Will you sell BRK?

[benchmark]

I have held BRK for a while. Given its perpetual 'under value' status, now I'm considering selling it for much cheaper financial stocks, given BAC and AIG are very likely to double in 2 years. However, my BRK was intended for retirement, so there is a psychological barrier to get over. I'm wondering if anyone on the board have thought about (or have done it).

[racemize]

there's no "no" option!

[twacowfca]

BRK is the main part of the defensive "security blanket" part of our portfolio.  We'll stick with BRK, or  some combination of BRK and FFH, our other potential defensive pillar, unless Mr. Market coughs up some extreme bargains such as we saw in 2008 or 2009.  :)

[benchmark]

there's no "no" option!

added, thanks.

[mikazo]

There's also no option for not owning BRK. Is that a requirement for being on this board?  ;)

[Palantir]

I think it makes sense to sell BRK, if you have better investment ideas ready to fire. I think the intrinsic value of BRK is about 1.5BV, so there's roughly 20% upside to these shares, and now that a buyback plan is in place, it will no longer be chronically undervalued. I feel like selling from time to time, but I'm going to wait till it hits the 1.5BV mark.

[Valuebo]

I think it makes sense to sell BRK, if you have better investment ideas ready to fire. I think the intrinsic value of BRK is about 1.5BV, so there's roughly 20% upside to these shares, and now that a buyback plan is in place, it will no longer be chronically undervalued. I feel like selling from time to time, but I'm going to wait till it hits the 1.5BV mark.

 

I believe BRK is easily worth 30% more. price/BV is closer to 1.2x atm, maybe 1.25x. The market has underappreciated the excellent safety and high quality this gem offers.

 

Everyone seems to believe BAC will go up to $20 in a linear way in the next 2-3 years. It might but things rarely go as expected. Given the current market level, uncertainty and lesser quality of BAC and others (nothing can compete with BRK after all...), it can definitely make sense to be heavily positioned in BRK (or FFH for that matter). Not that BAC, AIG, ... aren't great value atm, they just bear much higher risk so they require a higher potential return.

[goldfinger]

Everyone seems to believe BAC will go up to $20 in a linear way in the next 2-3 years

 

Who said that? It will happen sooner or later. I think we are just looking at the earning power and concluding it is worth 20$+.

In the last few years BRK didn't move linearly either by the way!

[Valuebo]

It is just a general notion I am picking up on, like the 'TBV by Christmas'. "Everyone" and "linear" are to be taken with a grain of salt. ;) I'm just saying it's very unlikely that there isn't going to be plenty of volatility in the next few years so having cash or alternatives makes a lot of sense. Of course, if you don't care for opportunistic trading, then you probably shouldn't care all that much.

[augustabound]

There's also no option for not owning BRK. Is that a requirement for being on this board?  ;)

 

You know, in some cultures that's considered blasphemy.  :P

But I'm in the same boat as you.

 

I was never fully comfortable with the thought of BRKs life after Buffett and Munger.  But from what has been publicized of Ted, I'm getting more comfortable with it.

[warrior]

We keep large portion of partner’s money in BRK about 34%. We are very comfortable with downside risk.

As long as we know that they buy at 1.1 BV , culture intact , and all awesome businesses , ect… we will hold it.

I agree with tombgrd...

Thanks to the board, I got too emotional with BAC, have to hold my hands and not to add more. perhaps a little vacation will help.

 

[Palantir]

I am confident BRK can do well long after WEB passes. I don't believe Berkshire needs him to run, and the way it is structured, with negative cost of float, good investment managers, and very strong operating businesses, WEB's absence IMO is not likely to be impactful.

 

I feel Ajit Jain's departure would have a larger impact than WEB's.

[shalab]

I think BRK will do fine - if you think Buffett has any predictive powers...

 

http://finance.fortune.cnn.com/2012/03/21/warren-buffett-hedge-fund-bet/

 

To ensure that $1 million would be there at the end of the bet, Buffett and Protégé each put up roughly $320,000 to buy a zero-coupon Treasury security. The total of about $640,000 was used to purchase a bond that will be worth $1 million at the bet's conclusion. This collateral is being overseen by the Long Now Foundation of San Francisco, which administers "long bets" set up by any competitors wanting to memorialize a gamble.

 

....

 

So a second plan was devised and is now going forward. It calls for the bond to be sold and the total proceeds to be invested in Berkshire Hathaway stock.

