Personal Finance

Why not buy Buffett's Berkshire share??

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Jun 23, 2008
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Why not buy Buffett's Berkshire share??

Buffett is probably the most successful world-wide investor these days. He beats S&P 500 or Dow index for a long time .
and the Berkshire actually is a holding company, his portfolio contains over 40 well selected companies,
to name a few,
Dairy Queen, Fruit of the Loom , Heinz Co. (NYSE: HNZ) ,Mars Inc., American Express Co. , IBM , Coca-Cola Co.

It's NOT like buying Index fund/ETF, you have to hold Enron, Nortel. so, in my eye, Berkshire is like a managed closed-end fund. Why not buy some Bershire share directly ? why not get Warren Buffett managing your money with proven investment philosophy and diversified portfolio ?

Berkshire A share is about $220K/share right now, it is definitely not for me. But Berkshire B share is only $140 now, many people can afford it.
Basically, B is 1/1500 of A share, but almost no voting right. and B is a little slightly discount to A share. Others are same.

http://www.investopedia.com/ask/answers ... shares.asp
http://www.berkshirehathaway.com/compab.pdf
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Oct 5, 2009
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because when he will pass away the share will likely go down? and then it will be a good time to buy... if the successor is as good as him, which is far from certain.
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I would
at least some % of USD portfolio, if you don't want to worry too much
It's almost like an Active managed stock (similar to Mawer Funds?)

I bought 100 at $141, then went to $148 (was I shocked to make $700 quickly), then down to $137 low I think, and then back up to $144 this week, and down to $142 today

With everything else going on, I may want 50% BRK.B in my portfolio and maybe 50% DIY stocks


I had similar roller coaster ride with Canadian version Fairfax (FFH) too ... and not sure if I want to hold it? ha
Bought 30 on the way down from $700, went down to $610 and up to $670 and now $64X
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theBeachBoy wrote: because when he will pass away the share will likely go down? and then it will be a good time to buy... if the successor is as good as him, which is far from certain.
and who will that be?
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Jul 1, 2007
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Buffett had a few lucky plays in the past, at a time of less efficient markets, that contributed greatly to the growth of his fund and overall net worth. More efficient markets and ostensibly more overvalued markets make his investment strategy, that started by Benjamin Graham, obsolete. It's very difficult to find a successful business today (ie: not a value trap) that fit Ben Graham's valuation formulas.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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Thalo wrote: Buffett had a few lucky plays in the past, at a time of less efficient markets, that contributed greatly to the growth of his fund and overall net worth. More efficient markets and ostensibly more overvalued markets make his investment strategy, that started by Benjamin Graham, obsolete. It's very difficult to find a successful business today (ie: not a value trap) that fit Ben Graham's valuation formulas.
I respectfully disagree. While some companies are not appropriate to follow Graham's model, its principle still works, since it's based on valuation and earnings - and that's what drive long term return. That's the essence of value investing, which works in any timeframe, including now. There are always bargains to be found.

Aside from that, the Graham trading model I built shows how powerful a portfolio can be, comparing to the market.

Rod
[OP]
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DJ_Peanuts22 wrote: and who will that be?
Berkshire is a big firm, involved with many deals around the world, e.g. Tim Hortons bought by Burger King . I don't think Buffett do everything himself, there must be some partners or assistants. After many years' working w/Buffett, I believe some of them have been trained well. Those people are good candidates for future CEO in Bershire.
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Mar 27, 2009
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DJ_Peanuts22 wrote: and who will that be?
Charlie munger is quite the genius himself and will obviously continue to have a major role. As for his direct successor it hasn't been disclosed yet. That being said, nobody is quite like Mr. Buffet.
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zibzer wrote: Charlie munger is quite the genius himself and will obviously continue to have a major role. As for his direct successor it hasn't been disclosed yet. That being said, nobody is quite like Mr. Buffet.
Actually, Munger is 91 right now, even older than Buffett who is 84. it is very interesting.
Buffett looks healthy and still active right now. I don't think Buffett would leave soon, probably 4 or 5 years later.
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Mar 27, 2009
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Good point. I didn't think of that.

Buffet clearly doesn't look worn out. He may surprise us and work into his 90s. He has mentioned before in interview that if he didn't enjoy what he was doing he would have retired years ago, so he may just be the type that works until death.

When the inevitable comes I am equally curious as the other posters as to who will take the reigns at Berkshire.
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I should add that I remember reading in an article a year or 2 back that he may place his son as an "ethics commissioner" or something of that sort. Seems to me this wouldn't effect day to day purchases and trading but perhaps it is worth a mention in this thread.
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Thalo wrote: Buffett had a few lucky plays in the past, at a time of less efficient markets, that contributed greatly to the growth of his fund and overall net worth. More efficient markets and ostensibly more overvalued markets make his investment strategy, that started by Benjamin Graham, obsolete. It's very difficult to find a successful business today (ie: not a value trap) that fit Ben Graham's valuation formulas.
Yes, Buffett has some lucky plays. Let's also comparing BRK.B w/ Dow or S&P500 in past 3,5,10, 20 years ,
https://ca.finance.yahoo.com/echarts?s= ... B;range=1d

BRK.B beats index over half of the time, never lost to index a lot . I don't believe a guy can be lucky for over 20 years. He must did something right constantly.
Maybe you are right, It's very difficult to find a successful business today (ie: not a value trap) that fit Ben Graham's valuation formulas.
But what I want is a proven long-time successful, easy to handle and meaningful investment vehicle which is also accessible for ordinary people. Up to now what I can find on market is index fund and Berkshire B share, may be Fairfax in Canada.
I believe there are some hedge fund, venture capital give much better return than BRK.B. But it is not accessible for me.
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Buffett buys back Berkshire stock when stock value is around 1.2 times book value (last time in 2011-2012).

