Jet, I enjoyed your post and am wired and have constructed my portfolio and planning very similar to you, and enjoyed. I am now 70% BRK and have done the exact same strategy since 2011 with BRK. I have recently entered the drawdown phase (in my mid 50s) and will have to trim over the coming years as my cash dwindles, but even then I may trim my index and big tech funds prior to my BRKšI totally trust WEB and the Boardās succession decision. Greg has learned from the best and proven himself in multiple key roles under close observation. He, Ajit and T&T will do quite well and respect all that has been built so purposefully and thoughtfully. Nothing is more important to WEB (99.9% of his wealth) and his true loyalty to shareholders than this decision so it does not worry me. I view Gregās age, energy and good health as a real positive as well. Thanks and hope we see a solid buyback number on the 11/5 release!
Itās great to hold BRK long term but if you take 25 years as the starting point the compounded returns to where we are today are only c8, add in the succession risk I dont think Brk is a 70-90 % holding, perhaps 30-40%.
I wanted a lower allocation to BRK because of this. I also want to find companies that can theoretically compound at 15-20% over the next 5 to 10 years, piggy backing on some of the greatest investing minds and their top selections and doing my own research. That experiment has proved a failure so far.
Sounds great in therory, much harder in practice, even if the valuations look attractive and youāve bought in under the superinvestors buy price they can still drop 50%. Weāre in a 1973-74 nifty fifty repeat period I feel and it will be a slow grind to lower valuations over a long period of time. History doesnt repeat but it rhymesā¦ whatās clear is that many were expecting a covid style dip and rebound and this is not how itās going to play out due to high inflation and necessary interest rate rises.
BRK ā¦ if you take 25 years as the starting point the compounded returns to where we are today are only c8
You probably mean 8%?
Why 25 years? Why not for example 22 years, when I bought most of my BRK, resulting in 10%?
Apart from that always artificial date picking, anecdotally:
- Every time I sold some BRK when the price supposedly was āhigh/great opportunity to sell someā I did regret it later.
- Most of my playing with options during the last years resulted in losses. The great exception which always worked: BRK options, as it simply is more predictable and itās current and future share price better assesible/estimable (thanks to Jim).
Jet Jockey mentioned 1997. Hence 25 years.
What about BRK and a desired 12% return with a 9% pa book value growth on long term trend.
10 years out we get we get a book value of 494 x 1.4 for the price 691, 12pa equates to a present value of 222 dollar per share.
My apologiesā¦I misspoke. I went back and researched my first purchase. Shouldnāt trust my memory. My first big slug of BRK was purchased on 12/17/1998 @$40.01, not in 1997. Iāve added many times along the way on dips. I just updated my spreadsheet with all my lots, 76 separate purchases! As of today, my IRR is 10.17%. At the peak price, earlier this year in March I believe, it was 11.14%. That was using a strictly buy and hold, and buy and add process ā no sales, no leverage and no use of options. I wish it was more, but I feel satisfied with what Iāve accumulated so far over time.
My original buy was in 2012 @80 dollars at c1.1x book I think. Holding for a decade gives 13.7% pa roughly
Interesting to note however that your purchase in 1998 @ 40 to 2012 @ 80 is only 5.95% per annum over those 14 years.
Valuation at purchase matters a great deal.
Yes, very true. As Buffett said, āprice is what you pay and value is what you get.ā My initial position was probably not my best price on this journey - that initial position to date is only about 8% PA. I was a neophyte then, but learned quickly to keep buying on significant dips. So, I began to scoop up a lot more shares around $32 in 2000, more at $41 in 2003, more at $54 in 2009, more at $65 in 2011, more at $84 in 2012, etcā¦wash, rinse, repeat. I was buying a lot during and after the Great Recession. It was those incremental purchases along the way that helped boost my overall IRR. As I said, I could have done a lot better, even acting more aggressively and decisively with options if I wanted to go that route. I thought at times that I was backing up the truck, when in fact, I should have been more patient for better prices. At other times, I had the cashā¦but, I just didnāt pull the trigger - thumb sucking, I guess. But, overall, Iām happy with my results over the long term, and I think being roughly right was a better outcome than being precisely wrong. I could have done far worse by tinkering too much. Sadly, this jetjockeyās eyesight is no longer 2020, but hindsight is always 2020. With 20% cash on the sidelines presently, Iāll be a hell lot more judicious and patient now on every purchase I will make going forward. Thx blackswanny and WEBspired for your replies.
