Dynamic

I've finally got round to reading the indexing section in detail. I think I'll need to re-read it, having thought about it, to see what is and is not being suggested in it. It reads like a good narrative, with good reasoning and feels like it has a lot of either validity or truthiness. I certainly don't feel I'm as equipped as the author to know from the top of my head or from long experience and study how all these things work. I can certainly envisage the instinctive actions of a large number of retail investors acting on instinct. The group I'm thinking of would be the type to start investing in equities only after a sustained period of 'consistent good performance' has been demonstrated, such as the last 2-5 years (i.e. certainly not buying low, more likely to buy near the top) and who tend to panic and sell if the market seems to be going down (i.e. a tendency to sell low). They have no concept of value being different from price, only a number that mysteriously moves up and down and shows 20% gains in each of the last couple of years. What I am still puzzled about is whether index rebalancing has any multiplicative or reinforcing effect on 'price momentum' or even a countervailing effect on it at time when there is no net inflow or outflow as various indexing investors add funds and withdraw funds over a period. After that, sure if there are net inflows it will tend to boost each company in proportion to their weighting. I believe that the S&P500 index figure represents a fixed fraction of the market cap (or free-float adjusted market cap) of the companies involved. The S&P500's total market cap at 31st Dec 2017 was $23,938,148.8 mn, float-adjusted: $22,900,164.8 mn, Index value = 2673.61 On that date, for example, AAPL was priced at $169.23 and had Mkt Cap of $858,675.6 mn (approx - I've assumed no change in share count in the last couple of months, but that doesn't change the gist of what I'm working out). AAPL should make up 858675.6/23938148.8 of the index = 3.587% by Market Cap on 31st Dec 2017 and would still represent 3.587% of the S&P500 index value of 2673.61, meaning 95.90 index points. I we assume 1 'point' is worth $1, than means for every purchase of 1 unit of S&P500 at $2,673.61, $95.90 of that was APPL, so the number of shares of Apple purchased was $95.90/$169.23 = 0.5667 shares of AAPL. With 5,074 mn shares in issue, that's 1/8,563,000,000 ths of the shares outstanding in AAPL represented in the index. It should be that every other firm in the index also has 1/8,563,000,000 ths of its market cap (or perhaps that fraction of its free float market cap) represented at present. So a firm XYZ Corp valued at exactly 1/100th of AAPL's market cap on 31st December would represent 0.03587% of the S&P on that date or $0.9590. If AAPL happened to do a 2-for-1 stock split on 1st Jan 2018, it would represent 1.1334 shares, still worth $95.90 (as the AAPL price would be $84.615) - no change in index weighting. If it didn't split, and rose to $181.72 (close on 12th March 2018) while the index rose to 2783.02, that 0.5667 shares would be worth $102.98 out of every $2,783.02 unit of index fund (at 12th March). This is now 3.700% of the index, but didn't involve index funds buying more shares in AAPL, it just reflects its rise in stock price having increased faster than the rest of the index increased. If rebalancing were carried out today, it would only be a reflection of changes in the number of shares in issue. For example if AAPL were to buy back and retire 10% of its stock this quarter, effectively the index funds would have to sell 10% of their AAPL holdings to rebalance exactly. This is extreme, and no company is likely to buy back that much - maybe 2-4% in a quarter on rare occasions, and index funds could take their time rebalancing and accept some tracking error. So having got that straight, what happens when net inflows into index funds are occurring? Today, for every net $2,783.02 coming in, the fund will be buying typically 0.5667 shares of AAPL give or take some tracking error. This is 1/8,563,000,000 ths of its market cap. Likewise, XYZ Corp shares would be bought at 1/8,563,000,000 ths of its market cap (i.e. they'd buy 1/8,563,000,000 ths of the shares outstanding). Relatively, the amount of buying demand on both index constituents is the same proportion of its shares outstanding. If APPL happened to fall 10% relative to the S&P500 (still at 2783.02), and the cash inflows for the index funds were the same, they'd still buy typically 0.5667 shares of AAPL for every net $2,783.02 coming in. If nobody repurchased their own shares, it would still be 0.5667 shares. Likewise is XYZ Corp fell 50% the S&P500 would barely budge, yet it would still have index funds buying the same 1/8,563,000,000 ths of the shares outstanding for every net inflow of $2,783.02 into these funds. If the S&P500 fell consistently or very sharply for a few months, especially with a serious geopolitical or economic event as a 'reason', what I would imagine is that most index funds would see net outflows of capital and would then switch to being on the selling side. For every $2,783.02 of net outflow today, they'd have to sell 1/8,563,000,000 ths of the shares outstanding (or free float) in every stock in the index, give or take tracking