73 Reds

Financial crises are very different. In fact it is easy to predict the ultimate outcome of any financial crisis because the damage is never permanent. You don't have to know the "when" and "how"; ultimately the country and the world will survive. Those that have the financial strength to endure not only survive but often prosper from economic crises. Death, however is permanent and in March 2020 there was no road-map for how we were going to overcome a worst-case scenario.

On that day they didn't know, nor could they even credibly predict what they didn't know. IMO their inaction was logical but I understand why some would disagree, though Berkshire is probably not the stock for those folks.

Its hard to blame a 90-year old for hunkering down during a pandemic. As with any investment, shareholders or prospective buyers should ask themselves why they want to own the stock. Its not a stock for everyone, but conversely, owning it would probably not hurt anyone.

He has talked down the share price repeatedly throughout his tenure. I don't look at volatility as a bad thing; it has nothing to do with intrinsic value but it creates opportunities. He treats partners better with more opportunities to buy lower and sell higher. He rarely get an opportunity to make acquisitions with stock by advising folks not to buy shares because they are "expensive". And if he always want the stock to trade near its IV, share buyback opportunities are less frequent and the value of each buyback is also less than it would be at lower prices.

@crs223 I am not suggesting that Geico sell insurance "under cost" to anyone. But it seems that properly measuring "cost" may be an issue at Geico. Where I live Geico has never been a viable option for auto insurance. This encompasses a more than 40-year time span, multiple family members - young and old and in-between, who oh-by-the-way have never had a ticket, accident or claim. The only reasonable conclusion is that Geico should not be in business here at all or their standards of assessing risk need adjustment.

One common criticism of Buffett is his "management" of the share price. Were he to allow the stock to be more volatile, he would have more opportunities to both repurchase shares when the price is cheap and use the stock as currency when the price gets expensive. I would expect future management to avoid addressing the share price.

Not to minimize the issues at Geico but it is hardly the only company that shuns its best customers. In fact most renewal type businesses raise prices on existing customers at renewal time while offering first time customers a better deal - the telecommunications industry is perhaps the worst culprit. Call me naive but wouldn't rewarding loyalty (and lack of claims/incidents in the case of insurance) increase customer stickiness and thereby decrease marketing and turnover costs?

You're welcome, Viking! The irony is I wouldn't buy Berkshire today but I wouldn't sell it either; decades of deferred capital gains makes that entirely logical. Going forward, the appeal of Berkshire is that it can, and does invest in literally anything. Trillion dollar companies evolved from one idea/concept and each operates in a single industry. When viewed like that, size is really no excuse.

Viking, first I'd like to say thanks. You are the primary inspiration for me having recently joined this board. Your work on Fairfax has been the most thorough, spot on analysis of any company or investment that I have seen in a lifetime. That said, a little push-back on Berkshire. As you know, Berkshire has one huge advantage over the S&P 500 - insurance float. That alone ensures that with proper underwriting discipline, size is no barrier to success. To your point about size, it does of course minimize the playing field of needle moving investments, that is until it doesn't. Financial armageddon will most certainly recur one day, whether during Buffett's tenure or thereafter. What company is better situated to avail itself to a time of blood in the streets? My personal opinion is that shareholders will demand much more of successor management than they do of Warren. They won't tolerate some of Buffett's nuances that shareholders were always happy to overlook. This does not require a change in culture; rather the company could focus less on empire-building and more on broadening the so-called "circle of competence" to encompass industries, and even geographical regions of the World that have never really been considered. Older shareholders like me are happy to own Berkshire in its present form with a bent toward preservation of capital. But in order to attract new shareholders, successor management may have to loosen up the company's investment objectives beyond those of a 93 year old. Future management will surely recognize that they are not Warren Buffett, nor should they try to be him. My guess as a shareholder is that they will utilize their specific strengths and skills to see the company evolve in a way of which Buffett would be proud, as opposed to stagnation and/or a poor S&P 500 proxy.

Yes, he easily could have financed the house but instead he chose to pay cash. One lesson that made a lasting impression on this shareholder.

Stocks are too easy to trade; after all they are mere pieces of paper with an ever-present market quote staring you in the face. But when you think of stocks the same way you think about owning real estate or even a partnership interest in a private business, the urge to trade all but vanishes. I've never understood the concept of owning a "tracking position" in a stock. Is it that difficult to research a company before you own it? You can't buy a tracking position in a private business interest or a rental property but you certainly wouldn't invest in these without proper due diligence. You also wouldn't sell them just because something comes along that looks like it might be a better investment - that's when always having some degree of liquidity becomes equally important. Experience has proven that the most important element of investing success is not smarts, but patience. To your point, pretend that you buy 10 "forever" stocks and hold them for 40 years. Also pretend that you aren't the world's greatest stock picker; in fact you are worse than average. Five of your stocks perform very well (use your 14% CAGR) but the other five stocks go to -0-. Even if you did not receive a single dividend from any of these stocks, you would have more than 49 times what you started with. This demonstrates why it is important for young folks to invest early and often. You don't have to be a great investor. But in order to greatly improve your odds of financial security you have to invest.

