That story Tesla vs Brkb is in Barronās.
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Is it legal for me to copy and paste this story from Barrons here?
I donāt think copying and pasting an entire article from a magazine like Barrons is allowed. Not sure anything would happen if you did, though.
Maybe a summary with a link to the full article?
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Watch out, Elon, Warren is catching up. With the drop in shares of Tesla TSLA +1.52% this year, the market value of Berkshire Hathaway BRK.A +3.20% is hot on the heels of the electric-vehicle leader.
Berkshire, led by longtime CEO Warren Buffett, is demonstrating its defensive attributes in a bear market, with its class A shares up 0.3% this year, against an 18% fall in the S&P 500SPX +2.46% . Tesla stock is off some 35%, reflecting disappointment on vehicle deliveries and a pullback in growth stocks; CEO Elon Muskās pursuit of Twitter hasnāt helped.
Berkshire sits on what Buffett, 92, calls a Fort Knox balance sheet, with over $100 billion in cash and equivalents, mostly U.S. Treasury bills. When Berkshire reports earnings on Nov. 5, investors will be eager to see how much of that cash Buffett deployed in its third quarter.
Tech on Top
Berkshire Hathaway, a diversified conglomerate, is an interloper in the tech-heavy ranks of the top companies by market cap.
| Company | Value |
|---|---|
| 1. Apple | $2.4 T |
| 2. Microsoft | 1.72 T |
| 3. Alphabet | 1.23 T |
| 4. Amazon.com | 1.18 T |
| 5. Tesla | $709.4 B |
| 6. Berkshire Hathaway | $642.8 B |
Top Six S&P 500 Companies by Market Capitalization, Oct. 26, 2022
Source: MarketWatch
This past Monday, Berkshire Hathaway had about the same market value as Teslaā$632 billionābefore the EV maker pulled ahead as Musk finalized the Twitter deal. At the start of 2022, Tesla was valued at $1.1 trillion, $450 billion more than Berkshire.
Since then, Berkshire has blown past flagging Meta Platforms META +1.29% , and Nvidia to rank sixth in the S&P 500 by market value. Berkshire still trails Apple , Microsoft , Alphabet , Amazon.com , and Tesla. Shares of Meta and Nvidia, which were ahead of Berkshire at the start of 2022, are both down more than 50% this year. If Berkshire can pass Tesla, it will be hard pressed to catch No. 4 Amazon, which is valued at a trillion dollars.
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Iām not really a fan of indexes, here in the UK The FTSE 100 is still where it was 25 years ago. Pref is individual value large caps with growth prospects that can be held for 5 to 10 years.
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UK is the most overvalued country. There is no reason for them to have a UN Veto; or a currency at par with USD
Keeping 80-90% of your net worth in Brk.b and buying more anytime itās at or below 1.4 p/b value is an excellent way to accumulate wealth. The hard part is doing nothing for years and years and years. Most people overthink it and will mess it all up. Ignoring financial press, checking this board and avoiding financial talk with friends helps.
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Thatās exactly where Iām atā¦at about 80%. Have been accumulating on dips since 97. Doing nothing for years and years may be hard for some, but it wasnāt for me ā have never sold a share. I guess Iām brain dead and not easily shaken out of my position. HOWEVER, for the first time in my life, Iām considering some diworsification away from my gigantic position in BRK, at least all the shares I have in my tax deferred 401k and Roth IRAā¦maybe the next time it starts to move over 1.5BV. Iāll still have a sizable position in my taxable account, but Iād rather just let that ride, since thatās where my largest embedded taxable gains are located. So, a huge taxable event to liquidate that position doesnāt sit well with me psychologically. No dividends also makes it a nice way to compounded off of the free loan from Uncle Sam. Itās all going to charity anyways so I donāt think about it all too much. Thereās something to be said about your observation of āoverthinkingā things. We are all affected in one way or another with a lot of the microanalysis of BRK on this board. I do tend to eschew some of these various models and try to simplify my understanding of BRK as much as possible by reading what WEB says each year in his annual report. Granted, I have more of a gut instinct and thatās not very scientific, nor do I have any kind of sophisticated background in accounting, so I get lost in the weeds sometimes when things get too intricate here on our forum. But, my strength is that I have had a very long term behavioral mindset and a cast iron discipline that enables me to buy on sale, add, hold, and forget. So far, that process has served me well. But, I admit Iām feeling some trepidation in recent years over successorship issues.
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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!
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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.
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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).
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Jet Jockey mentioned 1997. Hence 25 years.
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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.
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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.
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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.
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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.
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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.
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BRK.A: Berkshire Hathaway pares stake in BYDās Hong Kong-listed shares to 17.9%
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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.
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