error, meaning 0.5667 shares of AAPL worth $102.98 and almost a dollar's worth of XYZ Corp etc. Now, I imagine the know-nothing retail investors herding into and out of index funds based on emotions will also be accompanied by retail investors herding into and out of active managed funds too (with the exception of those few Value Funds that successfully manage to discourage this adverse behaviour among their partners, either by persuasion or by penalties for withdrawals without sufficient notice). It's likely that the active funds will also have to sell many of their positions regardless in order to fund the net redemptions, though they might be selective and strategic about which positions they sell in ways that index funds will not. I can certainly see how the net flows of capital will shift the balance of supply and demand and the herding behaviour would, for a time, reinforce the price action that caused the herding - a positive feedback loop (positive feedback loops in 'control theory' being unstable, causing overshoots and wild swings, whereas negative feedback loops tend to cause stable more gradual response to a sudden stimulus). Negative feedback loops are more 'positive' emotionally, while positive feedback loops can often produce emotionally 'negative' outcomes. I think it has always been this way. It seems you need to force out most of the emotional actors from the market before only the more rational actors are left and the self-reinforcement over downward 'momentum' can correct. The longer the boom, the more irrational actors are drawn in and the higher the market will peak before it busts, and the deeper the bust will go before they are driven out. Buffett's words may encourage many more people to buy index funds when the 'going is good' than the number that will be persuaded by his words to have the emotional detachment to stick to investing regularly even when the market has been in decline and looked scary. Only the latter group will reap the full rewards of investing in the wide range of businesses represented by the index. Those who bail out when fear abounds will tend to capture most of the falls and miss most of the rises. What I'm not seeing is how a rise in indexing is really any different to any rise in retail fund investing (e.g. mostly actively managed in the past booms). In the past, the range of active funds was wide, and although there was herding, there were many popular approaches including momentum-based and sector-focused that paid relatively scant attention to intrinsic value, especially as retail investors piled in towards the peak of a boom. In aggregate, I think the net inflow of funds still caused increased demand in almost all stocks causing prices to tend to rise, and when there was a net outflow of funds, that caused increased supply of almost all stocks, causing prices to fall. I'm thinking that it could be the active funds where they wish to advertise that you're taking part in the 'performance' of sexy well-known stocks like Apple, Facebook, Amazon, Google and the likes (and even Berkshire!) that may be over-weighting these stocks to increase their appeal to market their funds to bright-eyed retail investors who want a piece of that recent 'performance' as "it's sure to continue in future" in their minds. It can be subtle things like that which will sway them into picking specific funds (and the fund's market departments know it), and perhaps its that which would drive the relatively higher demand for these market darlings who have recently 'performed' so 'well' (or as we'd put it, whose price has become less attractive in relation to their intrinsic value). Equally, if you're trying to manage large funds actively, if a lot of additional money is flowing into your fund, it really forces you to look at investing in those stocks with the biggest market caps so you don't drastically distort the supply and demand of the smaller names by making up a great proportion of their daily volume. I admit I'm struggling to see how it's indexing rather than just the general flow of capital into funds of all kinds, that is driving the concentration of gains into a narrow range of large-caps. [glow=red,2,300]{edit}[/glow] Assuming most stocks of all sizes have similar percentage turnover of their shares in issue during a year (notable exceptions like Berkshire being the rare counter-example), and ignoring companies newly entering or leaving the index (especially large-cap entrances like BRK.B a few years ago), I cannot see index funds being responsible for the momentum multiplying effect causing the largest caps to experience the largest gains. To my mind, it seems more plausible that our culprit is the majority of non-value active managers possibly aiming to attract the most Assets Under Management as higher priority than long-term performance, that are most likely to focus on the 'big names' and large caps as all this new money comes in as we near the peak of the boom. To me it seems like that's the more likely mechanism for this concentration that precedes so many of these crashes. [glow=red,2,300]{/edit}[/glow] But I'm willing to be persuaded, and would be glad to be shown if I'm wrong in any of my assumptions. I try to remain a true skeptic - willing to change my beliefs on the basis of good evidence.