I remember back to when after purchasing my first lot at 80 then being very hesitant to buy at 120-130 later on thinking i was overpaying.
I had to keep reminding myself of that quote. Now i just think of price in relation to book value, growth in book value and what return Iām seeking and of course in relation to other potential companies.
BRK.A: Berkshire Hathaway pares stake in BYDās Hong Kong-listed shares to 17.9%
What this taught me was that even with experienced analysts Chinese stocks could still be beyond my abilities. I havenāt invested in them since.
Many years ago, I traveled quite extensively around China, and the only consistent experience I had everywhere I went (besides food poisoning and nightmare toilets etc) was people relentlessly trying to scam me or rip me off 24/7.
Well, OK, maybe not in the cities of Taiāan or Qingdao, those were all lovely people there it seemed, somehow.
I also have a few friends who are mainlanders that I met at university, and I randomly audited a course on Chinese business practices and customs at university for fun too.
The main lesson I took away from all my travels & conversations & from that course is that I would never, ever, ever invest in a Chinese company. I believe thereās a saying along the lines of: there are 3 sets of financial books in China. One for the shareholders, one for the taxman, and the ārealā books for the āownerā, who is certainly not the shareholders. Might not be the big boss either - maybe itās the accountantā¦
Add on the āmagical mystery factorā of Cayman island profit-exchange ADRs and itās an even bigger NOPE.
Good article. Thatās how I view our Berkshire - itās our core holding in place of something like an S&P500 index fund. Itās been somewhat better than the index, I think, though itād take a lot of work to verify that, and Iām not concerned enough to do it. Itās a great holding in taxable. Most of our taxable investment is in Berkshire.
What year are you talking?
Interesting thread, and good 10 lessons learned, Blackswan.
I also took a beating on BABA and a few other stocks over the last couple years, but have a few stocks that did well to mostly offset. Down about 11% since I began buying back into stocks in early 2021.
I definitely feel a bit dumb with 20/20 hindsight over how I handled things since the pandemic broke: dodged a lot of the initial fall, but then basically missed on the raging bull from the Covid low to the late 2021 high. If Iād just stuck with my pre-Covid plan of a globally diversified mix of index funds somewhat emphasizing small and value, with some BRK as a quasi value index and a fair chunk of short term bonds because of over-valuation concerns with the stock markets, Iād have done much better.
Most of my assets continue to be in residential real estate between my own home and a number of rentals. Those have done fabulously, so net net Iām doing well.
My BABA is down 63%, right about the same as my UPST, and I have a number of smaller losers, some down pretty significantly as well. BRK and MRNA doing well, but the star of my 2021 picks is BELFB: Bel Fuse, a small cap manufacturer of power-oriented smart connectors that I discovered in the AAII Shadow Stock portfolio ideas. I liked their conservative management, their positioning in an important industry, and they were still making money despite being beat down by the supply chain issues. Iām not touting the stock at the moment, itās run a long way and I donāt know what itās future holds if the economy drops, but it seems like a good company and trailing PE is just 9.3.
I think the comparison of recent trends to the nifty fifty era or the 2000 era are both somewhat apt, though who knows, maybe the Fed manages a soft landing and the worst of it is behind us? Or the economy could go south and the stock market grind down another 30%.
Nose-bleed valuations of the S&P 500 kept me out of that index when I came back into the market. I tried to do better with a value tilt, but without my mostly-lucky pick of Bel Fuse, Iād be doing worse than the index. As is Iām about the even with it, maybe slightly ahead with dividends, remarkable considering the brutal misses with sizable investments in BABA and UPST.
The news out of China is somewhat disturbing, with Xi consolidating power. I recently met someone from China who moved from Shanghai this year to escape the prospect of more Covid lockdowns and Xiās moves towards a more autocratic hold on the government. Itās all rattled my long term conviction about BABA, but Iām still holding.
Heck if thatās all it takes, Iāll wager everyone on this board is a genius.
Hi, many of these names are smarter than me, just sayin. Crypto investors still rattled by FTX liquidity issue (cnbc.com)
I hope you watched Anthony aka, the mootch, interviewed on cnbc this morning. Many experienced old timers got, bamboozled.
Painful for so many whales and minnows. Heard the great Bill Miller had 40% of his wealth in Bitcoin as well. Always like Bull and his perspectives but just never felt crypto was in my circle, thank goodness!