Not to be morbid, but for those with large positions in Berkshire what will you do when Warren or Charlie pass away?
0 voters
I think wait and see. Warren probably has trained a cadre of others in his methods. They are likely to carry on in his style. But then comes the question how are they doing? Well enough or not?
So, your poll includes price movements, but it appears we’re making this decision entirely irrespective of valuation levels?
That’s… not a thing I do.
When it’s cheap, if I have money handy I buy more.
When it’s expensive, I tend to sell a little.
That dynamic likely won’t change.
I think the whole idea of the death reaction is based on the notion that there is a “Buffett premium” in the current range of stock valuation levels.
I don’t think that’s been true in a very long time, so there is no need to prepare for its evaporation.
I tend to assume that capital allocation will be somewhat more rational than at the average firm.
But that’s not exactly a big hurdle.
Jim
“So, your poll includes price movements, but it appears we’re making this decision entirely irrespective of valuation levels?”
My apologies. I guess I was assuming most folks here have a rough idea of an “intrinsic value” in their head. So, if it falls below that value would you buy more with the new management team in place?
Lovely thread for his special day?
Terrible timing. Sorry.
It’s possible I’m being dense, but I promise I’m not trying to be difficult. Is it fair to recast the question as: are you are willing to own Berkshire under a new management team (hopefully many years in the future), and if so, what discount to your estimate of intrinsic value do you require in order to be a buyer?
If so, my answer is: yes I am, and to commit new capital I’d need a substantial discount or margin of safety – as I do under current management. I don’t care too much how that discount comes about, whether in apparent response to events or anticipation of them, through a rapid price drop or a slow slide. For what it’s worth, I think today we’re sitting at about a 20% discount to IV and I’m nibbling but not buying hand over fist.
If the new managers start incinerating capital or buying Bitcoin or Tesla, then my estimate of IV gets revised downward, however crudely and approximately. There’s (almost) always a price at which I would own a business with decent economics – but there’s also a price at which I’d sell at least some part of my holdings.
In large part my stake in Berkshire depends on how cheap or expensive I think it is relative to what other opportunities are available to me. If BRK is an 80-cent dollar but Dollar General is selling for under 10x forward earnings (as was the case in the not too distant past), at least some of my capital is probably going to migrate to DG. That might sound like it involves a lot of trading, but it doesn’t, really, because my circle of competence is so small that compelling disparities in likely future returns between something I own a lot of and something I’d like to don’t happen all that often.
BRK seems like a battleship, any movement off-course will be slow. So in the short-term (however that’s defined), my guess would be that it’d continue as before, apart perhaps from some very short-term turbulence when WEB is no longer at the helm. Also, there’s a quote by WEB, paraphrased below, that may be relevant
“I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
That said, it is possible to ruin a good company. HP comes to mind.
“If I die tonight, I think the stock would go up tomorrow,” Buffett, 86, said Saturday at Berkshire’s annual meeting in Omaha
https://www.bloomberg.com/news/articles/2017-05-06/buffett-s…
"A post-Buffett run? If Higgins is correct, Buffett’s death may have a surprisingly positive impact on Berkshire stock. While investors will certainly be saddened by the news, they may step in and buy the stock once the perceived headline risk has passed.
“He has done a fabulous job educating and involving his shareholders in his vision and philosophy,” says Salvini Financial Planning analyst Brooke Salvini. “If some less-knowledgeable shareholders are spooked by his death, there will be plenty of others [who] will gratefully purchase additional shares on a price dip.”
There’s a good chance Buffett would advise investors to buy Berkshire Hathaway stock today and not worry about short-term headline risk associated with his own health. Buffet has always chosen Berkshire’s holdings because he sees them as solid long-term investments for shareholders. Nothing about Buffett’s health will impact the businesses of the roughly 50 companies in which Berkshire currently invests."
https://money.usnews.com/investing/articles/2017-02-02/what-…
It seems there is a perception in the media and public that BRK is a stock picking operation. While that gets a lot of attention, the truth is BRK is mostly a cash cow, with side interest in financing deals and buying stocks. The dumb money will sell, figuring the magic touch is gone, the smart money will only let it drop so much recognizing a cash producing machine with considerable momentum and resilience.
You should not wait for the event. If your holding period is > 5 years, start moving your money to S&P 500 slowly.
You should not wait for the event. If your holding period is > 5 years, start moving your money to S&P 500 slowly.
Divi, you constantly tell people what they should do: “Do this … do that …”. Are you willing and ready to take on the responsibility coming with such? How will you feel if your advice badly backfires, if the S&P halves and people listening to you get into serious trouble before it recovers (to name just one hypothetical scenario)?
"Divi, you constantly tell people what they should do: “Do this … do that …”. "
divs is often wrong but never in doubt.
How will you feel if your advice badly backfires, if the S&P halves
S&P500 index will out perform S&P and most mutual and hedge funds over the next 15 years.
Don’t fall for the doom and gloom forecasters.
Dollar cost average. Get rich slowly. Sleep well. Enjoy life.
S&P500 index will out perform BRK and most mutual and hedge funds over the next 15 years.
Don’t fall for the doom and gloom forecasters.
Dollar cost average. Get rich slowly. Sleep well. Enjoy life.
divs is … never in doubt.
Reading the above post, followed by this answer:
S&P500 index will out perform BRK and most mutual and hedge funds over the next 15 years.
made my day 
Smart snipping is not objectively looking at it. The last 15 or 20 years of Berkshire performance clearly shows there is a higher correlation between SP500 and Berkshire. The notion that SP500 will drop 50% but somehow Berkshire will continue to gain is not root in reality. If you want to be objective, then you should consider when SP500 drops 50%, the risks of individual stocks falling more than 50% is high. If you can weather a 50% drop in Berkshire, why you cannot weather similar drop in SP500?