If I am being completely honest I am pretty optimistic about next year. So I don’t expect any cratering of the S&P500 valuation, although there might be some rough spots. Nor do I think there will be a lot valuation multiple change on BRK. But I do think earnings growth could be more challenging for the S&P500 than for BRK. So that is the bet I am making.
What am I missing here? Berkshire looks pretty damn good across several metrics, depending on timeframe.
Good morning, old friend. You have been here a long time so let me ask you this? If you recall in about 2009 I suggested that BRK should acquire the, right of first refusal, on all foundation sales of brk shares, or, at least Gates Foundation sales. The title of the posts which contained many, other suggestions, to help generate buyside interest in brk was Foundation Sales Forever Effect. IF, brk had been buying back 1-3 billion $$ worth of brk back, when BV was trading below 1.3 xs book, the past 13 years, how much higher would brk be today ? IF you recall, I also suggested the hurdle for buybacks should be, material discount to IV, NOT BV, and Buffett did make that adjustment later on. IF, he took his own advice, and bought 2-3 billion SPY a year, within reasonable valuations, rather than accumulate 100 billion plus in cash, over the years, where would brks BV or IV, be today? Anyway, thanks for sharing your thoughts over the years, you have been one of the long time gentlemen, as opposed to a few idiots, who were way out of line years ago, to anyone who deviated from the brkville, group think!! I do miss toddfinances , lol, he and I went at it, BUT, it was always respectful and he never threatened me. Happy healthy holidays to you and yours. btw, a few times i had to use, close derivatives of this ID, for various reasons. lol.
Probably isn’t total return for SPY.
Backtest Portfolio Asset Allocation (portfoliovisualizer.com)
Backtest Portfolio Asset Allocation (portfoliovisualizer.com)
Do these results include fees and taxes?
Those numbers would be interesting.
What these endless comparisons come down to is starting valuations.
Buy BRK @1.3x book or less you likely outperform, buy BRK @1.7x maybe not so much.
(Ballparkin’ these numbers.)
AdrianC…thx so much. That’s a nice dynamic analytical tool that I will bookmark. Very useful in comparing performance using various starting and ending points for any customized period. All the other online resources I’ve found just seem to capture cherry-picked snapshots so it’s frustrating sometimes to make any meaningful comparisons. As rightly emphasized by others, not knowing all the assumptions that impact on those returns, such as taxes, dividends included, only makes this exercise more inconsistent.
Fees yes. Taxes no.
For me, holding Berkshire has the advantage that I haven’t had to pay taxes on dividends. Most of our taxable is Berkshire.
Same philosophy here, AdrianC. Agree, what may be a small advantage in a given year becomes large, very large over decades.
BRK also pays an extra significant layer of taxes as a corporation on the investee dividends and capital gains unlike the S&P. BRK still has beaten the S&P in general, doubling it since 1965 when the equity portfolio dominated its valuation to the last 20 years when wholly operating businesses now dominate the valuation.
S&P imo will do fine, but my dominant bet has been and is still with BRK esp. at these relative valuations. Valuations, balance sheets and allocation decisions especially matter in inflationary times-seems to be a big theme in 2022 and a tough lesson for many speculators. Buffett’s critics are again silent, for now.
You are missing S&P dividends and associated compounding. Try a chart of “S&P 500 total returns”.
Hey Divi how does your UPST position (-90% Ytd) compare to the Index?
Your SNOW (-58% Ytd)?
Why do you pretend to be an indexer?
You should have just dollar cost averaged into the Index, and gotten rich slow, right?
Or maybe you shoulda just put it in Berkshire and took up ballroom dancing…
I don’t own SNOW. I have UPST and few other stocks like AMZN, TSLA, GOOG, IBM etc.
I do DCA on SP500 and have increased my allocation.
Stay positive. Negativity will make you miserable.
Thanks for your interest in my personal portfolio.
I’m an avid reader of the Saul board, schadenfreude I suppose!
And earlier this year you posted,
“I always wanted to buy SNOW but thought it was expensive. It is in my price range now and I am starting to accumulate.” ~Divi
Why be dishonest? (Dishonesty will make you miserable.)