Current stock value is around 1.5 times book value last time I checked an article on the topic.

My plan: I will buy Berkshire stock when the company decides to buyback its stock again. Unlike others, they only buyback when they sense it's REALLY worth it.

Note: since I am an index investor, my criteria to buy any individual stock is quite high.

(While others do buyback their stock without any consideration about whether the current stock price is really a bargain).
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cashinstinct wrote: Buffett buys back Berkshire stock when stock value is around 1.2 times book value (last time in 2011-2012).

Current stock value is around 1.5 times book value last time I checked an article on the topic.

My plan: I will buy Berkshire stock when the company decides to buyback its stock again. Unlike others, they only buyback when they sense it's REALLY worth it.

Note: since I am an index investor, my criteria to buy any individual stock is quite high.

(While others do buyback their stock without any consideration about whether the current stock price is really a bargain).
BRK.B
Valuation Measures
Market Cap (intraday)5: 349.24B
Trailing P/E (ttm, intraday): 17.14

Price/Sales (ttm): 1.81
Price/Book (mrq): 1.45

Holding book value not change, to arrive P/B =1.2, the stock price should down to $116 from current $141, i.e. 17.7%. That 's not small. Let's wait.

Tks for buying tips.
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Jun 27, 2015
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theBeachBoy wrote: because when he will pass away the share will likely go down? and then it will be a good time to buy... if the successor is as good as him, which is far from certain.
I agree. I've been looking to buy Berkshire stock for a while but I've shied away because of Buffet's age. Once he dies, the stock will tank regardless of whether it is deserved or not.
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Sep 20, 2014
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triggerhippie wrote: I agree. I've been looking to buy Berkshire stock for a while but I've shied away because of Buffet's age. Once he dies, the stock will tank regardless of whether it is deserved or not.
I suspect it will come back around. Buffet's death won't have an effect on the intrinsic value of the company because of the way he has designed the portfolio. No longer is the portfolio focused on the most undervalued plays. He's instead ventured into solid, dividend payers. The reasoning behind this is that it is hard to implement his traditional Graham inspired strategy at this scale - Berkshire is the 3rd largest company in the world by revenue, it really takes a lot to make a difference there. Moreover, the managers looking after most of the new positions in Berkshire's portfolio have been doing so very well. Buffet's done all he can to make sure that the company's actual value stays unharmed.

I personally really like the company. Incredibly diversified, multiple revenue streams and will fully capitalize on any growth available in the U.S. market (recent Heinz-Kraft merger is testament to that - http://seekingalpha.com/news/2657265-bu ... -no-credit). Additionally, Buffet's portfolio does better during bear markets than bull ones so the last 5 years aren't a true indicator of the performance.

I am a shareholder and am satisfied with the performance but as was pointed before, only recommend buying it at 1.2x book value as that's when Buffet would do it himself. It's a stock that will grow well over time - just don't expect miracles. It's size is its biggest problem - very hard to grow when you are this big.

As for the successor, he had recently hinted it has already been decided. His son would serve as sort of a "cultural successor" while the other guy will manage the day to day affairs. The most likely candidate is Ajit Jain.
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[OP]
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pulkit10 wrote: it is hard to implement his traditional Graham inspired strategy at this scale - Berkshire is the 3rd largest company in the world by revenue, it really takes a lot to make a difference there.

I am a shareholder and am satisfied with the performance but as was pointed before, only recommend buying it at 1.2x book value
Yes, Berkshire is so big now, and has tons of cash in hand. It is not easy to find enough deals to use all the cash. In a letter, Buffett mentioned dividend distribution may happen in next 10 or 20 years. There won't be big growth in the future.

As a BRK shareholder , have U found a good and deeply analysis report on BRK's value, and internal portfolio management? If you have one, pls share. So we can estimate how heavily BRK rely on Buffett. If their portfolio management has been established well, I wouldn't worry too much. Just look at how strong Apple is after Steve.
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annexguy wrote: Yes, Berkshire is so big now, and has tons of cash in hand. It is not easy to find enough deals to use all the cash. In a letter, Buffett mentioned dividend distribution may happen in next 10 or 20 years. There won't be big growth in the future.

As a BRK shareholder , have U found a good and deeply analysis report on BRK's value, and internal portfolio management? If you have one, pls share. So we can estimate how heavily BRK rely on Buffett. If their portfolio management has been established well, I wouldn't worry too much. Just look at how strong Apple is after Steve.
I haven't and I doubt there would be a reliable one available (would love to be proven wrong). I'd rather just rely on the shareholder letters and reports. The assets being managed by his managers have started off as small caps and are slowly starting to get bigger (DirecTV is one of the big ones). Buffet drops a few hints here and there but he stops short of giving exact details. Regardless, he is slowly bringing his successors up to speed and they have been doing a great job so far (have beat his returns handily, apparently).

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