Well, Prem Watsa acknowledged that Blackberry was a bad investment. Is an admittted bad investment better than any (every!) other alternative? Of course I've not always understood Buffett's reasoning either but there is always some inherent logic to what he does. The only rationale that makes sense to me here is that the company is trying to discourage new buyers in order to keep the stock price down for as long as possible in order to repurchase more cheap shares. If that is the intended goal, holding all remaining BB shares is a relatively cheap price to pay.

Yes, hiding a mistake is not appropriate but neither is perpetuating a mistake. I really do think this gives pause to prospective new investors.

Both, I suppose. Even if Blackberry shares can earn a >5% annual return is it truly a better idea than any return generated by the tax loss and reallocation of net sales proceeds? As a steward of capital, isn't that a more logical approach than holding shares in a company that you've called a terrible investment? Despite its value now being a mere blip on the radar, it is certainly talked about and thought about disproportionate to all the company's success. Anyone looking at the Fairfax portfolio and considering making an investment sees it for what it is.

I dunno; after quite the mea culpa one might assume that the resulting tax loss and even a 5% return on net sales proceeds, not to mention repurchasing FFX shares with the proceeds would generate a better result than continuing to hold equity in a company he no longer believes in. I think it it this kind of decision that holds some people back from investing in FFX.

Why do you think Fairfax continues to hold the remaining shares?

In the battle of age vs. velocity, age wins! But to be serious, given enough time, Berkshire will likely supplant a few of the names on that list. Those names look a lot like a list of dividend aristocrats. A long time ago I considered simply buying all dividend aristocrats and leaving them in a "coffee can" to grow. Probably not a bad strategy for someone with no interest whatsoever in investments or for others who chronically underachieve.

GEICO has never been price competitive for me and my family (no accidents, tickets or claims). As a BRK shareholder, that was never a concern because we live in a high-risk area. But recent GEICO results have been a head-scratcher for sure.

Well, you - or I found a fellow Compadre. Not that it started that way in my case, but it turned out that way almost by default. When you bang your head against a wall so may times and it always hurts, you try something different to avoid the pain. Just like for so many here, Buffett's and Munger's lessons resonated. BTW, been there/done that with enlarged prostate - common in men our age. Had a Turp some years ago and doc discovered cancer. Fortunately radiation treatment seemed to work - PSA has been in normal range for several years. Still go every 6 months for checkups and after 5 years only annually. Good luck with your upcoming surgery.

150 stocks - Wow! I have enough trouble keeping up with 5. As someone who has held my earliest shares since not long after you inherited yours, is there a particular reason why you've never sold any of those stocks? Surely they all could not have turned out to be great holdings(?)

Thanks for that! I don't view the issue as so much of a debate; rather its more a question of style and comfort level, as well as investing to one's strengths. To me, buying FFH a few years back well under book value was equivalent to buying single family homes at the height of the financial crisis. Whereas buying improved real estate for less than the cost of construction while getting the land for free was simply too good to pass up, buying FFH after Covid was at its core acquiring some fine assets well below cost with a steward at the helm who has grown book value at more than 18% per year since inception.

Indeed; its like being married and spotting a great looking woman - there is no harm in looking! But to your point, I'm always looking and FFH was in fact the most recent addition.

+1 There are some very talented stock pickers here; I'm not one of them. It takes too much time and effort. It is far easier to recognize powerful companies with enduring competitive advantages and superior management. Sitting on one's hands while owning shares in such companies is the best advice Munger could have given to most of us, who have neither the time, skills, and devotion necessary to trade our way to success.

The easiest stock to own for (thus far) eternity has been Berkshire. The issue is no longer whether I can personally outperform; rather the issue is how well I sleep at night. When you add in the benefit of deferred taxes, there really is no issue at all.

MSFT was pretty early on, late 80s. I'm a techno-idiot but fortunate enough to know some smart people in the industry, including my old college roommate who went on to do some amazing things like installing wall street trading floors for major brokerage houses even though we both nearly flunked Cobalt and Fortran (ugh!!) which was just starting to be taught in the universities. Those were so difficult that it didn't take much convincing that any company that would make using a computer easier for folks like me would be a hit. AAPL came along much later, post Steve Jobs. It was not until the ecosystem of AAPL became readily apparent that I started buying, but when Buffett also started buying it really clicked.