Much of the video from last Monday's Squawk Box is available on CNBC's YouTube channel, and they may well auto-play in sequence (as they seemed to do for me) if you start from the following video:

He recently emailed me the corrected version and it's now live on his website at: http://www.tilsonfunds.com/BRK.pdf Your old version may be cached, so you might need to Refresh or Reload in your web browser to get the updated one.

Yup, I mentioned this above and emailed this and a couple of typos to Whitney Tilson, who said thanks and that he would fix it, so perhaps in a few days it will be revised. The analysis is still pretty sound in my opinion, and I think this Berkshire slideset has been a valuable resource for a number of years, and I'm appreciative that he keeps it updated.

I've sent Whitney some notes from my proofreading, so he may well update it soon.

Just received a notification that a New Comment awaited me on Seeking Alpha. It's posted by Chris DeMuth Jr at the foot of an article he wrote about Damn Right! At the end of the comment he links to a PDF of the foreword on his Google Drive, which you may enjoy reading.

Slide 11 too states that the Tax Reform bill passed at the end of 2016 (rather than 2017). That slide and slide 12 both could so easily look as though the implied multiple on pre-tax profit has been calculated after the fact to fit the real share price action, but I think given the interest rate and inflation environment as it has varied over time and the change to the tax rate environment being factored in as 2017 drew to a close, they are actually reasonable multiples, and $348,638 per A share ($232.43 per B share) is about right for an Intrinsic Value at the close of 2017. (This works if you take IV to mean a value that allows for an excess return in the range of perhaps 6-9% above the risk-free rate) - which means you might still expect BRK's IV to compound at around 8-13% (or 6-9% in real terms, if inflation roughly matches the risk-free rate), given that the BV growth rate is probably in about that range too. I believe growth in IV of around 9-12% is fairly probable by the end of 2018, so a BRK.B price as high as $260 later in the year likely wouldn't lead me to consider the stock significantly overvalued.

Haven't checked the numbers yet but slide 7 (Earnings) totals in both categories exactly match 2015 numbers, as do many of the component parts. Raises alarm bells that this might be an oversight during editing?

No full interview as yet, but the list of videos you can scroll below this link may well be useful for seeing most of it in chunks. I must have watched 15-20 over the last couple of days, and seen the same ad dozens of times! https://www.cnbc.com/video/2018/02/26/buffett-charlie-and-i-have-never-had-an-arguement.html

It's not at all clunky. I think it's great and is really useful for tracking great Value Investors and the stocks they own, but it had slipped my mind which stock picker was behind Semper Augustus, so I thought I'd be explicit for the benefit of anyone else who's similarly slow-on-the-uptake, or is new to Semper Augustus letters and their great analysis! Your tracker is superb for tracking all these investors and brilliantly fit for purpose for idea generation. My BRK Look-Through is focused elsewhere, so it's great to have yours too

And in case anyone needs a reminder, click on that link, pull down the Investor selection and under C you'll find Christopher Bloomstram. BRK.A = 19.1%, BRK.B = 26.4%. Combined BRK = 45.5% of their reportable holdings under 13-F. Everything other position is 6.0% or lower.

Hi @globalfinancepartners. This is what is so great about CoBF - everyone noticing little improvements in accuracy. A friend and I noticed the differences between the holdings attributable to shareholders and the 13-F at the weekend and I have already adjusted the top holdings (which are the most material) to the exact number of shares shown in the AR on a private Google Sheet that uses the Look Through earnings. There may be other holdings below the level of the top 15 or so that are over-reported. It might be possible to dig through the 13-G forms to ascertain which belong to pension funds (and sanity-check against known examples such as Apple) I'm snowed under with work today but just realised I can change it very quickly as I put in an adjustment for Pension Funds in my Combined Holdings sheet (the one that combines the BRK 13-F, the NEAM 13-F and the non-US holdings), so I have done so on all three versions of the sheet. Contrary to the Title, the column for 'Assumed non-US holdings' also now includes these adjustments for the pension fund holdings, which can hopefully be updated every February when the 10-K is released. I imagine we cannot expect more because the 13-F's purpose is in disclosing how much voting power is controlled by a person or entity, not for portfolio tracking. I'm assuming that no mention of Sanofi in the AR means no change in their Euronext holdings. BYD was in the top holdings, confirming the number I've been using. Incidentally the Combined Holdings sheet does include links, where applicable, to the news release or other source of information for the 'Assumed non-US holdings' in the rightmost column. The PSX sale on 13th February 2018 to get below 10% is also included as an adjustment, but I'll need to remove that for next quarter's 13-F. Here are the links to the two main versions of the Look-Through Google Sheet: my privately editable one (Read Only to you); the publicly editable version.

Before the impact of Tax Cut Bill, Book Value Per Share increased by 12.72%. After the Tax Cut, Berkshire's BVPS increased by 23.03%. BVPS = $141.17 for BRK.B, $211,750 for BRK.A Markel increased 12.74% in 2017 including the effect of the Tax Cut. Fairfax increased 22.36% in USD in 2017 (Canada) White Mountain Insurance increased 15.82% in USD in 2017 (Bahamas) S&P500 TR rose 21.8% in 2017. BRK rose 21.9% in 2017.