Why pretend to be an indexer?
Why compare BRK to the index daily but not Upstart (your holding)?
Thank you so much! Happy Holidays!
Imagine how much more cheddar you’d have if you just bought BRK?
My personal portfolio is not relevant in this thread. Having said that, I bought little but of SNOW but sold since then at a loss a few months ago. Everything I said about SNOW is accurate. I don’t own SNOW but do own UPST.
I have lots of FXAIX, AMZN and TSLA.
Here is another failure that will make you happy. I bought GM and WAMU several years ago. They both went bankrupt and I lost all my money I invested.
Hopefully this brings joy to you and your family.
Dollar cost in S&P. Get rich slowly. Don’t be miserable. Enjoy life.
Of course it is, you continually give unwanted investment advice, “Dollar cost average in S&P. Sleep well. Get rich slowly.”
And your investment results tell me if I should heed this advice or put you on ignore.
It turns out you don’t even listen to yourself, why should anyone else?
And BTW, with stock picks like SNOW, TSLA, UPST, GM, all while pretending to be a Boglehead you made it to the ignore list!
Have a great weekend and a wonderful life, all the best!
Does this chart reinvest all the dividends or just the dividends after taxes have been paid on them?
In my personal portfolio I may be selling put’s all the time for juicing return and accepting the risk in return. On the other hand, I may also advice for general investor writing put’s is not the right strategy and it is not a income generation investment. Even though many smart people continue to peddle that. So what I do in my personal portfolio should be less relevant to the discussion.
The links AdrianC posted are good because they allow for computation of comparable returns between and investment in Berkshire and an investment in the S&P 500 index, because they allow for the reinvestment of dividends. An alternative comparison is the SP500TR index (TR for total return, meaning that the dividends are reinvested.)
I think verystablegenius raises the important point that a comparison between BRK and SPY is not much use if it doesn’t take into account starting and finishing valuations. If at some starting point BRK is trading at 1.3x BV (cheap), and the S&P is trading at 2x revenues (expensive), and if at the end point, BRK is trading at a higher multiple and S&P at a lower multiple, then it’s no surprise that BRK is likely to have outperformed SPY for that particular comparison. More important, it doesn’t tell you which is likelier to outperform, going forward.
A more helpful comparison would be which of the 2 has created more value, over a given period. You can measure that value any way you like, and using BV for Berkshire is a pretty good way, while using revenues (or earnings, averaged over a large enough period of time) is pretty good for the index, although there are alternative valuation methods for both. If you do a comparison like this, as mungofitch has pointed out on numerous occasions, BRK and SPY are about even, DESPITE the fact that BRK has stayed at roughly the same valuation multiple, while the SPY is currently at much higher multiples than what it had over the last 20-30 years.
20 years ago, the charge was S&P is expensive and BRK is a loaded spring.
Same story 15 year ago, 10 years ago and 5 years ago.
Why is this time different?
Since you just repeated the same post as before on this topic, I thought I would do the same:
"Hey it finally came true this year! 18% relative performance advantage for BRK.
Going forward, I bet less on BRK being a loaded spring and more on S&P500 being already sprung and maybe needing some more time to reload. I don’t know if BRK is that undervalued but it certainly isn’t overvalued. S&P500 still feels overvalued. Maybe you don’t feel that way because valuation isn’t your thing. But even a story investor has to care about valuation at some point. Look at Saul’s board for that lesson. I got caught up in the FOMO last year from that board too and it certainly was a good reminder that valuations at the extremes matter for successful entry and exit, even with businesses that are performing well."
I have to maybe edit this a bit. While S&P feels like it could still be overvalued, it is so much better than it was at the end of last year.
I would imagine the earnings hit to BRK op businesses (Insurance, Rails, Energy) would be less than the likely earnings revisions of the S&P (28% tech) and Nasdaq (50% tech) corporations with the Fed’s “higher for longer rates” and a potential not so soft landing/recession. Nice to know that our cash/equivalents are no way trash as we patiently wait to allocate.
Btw, it may only be wishful thinking but the A share volume has seemed a bit higher than avg. here recently, but I know that is hard to read into given trading of partial shares nowadays.