the economy goes into great recession, most businesses either lose money or face financial difficulties, which stocks would you rather have in your portfolio?
Sure, right, hey if a company loses money in a recession must be not a strong business, right? On the other hand a company that makes money even in a recession should be great right?
Utilities, because they are rate protected, makes money even in a recession. There are some good utilities that are good/ great investments.
A bank on the other hand loses money in a recession, lot of loans go bad, or they have to set asides a big reserve etc. Can the bank rebound next year or after few quarters of provisioning? How much money a bank could make post recession?
So there is the concept of full cycle investing, or mean-reversion if you like.
Here is something I read in one of Peter Lynch’s book, you buy auto-stocks (cyclical) at highest multiple and sell at lower multiple, that is at the bottom of the cycle, the multiple will be so high because of low profitability and at the peak cycle the multiple is low because of peak profits.
SO if capital preservation is your prime concern, you could just invest in US treasuries.
Other than Ibonds, which only keep up with inflation now that they eliminated the base rate, Treasuries earn a negative rate relative to inflation. You are losing money with them. Plus you only preserve principal if you hold them to term. Crappy investment, IMO, with MAYBE a small window of opportunity to buy long duration bonds when the rates start to come down. I am not a bond buyer, other than I bonds, which are laughably limited in volume.
A survivorship of market down drafts has to be built into a portfolio. When we were working, we did not pull money out of stocks in a downward trending market, though we did stop investments other than 401Ks and did not invest the cash we contributed to IRAs until the market was in our favor. When one no longer has a paycheck coming in, and already has enough money to live out their lives, protecting that nest egg takes priority over growing the kids’ inheritance. Caution is merited. The key is to find some modicum of growth in a portion of your portfolio while having a survivorship element to your portfolio so that you can come back from down market shocks.
Not everything is in our control. Survivorship is key. Investments are dependent on your inputs, like income or lack thereof.
It should not be “confusing” as it’s actually very simple. Berkshire is all about market beating returns with the most possible predictability and with (at least perceived by us) maximum safety, without the additional risk that normally comes with such.
LOL. And yet it’s very confusing to me why you, (generic board you, not you specifically,) would champion BUY NOW, even though you think the price will decline and you could get it cheaper. Very confusing. Really. Irrational to the core for me.
I will give agreement to BRK seeming to have better returns than the SPY, which is why I am looking at it as a proxy or booster to an SPY component. I am in the process of simplifying our portfolio, as I seem to be the only one in the family with any interest in investing. Call it an insurance policy against being hit by a bus, or a desire to focus on pickleball where I will no doubt soon get paid endorsements for my mediocre level of play. (yes, delusional.) I have lots of options when it comes to simplifying.
Ah! Suddenly you are looking at risk adjusted return!!! At $20 OKTA (mind it is $80 now), you have a $3 B market cap company with over $2 Billion in cash, expected to do $1.8 B in revenue 2022 and $2.4B in 2023 and going to be growing at 30% for the next few years. So it is all relative. OKTA is not at $20, but it is an example. You cannot look at Berkshire and see if it is good value and buy or you can look out and compare. It is a choice, one that is dictated by your risk tolerance, investment objective, etc…
Buy now is certain. Buy in the future is conditional on a better absolute price less than 268.xx. Buyers today are not willing to gamble that prices in the future are certain to be lower on an absolute basis. It is truly that simple. What if p/b value dips below one but it is two years in the future. A better value, but perhaps not a better absolute price.
People let me give you a quick turorial about life and investing. I am old and I am an investor and I have several hundred times what I need to live out my life. I inherited less than $40,000 in 1975.
Here we go:
A) If you cling to cash? Unless you make a ton of money and save you will be old and destitute.
B) If you obsess on seeking alpha the odds are very high you will be old and destitute.
C) If you invest using valuation and diversify into productive businesses via the stock market and democracy/capitalismm survives you will be old and have enough money to finish out this wolderful experience.
D) My guess is that democracy in the US will not be continuous, too many now want authoritarian/strongman leadership. My guess is the democracy will return at some point.
E) Capitalism is more likely to survive but if D above proves accurate some of your investments will be stolen by the authoritarian/stronmen or their supporters.
F) If you believe in things like Saul’s board you are a financial idiot thinking you can make it work using his garbage model.
G) If you use model D above you simply can’t fail if the US stays stable.
Buy now is certain. Buy in the future is conditional on a better absolute price less than 268.xx. Buyers today are not willing to gamble that prices in the future are certain to be lower on an absolute basis. It is truly that simple. What if p/b value dips below one but it is two years in the future. A better value, but perhaps not a better absolute price.
So given their age, what happens when they are no longer around? Not young-ins.”
IP,
Yes, those will be very sad times indeed as these men are heroes in so many ways, but as Cunningham outlined and argued clearly in his 2014 book “Berkshire Beyond Buffett” all will be fine and the dozens of wholly owned businesses and investees will chug right along. The nearly $50B+ and growing in annualized normalized earnings will keep pouring in and assets will be allocated thoughtfully. They have been preparing for Berkshire beyond Buffett for 20+ years now with great diverse businesses, excellent managers, huge float and wise allocation. WEB’s template has worked quite well for nearly 60 years. Their teachings will continue to enlighten for generations to come.
And yet it’s very confusing to me why you, (generic board you, not you specifically,) would champion BUY NOW, even though you think the price will decline and you could get it cheaper. Very confusing.
It’s a version of “Don’t let the perfect be the enemy of the good.”
It might get cheaper—and it might not. Don’t focus on what the price might be next month. Focus on what the price will likely be 10 years from now.
You don’t need to buy at the absolute bottom. Buying at a price that’s a great deal is Good Enough. Yeah, it might go down more. It also might not. In 10 years is it going to make much difference if you bought at 275 vs. 250, if the then current price is 2500?
I still recall when I refused to pay $2000 for one share of stock. That was BRK before there was BRK-A anf BRK-B. Bad bad move on my part. Because it’s now worth about $half a million.
but as Cunningham outlined and argued clearly in his 2014 book “Berkshire Beyond Buffett” all will be fine
I don’t know. I hope so. But many folks are underestimating Buffett. Do you believe post WEB, the operating business will continue to perform like today? Forget about equity portfolio, just the operating business and insurance?
I still recall when I refused to pay $2000 for one share of stock. That was BRK before there was BRK-A anf BRK-B. Bad bad move on my part. Because it’s now worth about $half a million.
Was worth about $half a million. Closed Friday at $403,150. You can feel 20% less bad.
Here is one reason not to wait too long when wanting to buy a stock after a beer market has begun. The bottom seems to come pretty quickly in most cases.
“7 out of the last 12 bear markets have bottomed in 46 days or less once the 20% level was breached. And 5 out of the 12 were over in a month or less.
