Anyone buying BRK.B at current levels?

[Seoshin]

as the title suggests, is the current valuation of BRK.B enticing for you to add more? 

[ValueMaven]

Yes.  I bought a lot at $270 - which is about 1.3x BV

[Gregmal]

Absolutely. I’m really only buying sunset stocks right now. Building or adding to my positions in unbreakable long term winners. Once fully there, off go the computers and cell phones, mental freedom achieved.  

[aws]

Check this thread and I'll think you see just about everyone is.

 

[Viking]

I want to buy BRK… but not yet. Why not?

 

BRK is trading today

- 50% HIGHER than the low it hit in 2020 (the last bear market).

- 15% HIGHER than is was trading pre pandemic.

- flat to 1 year ago.

Looks to me like bear market in stocks has not hit BRK particularly hard yet. 

 

Its equity portfolio is getting crushed (the OXY purchase looks like he might have timed the short term top of the oil market perfectly). Apple is still trading at 21x earnings (and earnings are likely going to struggle in the near term)… so does it keep its super high growth multiple when super high growth is no longer happening?

 

The global and US economy is rolling over… BRK’s 100% owned businesses are highly levered to US economic activity and would not do well if we see a recession.

 

My guess is we will get a lower entry point in the next 3 months…

Edited June 18, 2022 by Viking

[Blugolds11]

I added quite a bit this week, combination of buying shares, selling puts, and will likely add more this week, honestly hope it continues on current trajectory, I'd love to get some in the 250's but Im not sitting around sucking my thumb waiting either. It actually feels great to be deploying a portion of my (large to me) cash percentage. 

 

Also trying to be more aggressive as opportunity presents. Position sizing (not counting BRK) has always been a struggle for me. Seems like I either size too large or futz around and miss the boat. Some of my best returns ever have been sized so small that they were essentially insignificant because I lacked the conviction to push real chips in rather than just paying the ante. A year or so when adding COST I was tiptoeing in, following it down as I worked toward what I considered a full position, I never got a chance to get there because it took off on me. (maybe 50% of full position achieved).  I have more conviction in BRK than other names so its easier for me, but I sometimes find myself holding out sometimes for juuuuusssttt a little better price (that may or may not come) so Ive focused on acting when it's "pretty close" and being fine with it bc when looking through a long term lens it really doesnt make a difference if you bought BRK back in 2020 and paid 168 or 174 and I dont think it matters now if I pay 265 or 255 when Im looking at actions today in another year or two...or 5...or 10.

[Gregmal]

17 minutes ago, Blugolds11 said:

I added quite a bit this week, combination of buying shares, selling puts, and will likely add more this week, honestly hope it continues on current trajectory, I'd love to get some in the 250's but Im not sitting around sucking my thumb waiting either. It actually feels great to be deploying a portion of my (large to me) cash percentage. 

 

Also trying to be more aggressive as opportunity presents. Position sizing (not counting BRK) has always been a struggle for me. Seems like I either size too large or futz around and miss the boat. Some of my best returns ever have been sized so small that they were essentially insignificant because I lacked the conviction to push real chips in rather than just paying the ante. A year or so when adding COST I was tiptoeing in, following it down as I worked toward what I considered a full position, I never got a chance to get there because it took off on me. (maybe 50% of full position achieved).  I have more conviction in BRK than other names so its easier for me, but I sometimes find myself holding out sometimes for juuuuusssttt a little better price (that may or may not come) so Ive focused on acting when it's "pretty close" and being fine with it bc when looking through a long term lens it really doesnt make a difference if you bought BRK back in 2020 and paid 168 or 174 and I dont think it matters now if I pay 265 or 255 when Im looking at actions today in another year or two...or 5...or 10.

Exactly. And it is good you are cognizant of this as one evolves as an investor and fine tunes the mechanisms through which you invest. Through its history, Berkshire has had how many 50% drawdowns? Here that would be roughly $180 per share. Then you ask what gets us there and its…..a 3.5% 10 year and a run of the mill recession….LOL. The biggest mistakes made are exactly that. Sitting around and finding excuses not to do things in situations that when you look back, where obvious. Over and over we hear that what’s obvious in hindsite isn’t obvious at the present moment. But that’s false too. Or at least many times it is. If it wasn’t obvious it’s cuz you weren’t looking at things properly. I have a hunch the Q2 buyback numbers are going to be very surprising, and to the upside. 

Edited June 18, 2022 by Gregmal

[Gregmal]

If nothing else I would target the pre COVID level around maybe 230 or so for some real size. And additionally, you can overcome the sizing problem by adding leverage through in the money options. Typically my accumulation style is to buy shares when the valuations are good enough but not great, and once you really get into can’t miss territory then you hit up the LEAPs that are maybe 25% below current prices. 

[Gregmal]

37 minutes ago, Viking said:

I want to buy BRK… but not yet. Why not?

 

BRK is trading today

- 50% HIGHER than the low it hit in 2020 (the last bear market).

- 15% HIGHER than is was trading pre pandemic.

- flat to 1 year ago.

Looks to me like bear market in stocks has not hit BRK particularly hard yet. 