OK, I've updated all three versions of the Spreadsheet. These now include more stock holdings than most BRK portfolio summaries you'll find online: 1. Actual holdings reported in the Berkshire Hathaway Inc 13-F filing at the end of the most recent quarter. 2. Actual holdings belonging to Berkshire in the New England Asset Management Inc 13-F filing (Owner Code "01 02" in Column 7 only) - thank you to globalfinancepartners for steering me here. 3. Assumed holdings of non US securities that are not reportable to SEC but are mentioned in the Annual Report and presumed still to be held unless we hear otherwise. 4. Plus or (minus) acquisitions or (disposals) of securities announced since the last 13-F quarter. This quarter that's the 35,000,000 PSX shares bought back by PSX on 13th Feb 2018 to keep share count below 10% for regulatory reasons. I may in future cease to maintain the editable version where people can request access soon. It seems sensible just to have two in future: my privately editable one (Read Only to you); the publicly editable version. I believe I cannot just 'Make a Copy' and retain the existing URL I've published, so my copying process is more long-winded, hence the reduction to 2 versions. The privately editable one is as I edited it. It's now very simple to create a Copy for your own private use by pulling down the File... menu and selecting Make A Copy... which will create a Copy of the whole workbook in your own Google Drive, where you will have Read/Write access. The publicly editable version is definitely not private - so don't post private or confidential information on it even for a moment as even the Revision History is public. It may also get corrupted by anyone else on the internet, so it's less likely to be reliable than a copy of mine unless someone only fixes errors I've made! As I said above, I will only update cell AH3 when the annual report tells us the dividends received. This avoids double-counting that portion of look-through earnings that was already reported in GAAP earnings. At the moment this is a year out of date while I wait for the Annual Report. I'm not 100% sure whether dividends received on the New England Asset Management holdings show up in Berkshire's GAAP Earnings, but I suspect they would - it makes accounting sense. If not, it may create a minor error in the operating company earnings adjusted to exclude dividends received to avoid this double-counting. The Annual Report is usually the only hint to non-US holdings such as BYD, Sanofi (SNW) on Euronext (which I enter as an equivalent number of Sanofi ADRs (SNY)), Società Cattolica di Assicurazione - Società Cooperativa and Home Capital Group (CANADA) - you'll note that these are now included in a separate column in the tab 'COMBINED HOLDINGS' where I also included as a negative figure the sale of 35 million PSX shares announced since 31st Dec 2017, an adjustment that will need to be removed once the 2018q1 13-F filing is published in mid May 2018.

The excerpts were full of non sequiturs. But the guy doesn't need sound arguments to sell books. He just has to find an appealing narrative for a receptive niche audience. His moat is in being different not in writing cogent arguments. Buffett frequently refers to moats like Geico's made from passing on savings by being the low cost operator in a highly competitive industry thereby winning more business and restraining loyal customers. Likewise BH Energy wins favor from customers and regulators by keeping costs low and investing in infrastructure. In return it is permitted a decent return. He either hasn't paid attention or has conveniently ignored and misinterpreted the idea of moats.

Thanks, I've just seen the SEC filing come through on the PSX. I'll update my sheets when I'm on the computer to include the extra stocks via New England that you mention. Probably tomorrow. If these are beneficially owned by BRK they belong in a Look Through analysis I guess. Does anyone disagree with this plan or the belief that they are to shareholders' benefit? I'll probably include a separate New England 13F sheet and Berkshire 13F then combine those into aggregate holdings. Thanks again for the clarifications.

