73 Reds

Berkshire/Fairfax: How many businesses compound BV at an annual rate of near 20% for decades?

Blake, if you base your otherwise long term investment decisions on whether or not the market is right "now" you will always miss the boat.

Well, as another poster stated, try hard not to overthink it. In one manner I think we're alike - I directly own and control the majority of my investment assets because they are not publicly owned. If they blow up its solely on me and there is no one else to blame.

@gfp sounds like you might want to to rethink the "for free" money management arrangement unless she is a friend with benefits!

@Kupotea you need to do what's best for your own peace of mind. That said, I agree with @SharperDingaan. Most of us have or had families and are or were in your shoes at one time. For me, the issue comes down to not wanting to needlessly sacrifice performance. Consider all of your sources of wealth generation, including your and/or your spouse's jobs. Have you retired from active employment and do you live solely off your investments? If not, rather than adjusting your investments, perhaps adjusting your lifestyle just a bit so that you are saving more and spending less is an option. Figure out what you are really good at when it comes to investing and focus on that. Sure investing involves a certain amount of luck but 8 years of solid outperformance is much more than luck - particularly in investments like gold and royalty companies which you properly identified. Remember, stock indices can drop and drop by a lot and for longer than you anticipate (just ask Blake, LOL). If you are concerned about a permanent impairment of capital there are plenty of individual stocks and industries that aren't going away anytime soon. You can own companies with monopolistic-like characteristics with superior management that understands how to allocate capital. Look no further than the namesake of this board for two such stocks that will likely beat any broad based index over time.

@Kupotea if you want my thoughts on rebalancing, why sell something that is working, pay taxes, and then reallocate the remaining proceeds into something that doesn't work as well?

Agreed. Do precisely what you do now, albeit with less of your overall capital that you couldn't stand to lose. Personally I've been in your shoes for a long time and didn't change anything once that time arrived.

Yep. Trump being.... well, the same guy we elected and Elon pretending that money buys power. Easy to see how these guys were so quickly infatuated with each other and how quickly infatuation tends to fade.

Great post @Viking. Of particular interest was your take on minority partners and Fairfax's options to buy out their interests at a future date. Options are such a wonderful - and often overlooked secret to so much business and financial success. They can be used in countless ways to make deals, contracts, leases, etc... much more valuable for both the option giver (seller) and option holder (buyer).

Feel free to disagree. But try not to confuse Buffett's holding a lot of cash with the notion that there is nothing for you to invest in. He is in a league all his own but the world is your oyster.

Blake, you could be waiting a long time. Throughout my investment lifetime there have always been well-respected economists predicting doom and gloom. Their stories were always compelling.

Respectfully disagree. People holding investments that lack a daily price quote focus on the business itself rather than the price. Their thinking is therefore not affected by price swings or market quotations. These people also often have more significant ties to the underlying investments and have more knowledge and insight than some outsider making a bid. Such people also tend to be long term investors as opposed to stock investors who mostly have a trading mentality. Depending on the nature of the business a "bear market" in stocks may have little or no effect whatsoever - in fact some businesses thrive during bear markets.

I won't ask if the stock has a name but surely someone else here will. Stocks that trade by appointment are of no interest without control of the company.

Not sure I understand the question. Why is optionality or liquidity only necessary during drawdowns? Seems like buying power is necessary any time a desirable investment becomes available at the right price. Drawdowns only tend to provide more such investments. As some have alluded to, at least a portion of an investment portfolio should provide recurring income in the form of dividends, interest or distributions. I don't like bonds, gold or BTC. For me, the best all-weather investments are great businesses with pricing power, real estate and private, secured paper.

Yep - terrific post. Also consider who owns most of our debt (Japan, China). They don't want to be repaid because who would they rather lend to?

Still can't figure out why anyone here would want to listen to a banker for investment advice. Blake, over the course of an entire investment lifetime Buffett and Bogle are the only people whose words made a difference to me.

I think that was before something called "air conditioning".

Don't buy LG refrigerator/freezers - went through 2 in less than 3 years. Never again.

Fair enough. Which is a good reason to own them all. An easy group to own with some upside if they manage to get it right and little downside.

MO can continue to raise cigarette prices while working on other products like vapes, HTPs, pouches, etc.. Nicotine is addictive. Demand is not going away. No need to focus on precise numbers; rather on optionality. If you believe tobacco companies are going out of business don't own them. I own them for one reason - they generate a lot of dividends in a small retirement account which are fun to play with. Yet if I were a retiree in need of dividend income these companies would be at the top of the list.

Both much higher than today. The issue here (per the thread title) is 6% or higher dividend portfolio for retirees. MO has been, is and will continue to be just that. Price appreciation is gravy.

No one is arguing that cigarette sales are rapidly declining. Cigs are not the reason to own these companies.

@Jaygo There are many different kinds of "smart". Some of the most successful people I know and do business with barely made it out of high school. The best investments don't need bottom-feeding shareholders.

Yep. I was very much against Berkshire's stock split but understood Buffett's reasoning at the time. Fairfax's stock price is nowhere near the price at which BRK split.