 

Its equity portfolio is getting crushed (the OXY purchase looks like he might have timed the short term top of the oil market perfectly). Apple is still trading at 21x earnings (and earnings are likely going to struggle in the near term)… so does it keep its super high growth multiple when super high growth is no longer happening?

 

The global and US economy is rolling over… BRK’s 100% owned businesses are highly levered to US economic activity and would not do well if we see a recession.

 

My guess is we will get a lower entry point in the next 3 months…

You realize Berkshire has gone from 360 to 260, right? For a stock with a huge % of market cap in cash I don’t know how that qualifies as not getting hit. It went briefly to 165 on COVID fears where the assumptions were that the world was ending, insurance was toast due to claims from people getting COVID, and Buffett himself shitting the bed with his investments. How is that even remotely comparable to todays situation where we have what exactly? Widespread panic over 3-4% rates and a run of the mill recession?

[Parsad]

1 hour ago, Viking said:

I want to buy BRK… but not yet. Why not?

 

BRK is trading today

- 50% HIGHER than the low it hit in 2020 (the last bear market).

- 15% HIGHER than is was trading pre pandemic.

- flat to 1 year ago.

Looks to me like bear market in stocks has not hit BRK particularly hard yet. 

 

Its equity portfolio is getting crushed (the OXY purchase looks like he might have timed the short term top of the oil market perfectly). Apple is still trading at 21x earnings (and earnings are likely going to struggle in the near term)… so does it keep its super high growth multiple when super high growth is no longer happening?

 

The global and US economy is rolling over… BRK’s 100% owned businesses are highly levered to US economic activity and would not do well if we see a recession.

 

My guess is we will get a lower entry point in the next 3 months…

 

+1!  Getting cheaper, but not where I would buy yet.  Cheers!

[Parsad]

31 minutes ago, Gregmal said:

You realize Berkshire has gone from 360 to 260, right? For a stock with a huge % of market cap in cash I don’t know how that qualifies as not getting hit. It went briefly to 165 on COVID fears where the assumptions were that the world was ending, insurance was toast due to claims from people getting COVID, and Buffett himself shitting the bed with his investments. How is that even remotely comparable to todays situation where we have what exactly? Widespread panic over 3-4% rates and a run of the mill recession?

 

Compared to the hit many other quality companies have taken, BRK is still not cheap.  It's about where BRK starts to buy back, but not "margin of safety" cheap.  It would have to get closer to book value.  Until then, there are other businesses that are much cheaper.  Cheers!

[Viking]

@Gregmal I am playing devils advocate (sort of). Yes, BRK is down 27% in the last 3 months. That is one data point. i presented a few other data points that simply suggest BRK might not be so cheap (i.e. it is trading today about where it was trading 12 months ago). The truth… probably somewhere in between. 

—————

BRK is trading today

- 50% HIGHER than the low it hit in 2020 (the last bear market).

- 15% HIGHER than is was trading pre pandemic.

- flat to 1 year ago.

Edited June 18, 2022 by Viking

[aws]

By my calculations Berkshire has slightly underperformed the S&P 500 since the bottom tick of the covid bear market. Berkshire is up about 68% off that low as of now, while the S&P 500 TR index is up 74% off the low. And that was after a pretty severe underperformance in 2019 where the S&P beat Berkshire by 20%.

 

Since I am a buyer I do hope the underperformance continues for another couple of months, but I am not being too greedy and I am adding quite a bit around here.

[Gregmal]

7 minutes ago, Viking said:

@Gregmal I am playing devils advocate (sort of). Yes, BRK is down 27% in the last 3 months. That is one data point. i presented a few other data points that simply suggest BRK might not be so cheap (i.e. it is trading today about where it was trading 12 months ago). The truth… probably somewhere in between. 

—————

BRK is trading today

- 50% HIGHER than the low it hit in 2020 (the last bear market).

- 15% HIGHER than is was trading pre pandemic.

- flat to 1 year ago.

I think what is worth looking ahead to is that if the “new economy” theme, and easy money policy period is gone, Berkshire is a 1.6-2x book company. It’s all about the cycle. I can buy Berkshire here because in any number of scenarios it’s at worst, probably just OK. Where are the next darlings? There is still a good likelihood IMO old economy and value is where all this shakes out to. It started last year, the shakeups have accelerated big time, and look at crypto in real time. Look at high multiple tech. That stuff is destroyed and likely not coming back for years if not longer. During COVID there was a when does the market hit all time highs again thread. If I had to guess for the Nasdaq it would be past 2030.

 

But there’s still a ton of liquidity in the system. There’s a need for places to put capital. Berkshire in a very easy and low maintenance way, checks a lot of boxes.
 

 

[LearningMachine]

If due to inflation, BRK float doubles from $148B over the next 7-10 years, that will be an additional $148B to invest.  If BRK can conservatively earn 8% on that money on average, that is an additional $12B in annual earnings.

 

Now, BRK also has about $177B of PP&E that will need replacement, primarily due to railroad and utility businesses.  Let's assume that can be funded out of cashflows from railroad and utility businesses.  However, overall, that will mean some decrease in free cashflow coming of railroad and utility businesses offset by increase in earnings from insurance float investments.  