The latest 13-F as of 31st Dec 2017 is now included in all three spreadsheets. There are some doubts about figures assumed but not reportable in the 13-F (see below), but these might be resolved on 23rd Feb when the Annual Report comes out. If you select a Google Sheets workbook you can edit (or copy it to a private Google Sheet workbook of your own using the instructions on my non-editable version) you can enter your currency and number of shares in the blue cells near the top-left of the first Worksheet tab and you can also set the currency of your choice. By default, however, I've set the number of shares to represent one-millionth of all those outstanding, amounting to 2467.18 BRK.B equivalent shares at present and the currency to USD. When cell C5 contains that number, 2467.18, you can read off the equivalent number of shares in each holding as millions of shares held by Berkshire Hathaway as a whole, and the values of those holdings as if they were in millions of US dollars (or whatever currency is set in cell B2). Cell I6 therefore would also represent Berkshire's Market Cap in millions. If you prefer a simpler layout, click on the tab with the red stripe below its name, "Look-Through Summary". Columns A-J have been distilled down to basic info you might want (less useful columns such as my very rough Low End Valuation have been 'hidden from view' to simplify matters a little). However, if you want to change currency or number of shares you must enter these on the first sheet, entitled "Look-Through BRK earnings and holdings" (as the red text in cell A1 warns you) I have removed WABCO as it was sold entirely in 2017Q3. Teva is now included. This version is the one nobody but I can edit. It contains instructions for copying them to your own private spreadsheet so you can edit it to your heart's content in full privacy: https://docs.google.com/spreadsheets/d/1Ok3bOO4z_2Itbta6FguKbuFA1HvcQvzisspPBN6IpZY/edit#gid=292668837 This version is editable by anyone, but be aware that anyone can see your edit history, so if you enter private information there, it's potentially disclosed to the whole internet! It could also get corrupted by anyone! https://docs.google.com/spreadsheets/d/10gMfyZOFCW1-KrY_P8SGRf3pTstspdAGw_DuKSQxO8s/edit?usp=sharing There's another version that you may request permission from me to edit, here: https://docs.google.com/spreadsheets/d/1Um4ENkSz4tppynxqKAMVLrUcuNqn2JaVBBRu4CEVvGQ/edit?usp=sharing If you'd like a simplified overview of the BRK portfolio, I can recommend http://minesafetydisclosures.com/individual-investor-portfolio and for CNBC's Look Through, https://www.cnbc.com/berkshire-hathaway-portfolio/ Discussion of discrepancies The 13-F numbers and the totals agree with one posted on Seeking Alpha, so I'm pretty happy we both entered the information just fine. https://seekingalpha.com/article/4147016-tracking-warren-buffetts-berkshire-hathaway-portfolio-q4-2017-update The rocketfinancial version of BRK's portfolio seems to have additional stock in US Bancorp, which they seem to have taken from the 13-G filing. I think something odd is going on there as the 13-F is made up to the same date 31st Dec 2017. I love the way they present it (and the speed it was updated yesterday), and I'm sending them a support email to query it. http://www.rocketfinancial.com/Holdings.aspx?fID=1058 They might be correct to rely on the 13-G and the rest of us wrong. I'm not sure. Could the difference be amounts held in pension funds etc, not attributable to shareholders? Phillips 66 (PSX) shows at 45,689,892 on CNBC. The rest of us have 80,689,892, so I think they're wrong there, https://www.cnbc.com/berkshire-hathaway-portfolio/ meaning they're about $3bn out. The rest matches just fine. I've just contacted them to let them know. I only update cell AH3 when the annual report tells us the dividends received. This avoids double-counting that portion of look-through earnings that was already reported in GAAP earnings. At the moment this is a year out of date while I wait for the Annual Report. The Annual Report is usually the only hint to non-US holdings such as BYD, Sanofi (SNW) on Euronext (which I enter as an equivalent number of Sanofi ADRs (SNY)), Società Cattolica di Assicurazione - Società Cooperativa and Home Capital Group (CANADA) - you'll note that these are highlighted differently on the sheets including 13-F LATEST.

I wouldn't be at all surprised to discover in due course that IBM was completely gone by the end of January. I imagine they sold selectively before the tax cut then were able to sell a fair proportion of traded volume without depressing the price. Sanofi Is interesting as they hold most on Euronext rather than ADR. We know some ADRs were sold but the annual report might tell us more about the portion they aren't required to divulge in 13F.

