financial circumstances, goals and risk tolerances)

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Here is my simple theory. SP500, has more technology exposure (28%) than Berkshire, at least now it is better with big Apple stake. Technology will outperform next decade, especially AI, Gene technology, will spur new growth and great returns. Who those players, I don’t know, I don’t need to know is the beauty of the Index.

Berkshire has no great secular growth stories in their operating businesses. There is a higher probability WEB will not be around and in his absence the company may experience few missteps, may be not. OTOH, Berkshire could aggressively buyback and push the earnings, BV of outstanding shares, and the share price could benefit from that.

As far as SP500 is expensive, value, etc, those who claim higher valuation are claiming that from 2010. At some point those arguments are music to those who believed it from 2010, if not, it is just not reflecting reality.

Separately, earnings revisions will come for next 3 to 4 months and analyst estimates will come down, whether that will result in SP500 sell off or just multiples expansion will handle that needs to be seen. That’s where the dollar cost averaging beats it.

I have sold some SP500 Index puts for $300, and willing to buy index at that level.

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there are data points that clearly shows SP500 can outperform long-term

I see two paths for the S&P to out perform going forward: out perform in earnings growth, or outperform in multiple growth. The data points from the past are from outsized S&P multiple growth, an imbalance which has not reverted to a level I would consider justified. As far as earnings growth, the S&P has not shown an ability to drastically increase earnings: the mix of high growth tech and solid industrials can’t shift quickly, and earnings growth is steady, but not spectacular.

Here is my simple theory. SP500, has more technology exposure (28%) than Berkshire, at least now it is better with big Apple stake. Technology will outperform next decade, especially AI, Gene technology, will spur new growth and great returns. Who those players, I don’t know, I don’t need to know is the beauty of the Index.

Berkshire has no great secular growth stories in their operating businesses. There is a higher probability WEB will not be around and in his absence the company may experience few missteps, may be not. OTOH, Berkshire could aggressively buyback and push the earnings, BV of outstanding shares, and the share price could benefit from that.

This all seems pretty reasonable.

I still think the SP500 is overvalued vs Berkshire going forward the next 5 years or so, but I suppose most folks are more comfortable with holding a big slug of the SP500 than Berkshire because of the items you mention, diversification, etc.

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I still think the SP500 is overvalued vs Berkshire going forward the next 5 years or so,

This is where it gets tricky. For me, SPY has a potential for $250 EPS next year. Most folks have a very different view of earnings.

For ex: Berkshire enthusiasts will tell you GAAP EPS for Berkshire is misleading because it artificially inflates/ deflates earnings because of unrealized equities gains. Which is a fair point. However, they will be insisting on GAAP earnings and not use adjusted earnings for the other companies. There are clearly different standards.

When you use adjusted/ normalized earnings, you will see SP500 is not that expensive. Also, Now, the index has some giant companies like AMZN, Tesla that shows very little earnings further skewing the argument. So either you can keep saying SP500 is overvalued or look at it objectively.

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OR one can look at things more objectively, saying the trend has changed. Berkshire outperformance is due to past performance.

Why an out performance 15 years ago matters to an investor today?

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Period BRK S&P
---------------------
1 4.8% -5.8%
3 38.8% 39.9%
5 67% 74%
10 237% 249%
15 292% 245%

After all the twists and turns, BRK still doing better over 15 years…

There! Fixed it for you, because 15 years is longer than 10…and I can cherry pick data too! :wink:

Just so long as we’re all cherry picking, I’ll pile on with TMFMurph and add the 20 year point. Yes, the performance begins to widen as you go back in time. Some of us have been holding at least that long and even further back in time. Only fair, right? Just saying…
Note: Tap the 20 TOTAL Return screen, which is divs included.:wink:

BRK - 581.94%
SPY - 506.46%

https://www.financecharts.com/compare/BRK-B,SPY/growth/total…

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I find it interesting that divs hangs on a Berkshire board and talks about how superior the S&P 500 index is.

Would be like an active manager hanging on the Boogleheads board trying to convince the masses that they to will be saved with an active guru.

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I see two paths for the S&P to out perform going forward: out perform in earnings growth, or
outperform in multiple growth. The data points from the past are from outsized S&P multiple growth,
an imbalance which has not reverted to a level I would consider justified. As far as earnings
growth, the S&P has not shown an ability to drastically increase earnings: the mix of high growth
tech and solid industrials can’t shift quickly, and earnings growth is steady, but not spectacular.

Blah blah blah!
I keep it simpler : )

The value (earning power) of the S&P 500 index rises in value at around inflation plus 2-3%/year, plus or minus a bit.
But it’s priced as if the figure were 8%.

Berkshire rises in value at around inflation plus 7-9%/year, plus or minus a bit.
But it’s priced as if the figure were 3%.

Finer points:

  • You do get a dividend of 1.54% with the S&P, which closes the gap meaningfully.
  • The value of Berkshire might reasonably be expected to grow at a slower rate in future, not true for the S&P.

If they were both to be trading at a comparable notion of fair value today, they might both be reasonable choices.
We’re nowhere near that situation today, but it could happen some day.

Jim

Geek note:

For those who wonder what fair value might mean, here is my definition:
The price you’d pay today that would get you inflation + 6.5%/year in the next decade,
assuming a terminal multiple commensurate with the then-current prospective rate of value generation.
At that distance from today, I’d expect very similar rates of prospective value growth, so I’d assume they were both trading at around the same CAPE in 2032.
No part of that is true today.

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Berkshire enthusiasts will tell you GAAP EPS for Berkshire is misleading because it artificially inflates/ deflates earnings because of unrealized equities gains. Which is a fair point. However, they will be insisting on GAAP earnings and not use adjusted earnings for the other companies. There are clearly different standards.

Berkies would probably agree on a standard for all companies to adjust GAAP earnings to disregard the impact of unrealized gains/losses of equities held for long term investment.

One cannot reasonably accept all companies’ adjusted earnings without critically assessing them. There’s a long history of companies using ‘one time’ adjustments on a regular basis to inflate their reported adjusted earnings when the items they are sweeping under the rug as ‘one time’ expenses should indeed be reflected in earnings that year. Actual expenses, not the unrealized ups and downs of equities held for long term investment.

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15 years is longer than 10

This is a nonsense argument because BRK today is not the same as BRK 15 years ago. Not even 10 years ago. Size matters. Degree of difficulty is higher.

Echo chamber…

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GAAP EPS for Berkshire is misleading because it artificially inflates/ deflates earnings because of unrealized equities gains.

Hmmm…I would tend to disagree. There isn’t anything artificial going on.
This change actually makes Berkshire’s GAAP earnings much more meaningful than they used to be.
They are just much more variable than for other firms, and more variable than they were for Berkshire in the past.
A whole lot of smoothing is needed, sure, but the average is right over time.

It used to be that no matter how much you smoothed earnings figures you couldn’t get a meaningful number.
A lot of stuff never hit EPS at all, always landing in “other comprehensive gain/loss”.

This is a general example of the problems with GAAP: they usually aren’t problems of things being wrong or misleading,
just problems of things landing in a reporting period other than the specific one you’d prefer.
When you remember that rule of thumb, you come to appreciate that GAAP earnings figures are better than their rep would suggest.

Jim

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Now you are accusing him of being optimistic?