Yep. SPY beating BRK over 5, 10, 15 and 20 years.
Go back to 1999 and Berkshire wins:
Not much comfort.
Even with buybacks and the massive Apple gain, Berkie can’t beat the lowly S&P 500. Sad.
BUT… they have chocolates you can buy at the annual meeting!
He is no fool who gives what he cannot keep to gain what he cannot lose.
“We feel noble intentions should be checked periodically against results. We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained. To date, this test has been met. We will continue to apply it on a five-year rolling basis. As our net worth grows, it is more difficult to use retained earnings wisely.
We continue to pass the test, but the challenges of doing so have grown more difficult. If we reach the point that we can’t create extra value by retaining earnings, we will pay them out and let our shareholders deploy the funds.”
This got changed at some point:
"I should have written the “five-year rolling basis” sentence differently, an error I didn’t realize until I received a question about this subject at the 2009 annual meeting.
When the stock market has declined sharply over a five-year stretch, our market-price premium to book value has sometimes shrunk. And when that happens, we fail the test as I improperly formulated it. In fact, we fell far short as early as 1971-75, well before I wrote this principle in 1983.
The five-year test should be: (1) during the period did our book-value gain exceed the performance of the S&P; and (2) did our stock consistently sell at a premium to book, meaning that every $1 of retained earnings was always worth more than $1?
If these tests are met, retaining earnings has made sense"
Still being met? Well, no.
Interestingly, WEB did not address this and there was no question about this in annual meeting.
"We continue to pass the test, but the challenges of doing so have grown more difficult. If we reach the point that we can’t create extra value by retaining earnings, we will pay them out and let our shareholders deploy the funds.”
Maybe that’s why, for years, even decades, WEB advises people to invest their money in low cost index funds, he doesn’t tell them to invest in Berkshire Hathaway?
Most of the compounding in S&P is and has been due to the step changes in technology.
Even in BRKs portfolio, Apple is pulling it up. Most of the BRK businesses and investments have been average (Precision, Marmon, BNSF, Geico, General Re, BAC, Oxy, KO, AXP, WFC)
WEB has stayed away from tech and has been very risk averse. Could he have invested modest amounts in TSLA, NVDA, MSFT, GOOG, AMZN etc. when they were younger ?
I am doubtful if Abel will do anything differently.
My guess is that BRK will continue to underperform S&P over next 15 years.
Come on over if you miss a vigorous discussion of all things Berkshire.
Interesting how things have split between the new Fool boards and Shrewdm. Over on Shrewdm the BRK board is quite active. Here, the Macro Economics board has a lot of activity. I prefer Shrewdm and it would suit me if everyone moved over there.
That board has lot of smart people with a depressing outlook reaffirming each other’s points.
Nothing they ever say about S&P, AMZN, TSLA, CBI, DLTR, ADS, GOOG or other has ever panned out in last 15 years. They are always pessimistic and hoping for doom and gloom.
AMZN is worth at most $10, that was before 20 for 1 split and IBM is going to moon, AWS is commodity services, they will never make money.
Nothing they ever say about S&P, AMZN, TSLA, CBI, DLTR, ADS, GOOG or other has ever panned out in last 15 years
Good joke, Divi.
Reminds me how thankful I am to Jim because I made more money following his great DLTR call than I could imagine.
Oh, not to forget the money I made by following his unbelievably precious bottom call for the S&P, spot on the very day of it’s low last October.
(Didn’t you post before “There are no timing indicators”? Or was it the King? Sounds rather like you.)
But of course, as you say, nothing they say over there ever panned out. Not even “their” SaaS scepticism, right? Who cares that after them falling even Saul was forced to change course?
reaffirming each other’s points.
I’ll let you 2 continue doing so here.
Sorry for the disturbance and keep up the good work
Wasn’t AMZN going to 0 ? Wasn’t TSLA and EVs a joke ? Wasn’t CBI and ADS PE at historical lows ? Weren’t $10 Chinese phones coming to eat Apple’s lunch ? Wasn’t BRK a loaded spring and S&P poised to fall by 50% to get to fair value ?
The doom and gloom list is endless in last 15 years.
That’s one call. If you have listened to him, how much you would have lost in IBM, AMZN etc… forget it. The recent fetish on equal weighted…
Hey you love the guy and it works for you, great. Enjoy.
The best discussion on AMZN is on Falling Knives board that goes back to 2014 I think, when I was making an argument that AWS one day could see $100 B valuation and he was like AMZN is worth only $10 and AMZN carried more than $10 cash per share at that time and the argument is like you need to deduct all liabilities and have to assume all other assets are worth zero and if you do “net cash” is less than $10 therefore I am generous in my $10 valuation… The BS is amazing.
Even better ones like Amazon is indulging in fraud because they use sale buyback leasing or when calculating enterprise value debt doesn’t count…
You can go on and on… none of that matters to the peanut gallery. They are awestruck by the man… so he can peddle any BS and will get 100 rec’s.