I don't like to talk in terms of beta and alpha too much because I'd rather call it volatility in market price (instead of beta) and compounding of IV (instead of alpha). Alpha and beta imply that volatility is the main part of risk and that therefore a more volatile stock should have its actual return adjusted downward according to its beta volatility to create an adjusted 'alpha' return that is lowered to account for the 'risk' implied by beta. As my intended holding period is far beyond the typical 1 year used by alpha/beta proponents, I do not consider I should adjust my return downwards and should simply focus on the business fundamentals and their likely growth and whether I paying or being offered a cheap or expensive price for that intrinsic value. In other worse, because in overall terms I care only about my overall compound return of my portfolio over 10-30 years, not how bumpy a ride it is to get there (and whether or not I trail the market index in 25-50% of the years), I'm explicitly not adjusting compound returns downward. In Feb 2016, aside from some shares (perhaps 15% of portfolio) outside my normal trading accounts, I pretty much went 100% BRK.B, selling a fairly full-valued Halma plc position and adding my cash balance to buy as much BRK.B as I could at $124-$125, which was just below 1.2x forward BV (announced 2015Q4 figures at the end of Feb 2016) and was about 1.234x 2015Q3BV. At that time I did consider elements of timing in choosing when to make the trades, as I knew the Q4 figures would be released after close on the last Friday of February, giving me a window during which such low prices could remain available. I anticipated that after the annual report release the stock wouldn't trade quite so low again. It turns out I was within a dollar of the quarter's low when I bought. My main focus there was value - obtaining a large margin of safety by getting a significant discount to IV. My secondary thought was that the price was unlikely to get any cheaper, so I had a good chance of only seeing gains from then on and it was the time to pull the trigger and buy rather than wait for up to 3 weeks to see if the price fell any lower, which was a small element of consideration of volatility, but also the fact that everyone knew about the 1.2x BV buyback threshold being considered a significant discount to IV. In that position I anticipated very little downside risk other than a market crash or heavy insurance losses, given the buyback threshold being so near my buy price. Later in May 2016, Apple was trading around $95 (it actually traded a bit lower before I bought, but I wanted to get my thinking straight on the company before committing large sums to it). At this time BRK.B was trading at $142 and still somewhat undervalued and I sold enough to buy a 25% position in Apple on a trailing 12-month earnings yield of about 9.5% after tough year-on-year comparisons (10.4% yield after backing out net cash) with a belief that earnings would very likely recover and that comparisons would also look better and that I was buying well below IV. That was about as bold as I dared to go on a high conviction idea that carried more fundamental risk than BRK.B. Of my total portfolio I think BRK.B was around 55-60% at this point and I figured that the BRK.B position remaining should alone compound sufficiently to meet our retirement goals but that the Apple position could help us reach them faster. From then until December 2017 I didn't trade - only added more cash to the portfolio as I lacked high conviction ideas due to higher market prices. In the last three months, I've probably gone from around 55% BRK.B to 72% once I felt confident about the effects of the tax cut on forward BV and IV. Again, value was my primary concern, but in giving up 'dry powder' cash I was giving up something with stable value in the event of a sharp decline in market prices, so I gave a little thought to how much I might gain or lose in the short term on the moderate chance that I found a high conviction opportunity before the fundamental compounding of BRK.B would almost certainly mean I had done better than cash. I started out with about 10.5% cash position (in GBP) from new savings as of 10th Dec 2017 and bought more BRK.B at about £147 GBP ($196). That trade is one where I mainly focused on compounding but in weighing what I was giving up in terms of cash optionality should a huge bargain appear, equivalent to my May 2016 BRK to Apple trade, I did give a little consideration to the downside risks. At the time, short of a recession, I figured that an unfortunate BRK.B price action might lead to 12-13% loss at most, unless there happened to be large insurance losses or a major market crash that might increase the market price decline to 30% in the latter case. I also figured that BRK's fundamental compounding was likely to see the 'soft floor' increase to around $196 by around 2019Q1 or 2019Q2 (unless there was a big market crash). I didn't want to miss out on likely 9-11% compounding by staying in cash. I figured also that we'd probably add 8-10% to our cash balance over the following 12-18 months of saving, giving reasonable 'dry powder' to take advantage of any bargains. And I figured that my chances of getting a high conviction opportunity were probably around 25% in that time frame. All in all, I imagined that (short of a major market crash) in perhaps 70% of cases, BRK.B would be trading at or above my $196 buy price if that bargain came along (assuming a normal 1.2x BVPS to 1.6x BVPS trading range), and in about 25% of cases it would be below my buy price by up to 13%, and in about 5% of cases it would be between 14-30% down due to a deep market crash. So I considered I was unlikely to lose a lot of optionality, and I stood a good prospect of making a gain on BRK.B before that bargain came along and I'd be fairly certain of 9-11% compounding long term, which exceeds my retirement return assumption of 3.5% above inflation long-term. Comparing that to cash - it has a negative return after inflation but preserves its nominal value in the event of stock price falls no matter what, allowing me to take advantage of bargains. To me Berkshire provided enough probability of being able to participate in future bargains with the high likelihood of more than sufficient long-term compounding, so I made the trade, taking me to around 67-69% BRK.B (68.82% at year end 2017). On 8th and 9th Feb 2018 BRK returned to around $192-$196 (now only £137-£141 GBP thanks to a weaker USD) as markets generally fell. I had small positions in IBM and Wells Fargo that I wasn't as sure about as BRK.B for the future and some additional cash to contribute too, and I sold IBM one day in my wife's account (prior to going ex-dividend, I think) and bought as much BRK.B as the increased cash balance allowed. The next day we had added quite a bit more cash by transferring bank balances around (without risking our day-to-day requirements or emergency funds) and added it to my trading account. I had a target number of BRK.B shares I wanted to buy using the cash plus Wells Fargo stock. A reasonable looking price came for WFC so I sold that. I patiently waited for about 40 minutes more until BRK.B dropped just enough to buy the amount I was seeking at around $192. Before today's open, with BRK.B at just under $198, cash is 0.01% (though I'll get Apple dividend and my final Wells Fargo dividend soon and add more cash in March), BRK.B is 71.75% and AAPL is 25.83%. I estimate that both my main positions are trading at a discount to IV and should have good prospects to compound per share fundamental value at least 9-11% in the long run. Apple is more likely to suffer temporary declines and has the greater but still acceptable risk of permanent loss of value of the two. Annoyingly I lose 30% of every AAPL dividend to the US government, but my capital gains of 73% in USD, 81% in GBP, are tax-free so I can't complain really. If Berkshire becomes extremely cheap (e.g. $180 at present) I may consider that it's a sufficiently better prospect than AAPL to go all-in on BRK.B.

