Nomad Posted February 25, 2019 Share Posted February 25, 2019 I recall reading in one of the Buffett biographies that WEB knew Ben Graham was ready to hang it up when Graham told investors to buy AT&T, the fully-valued large cap stalwart of its day. After reading the 2019 letter, I'm left wondering: Has Buffett himself reached a similar point? This is not intended as criticism of WEB, who I admire very much and whose public statements and writings have been invaluable to me as an investor and a human being. But recent developments do make me wonder. In the last couple of years WEB has: - Recommended market-cap-weighted indexing for most retail investors (not a bad approach IMO, but curious given his famous "Superinvestors of Graham and Doddsville" article from the 1980s and also possibly a route to heartbreak given recent market valuations and popularity of the strategy) - Made several purchases, including AAPL and some VC-style investments, in the very technology sector he once considered anathema (these are probably the work of Todd and Ted but nevertheless reflect a marked change in approach for Berkshire) - Written increasingly short letters to shareholders (50th anniversary edition notwithstanding) - Told investors that the market value of Berkshire, not the book value, is the preferred valuation metric going forward (2019 letter) The last of these was the most shocking for me given how much emphasis Bufffett has placed on the compound growth rate of Berkshire's book value over the past decades. Granted, in the long run, the market is a weighing machine, blah blah blah, but in the long run we're also all dead, as Keynes pointed out. Buffett has spent what seems like an eternity warning us about the vagaries of Mr. Market and how he can under-price companies for years at a time, only to suddenly switch gears and rely on Mr. Market's appraisal of Berkshire as the primary indicator of its intrinsic value. Am I reading too much into things? It's true that recent accounting changes, the rise of intangible assets, etc. make book value a less accurate indicator of value today than it once was, but to throw it out entirely in favor of the market's appraisal of Berkshire seems bizarre to me given everything I know about WEB. It's certainly possible that this shift is a function of Berkshire's massive size, increasingly efficient capital markets, the sheer number of Munger's cod fishers casting nets in depleted waters, and frustratingly high equity valuations. But could it instead be an indicator that Buffett is content to slowly transition the reins to Todd and Tedd during his later years while remaining the public face of Berkshire? In any event, I'm curious to hear the thoughts of the smarter, wiser folks on this board because I'm legitimately baffled by the seeming shift in Buffett's approach to investing. Link to comment Share on other sites More sharing options...
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