 

However, all of this assumes (1) float stays negative cost (for which Ajit probably needs to be around), and that (2) money can indeed be invested well (for which Buffett likely needs to be around).  So, I think folks also have to be think about potentially having to exit this investment after Buffett, Munger & Ajit are not around, and pay taxes at that time.   There might be a drop in price also due to many people trying to exit at the same time.   Isn't this about 99% probability event in the next 7-10 years? 

 

So, the right price here will need to make your required investment return after taking that taxable event into account. 

 

Edited June 18, 2022 by LearningMachine

[nwoodman]

The 260’s are a good entry point.  Kelly optimise if the opportunity presents.  The probability of permanent capital loss over a 3-5 year period is very low IMHO.

[StubbleJumper]

Might have been better to ask who on this board isn't buying BRK at last week's prices.  

 

 

SJ

[ValueMaven]

3 hours ago, Parsad said:

 

Compared to the hit many other quality companies have taken, BRK is still not cheap.  It's about where BRK starts to buy back, but not "margin of safety" cheap.  It would have to get closer to book value.  Until then, there are other businesses that are much cheaper.  Cheers!

 

@ParsadI am sorry - but that is a REALLY poor way to look at such a HIGH quality company as Berkshire.  Quality wins, and is never 'Graham and Dodd' cheap.  Hmmm...Let's see, operating income in 2022 will likely be $37B - $40B, they are aggressively buying back stock (true reduction of 10% over the last two years), putting sizable capital to work across the Energy and Insurance businesses...Which is more attractive - Berkshire at 1.3x BV, or Citigroup at 0.6x BV ... LOL 

[Longtermlens]

For what its worth Li Lu established his Berkshire position in Q3 2021. Assuming he bottom ticked the Q - he probably bought his 11% US portfolio position around $275. Not a huge position for him but a position nonetheless. 

 

If its good enough for him at that price - its good enough for me now! 

[Ulti]

https://seekingalpha.com/article/4519091-berkshire-hathaway-hit-to-book-value-could-be-drastic-but-buying-opportunity#scroll_comments

[bookie71]

Lots more correction coming. Still setting on sidelines.

[crs223]

1 hour ago, bookie71 said:

Lots more correction coming. Still setting on sidelines.

@bookie71How do you know when the correction is complete?  Thank you!

[Gregmal]

For a few years I had a picture of the article from some expert, I forget the guy, who was calling for a “further 20-30%” decline at like 680 S&P in 2009. Reminder to self, don’t ever be that clown. 
 

In 2008-09, the GFC occurred because the entire system was illiquid and propped up by ghost loans and phantom products tied to a housing market that was unsustainable in terms of pricing and supply. The 10 year then was what? Maybe 5%? As a result, major banks failed, housing which is the largest driver of the economy imploded and the market fell like 45-50% from the peak to the trough.

 

Today, depending on which index you think is most relevant, we re off maybe 25%. Why? Supposedly it’s a 3.5% 10 year and one minute the economy is too hot and needs to be killed and then next minute it’s OMG the economy is headed for a recession? Housing is fundamentally sound, job market strong, unemployment low, individual household balance sheets better than they’ve been in ages….Of course markets can go anywhere short term but it’s a little preposterous and definitely bombastic to currently be acting as if it s a given there is significantly more material downside. And yes, I am aware we can list every current fear, ignore the ytd declines and state that it’s not priced in, and then find further reason to be scared, but idk, I’d rather just look for good solid attractive long term investments than run in that hamster wheel.

[Gregmal]

You never want to ignore risks. So have a plan of course, but making ridiculous presumptions your baseline for investing seems foolish. If you look at all the people who are having their 15 minutes of fame right now, do some digging. You’ll see almost all of them have been saying the same thing for ages and performed pretty terribly. If you’ve been calling bubble or recession 6 times a year for the last decade, you don’t get credit for getting 1/20 right. 

[mattee2264]

I don't think it is unreasonable to expect more material downside especially if we are indeed heading into recession which is seeming more and more likely. The average recessionary bear market sees a drop of 30-40% and while the market peak in 2021 wasn't as insane as 2000 or 1929 it was certainly expensive by historical standards and underpinned by an assumption that interest rates would continue to stay low and the Fed would continue to be supportive and we were in for another Roaring 20s in other words the usual blue sky assumptions that take hold at secular market peaks and shatter confidence when proven to be false and market moves tend to go too far in both directions ("Mr Market"). 

 

Also you don't have to make apocalyptic assumptions to justify lower market levels. I think one Bank of America scenario is that 2023 earnings estimates fall to around $200 and a 15x multiple (to reflect the higher rate environment) results in a valuation of 3000 which would be around a 35% peak to trough decline. So you don't need to assume an extreme bear market scenario where we end up with single digit PE ratios or anything crazy like that. Or even much more than a garden variety earnings recession. And really that would just take us back to where we were before the pandemic with the somewhat higher earning power offset by somewhat lower multiples to reflect a higher rate environment.