I agree John, using an estimate of year end 2017 Book Value per A share of $215,000 ($143.33 per B share) the buyback threshold (soft floor) would reach $258,000 per A share ($172 per B share) once such a number is published (after the close on Fri 23rd Feb). That's an estimate of course and I wouldn't be surprised to see it anywhere in the range of $142 to $147. A price of $198.89 is 1.39x that estimate (15.6% above $172 estimated threshold), or 1.40x $142, or 1.35x $147. Until that date, I believe buybacks are only authorized at 1.2x 2017Q3 BVPS or lower (around $225,000 for A, $150 for B) - actually a little lower, but the exact figure depends on which date you take the count of shares outstanding. There's definitely some downside potential in the current price, however I'd be very surprised to see prices close to $170-$177. So while the buyback threshold based on the last published quarter is strictly-speaking well below the current price at present, I would believe enough investors are sufficiently forward-looking to have a reasonable estimate of what the threshold will be once the year-end accounts are released, and would be likely to provide sufficient demand to stop the price falling below that sort of level, thus providing a forward-looking soft floor. The exception would be a dramatic sell-off in stocks, leading to bargains everywhere, an assumption of mark-to-market loss causing a decline in their estimation of BVPS at the end of Q1. I imagine some investors are also factoring in the Kraft-Heinz (KHC) holding which is not fully included in BVPS, making the 1.2x BVPS represent an even bigger discount to intrinsic value than before the stake in KHC was consolidated, so that perhaps adds around $3.42 to BV per B share once adjusted (about a 2.4% boost). The $143.33 estimate rises to $146.75, and 1.2x that is $176.10 (or 1.229x unadjusted BVPS). I would typically project around 2.5% increase in BVPS per quarter, but perhaps a little less if I expect mark-to-market adjustments to be negative or insurance losses to be heavy. Perhaps adding 2.0% to the 2017Q4 estimate of $143.33 would see around $146.20 by 2018Q1 and a buyback price of $175.44. Adding a 2.4% boost to adjust crudely for KHC might see adjusted BVPS for 2018Q1 reach $149.71 and 1.2x that is $179.65. For that reason, if prices reached around $180 in the absence of more tempting prospects elsewhere, I'd be getting very tempted to go essentially all-in on BRK.B, expecting a downside risk that is more limited than usual (save for a market crash) and significant upside potential by way both of re-rating by Mr Market and of compound growth in fundamentals that should exceed my targets in the long term. I do give a little thought to the downside in the short-term, mainly as it would affect my ability or willingness to pounce on any high conviction opportunities I may find in other stocks that I would feel (at the time of getting such high conviction) would be greatly undervalued. The chance of a coinciding temporary decline in BRK.B's market price reducing my ability to capitalize on such possible future high conviction opportunities is outweighed by the long-term fundamental compounding I anticipate BRK.B will achieve for more than a decade, and well in excess of my target compound return, so I'm willing to make that trade-off for such certainty of meeting my goals. Currently I have 71.9% in BRK.B after adding new cash and switching out of IBM and Wells Fargo to buy more BRK.B at around $193-$194 on average last week. My only other significant position is Apple at 25.7%. I wouldn't recommend such a concentrated portfolio to most, but it suits me at present.

I am indeed a believer in Charlie Munger's maxim of making a truly meaningful commitment to a high conviction idea, which I would expect to come along only rarely. I know my allocation is extreme and not suitable for most people. Berkshire is the only company I'd be happy to hold a 100% position in thanks to its extremely low risk of collapse, diversified income streams and high certainty of compounding at a rate that will meet my fairly modest long-term goals over the next decade at least. I'd be happy to hold 100% BRK.B pretty much anywhere in the typical 1.2x BVPS to 1.6x BVPS trading range (adjusting for anticipated forward BVPS, such as currently projecting around $143-$145 BVPS to be announced in the Annual Report). I've held a >50% position since 2003 which modestly beat the S&P500 on an annualized basis despite a slightly high entry price by my current standards. Halma plc is probably next on my list at around 50-60% maximum weighting. It's currently far too richly priced and I sold it all at 808p (P/E 28.8) to add to cash held to purchase more BRK.B at 1.2x projected BVPS at $124 in Feb 2016. Apple, I'm prepared to hold up to about a 50% position in before wanting to trim for single company portfolio risks alone, though I might also trim if valuation became particularly high, ideally to trade into something significantly undervalued and ideally with good compounding prospects. When I purchased at $95 (which was a high conviction idea at that price in May 2016) I was prepared to put 25% in as my highest initial stake, with the idea that it could potentially double to almost a 50% position if re-rated quickly. I felt that even if Apple lost a lot of its value, my other positions at 75% and future monies to be added to the portfolio should meet our retirement goals. The 25% in Apple at such a low price was a chance to substantially boost our returns. Only by adding so much more cash and getting good returns on BRK.B has Apple remained close to 25% position despite its appreciation. I also know I have fewer of these high conviction ideas than many Value Investors do (smaller circle of competence), so I need to seriously capitalise on them by taking large stakes from time to time. Being able to detach from market price and focus on growing my portfolio's intrinsic value (and my 'Low Value' - a rough metric based on Fundamentals not Market Price) is a big help in handling the potential volatility over a year or two. I expected to do fairly well in 2016 with a reasonable probability, but to sustain a small margin over the S&P500 in 2017 with only one trade (adding more BRK.B late in the year with our 10% cash position) was probably mostly luck. I fully appreciate the most people won't be able to stomach my degree of concentration. In my case, I felt that WFC and IBM were di-worse-ifying even if not statistically expensive (and I'll still own some exposure to each via BRK.B) and that BRK.B has much surer prospects of meeting my long term goals. If Berkshire were to hit $180 or so, I might well consider going to around 99% BRK.B and sleep well at night too. I don't imagine many would feel as content with such concentration!

I always wonder how much is timing and how much is pricing. Pricing to a high margin of safety often produces results that look like market timing. The partnership had three broad categories. General undervalued which may well be prone to market swings, control positions where Buffett could encourage the Board to distribute excess capital promptly returning value even in down markets, arbitrage which is largely immune to market swings.

Thanks Nell-e. I get what you're saying. I could imagine a top mark for BRK.B this year being around $250 but I wouldn't expect it. If 2017Q4 BV were to be $145 and it rose to around $159 by 2018Q3 (a slight stretch but very possible), 1.6x BV is a viable price. Also I could see it going down a fair bit if there was a big market crash perhaps even $150-160 with mark-to-market declines in the portfolio.

Sold out of Wells Fargo WFC at about $55.51 USD (£40.22 GBP) after commission. About a 4% position closed. Not convinced it will compound as reliably or as fast as Berkshire. Bought more Berkshire Hathaway BRK.B at about $192.87 USD (£139.68 GBP) after commission using proceeds plus extra cash that we added to the investment account ahead of schedule to take advantage of favourable prices (1.5% cash -> 0% cash). BRK.B is now a 72.3% position. AAPL is now 25.3% position. HPE 0.6% HPQ 0.5% Spouse's employee ShareSave scheme is 1.3% Made a profit on WFC of about 24.8% in GBP including dividends (with 30% withholding tax deducted) since buy on 17 May 2016, beating the FTSE100-TRI (up 22.4%). Probably about 16% capital gain in USD plus about 3.5% in dividends after withholding. Clearly underperformed the S&P500 (up around 29%) on this stock by about 9-10%. Also lagged performance of AAPL which I bought at $95 on 20 May 2016, and I should in hindsight have sold my fairly new IBM and very new WFC positions to fund more of my 25% stake in AAPL at $95, and thereby sold fewer BRK.B shares at $142 to swap into AAPL. Still, 2016 was an amazing year for me and IBM and WFC only minor positions, so I can't complain. 2017 was much more normal, hardly trading and lucky to beat the indexes I follow by 3%, 2% and 5% (S&P500TR, FTSE100-TR, FTAS-TRI respectively).

Thank you. We live frugal but fun lives below our means and we have no dependents. Since we both started full time work we decided to continue living on about the same budget we'd set (which did include some investment savings) essentially living on one income and investing the other income after taxes. We still get to go to shows and restaurants, take trips abroad, and generally really enjoy living. We saw that prices such as BRK.B were looking to be in our buying range, so rather than keep a few thousand pounds hanging around in our various accounts as a buffer and add funds to our investment accounts later in the month, we decided to look at our outgoings (a few direct debits and two credit cards to be paid in full at the end of Feb) and run our buffer much lower this month, shuffling a few sums around while my paycheck for January clears, allowing any potential emergency spending to be funded by our ample credit limits on various cards. That probably means we've added about 2 months worth of our stretch savings goal immediately, plus a third-of-a-month's worth will be automatically taken from my wife's salary at the end of this month as it is every month for her ShareSave option plan (which has a market price 35% above the option strike price at present but can only be exercised in late 2022, though it could be redeemed for the saved cash prior to that time if we withdraw from the 5-year scheme). As it happens we've booked flights to South America and paid for a clutch replacement on our very economical car just after the cut date for our credit cards, but we'll have those covered easily with our salaries at the end of this month/beginning of next without paying a penny in interest.