 

Naturally, some set of dire circumstances could make the roughly $930,000 put into Berkshire worth less than $1 million at the bet's conclusion on December 31, 2017.  So Buffett has guaranteed $1 million by giving Long Now the right at the bet's conclusion to "put" the stock to him (or his estate) in exchange for that amount. In other words, $1 million becomes the floor for the winning charity, with the Berkshire investment establishing the prospect for more.

 

[twacowfca]

I think BRK will do fine - if you think Buffett has any predictive powers...

 

http://finance.fortune.cnn.com/2012/03/21/warren-buffett-hedge-fund-bet/

 

To ensure that $1 million would be there at the end of the bet, Buffett and Protégé each put up roughly $320,000 to buy a zero-coupon Treasury security. The total of about $640,000 was used to purchase a bond that will be worth $1 million at the bet's conclusion. This collateral is being overseen by the Long Now Foundation of San Francisco, which administers "long bets" set up by any competitors wanting to memorialize a gamble.

 

....

 

So a second plan was devised and is now going forward. It calls for the bond to be sold and the total proceeds to be invested in Berkshire Hathaway stock.

 

Naturally, some set of dire circumstances could make the roughly $930,000 put into Berkshire worth less than $1 million at the bet's conclusion on December 31, 2017.  So Buffett has guaranteed $1 million by giving Long Now the right at the bet's conclusion to "put" the stock to him (or his estate) in exchange for that amount. In other words, $1 million becomes the floor for the winning charity, with the Berkshire investment establishing the prospect for more.

 

 

Oh My Goodness!  A double Buffett put! 

 

And the winner is . . . Not the hedge funds . . . Not the S&P 500. . . . The winner is . . . BRK!  :)

[benchmark]

We keep large portion of partner’s money in BRK about 34%. We are very comfortable with downside risk.

As long as we know that they buy at 1.1 BV , culture intact , and all awesome businesses , ect… we will hold it.

I agree with tombgrd...

Thanks to the board, I got too emotional with BAC, have to hold my hands and not to add more. perhaps a little vacation will help.

 

That's why I created the poll, trying to raise money to buy more BAC -- 50cent on the dollar.

[benchmark]

I think it makes sense to sell BRK, if you have better investment ideas ready to fire. I think the intrinsic value of BRK is about 1.5BV, so there's roughly 20% upside to these shares, and now that a buyback plan is in place, it will no longer be chronically undervalued. I feel like selling from time to time, but I'm going to wait till it hits the 1.5BV mark.

 

I believe BRK is easily worth 30% more. price/BV is closer to 1.2x atm, maybe 1.25x. The market has underappreciated the excellent safety and high quality this gem offers.

 

Everyone seems to believe BAC will go up to $20 in a linear way in the next 2-3 years. It might but things rarely go as expected. Given the current market level, uncertainty and lesser quality of BAC and others (nothing can compete with BRK after all...), it can definitely make sense to be heavily positioned in BRK (or FFH for that matter). Not that BAC, AIG, ... aren't great value atm, they just bear much higher risk so they require a higher potential return.

 

I don't think that the road to $20 will be smooth, but it will get there sooner (2years) or later (4 years). Comparing that with BRK's steady 8% growth, you'll double your money in less than half the time. The only thing that holds me back is about paying taxes of the gain on BRK.

[twacowfca]

I think it makes sense to sell BRK, if you have better investment ideas ready to fire. I think the intrinsic value of BRK is about 1.5BV, so there's roughly 20% upside to these shares, and now that a buyback plan is in place, it will no longer be chronically undervalued. I feel like selling from time to time, but I'm going to wait till it hits the 1.5BV mark.

 

I believe BRK is easily worth 30% more. price/BV is closer to 1.2x atm, maybe 1.25x. The market has underappreciated the excellent safety and high quality this gem offers.

 

Everyone seems to believe BAC will go up to $20 in a linear way in the next 2-3 years. It might but things rarely go as expected. Given the current market level, uncertainty and lesser quality of BAC and others (nothing can compete with BRK after all...), it can definitely make sense to be heavily positioned in BRK (or FFH for that matter). Not that BAC, AIG, ... aren't great value atm, they just bear much higher risk so they require a higher potential return.

 

I don't think that the road to $20 will be smooth, but it will get there sooner (2years) or later (4 years). Comparing that with BRK's steady 8% growth, you'll double your money in less than half the time. The only thing that holds me back is about paying taxes of the gain on BRK.

 

 

Now you're thinking like a banker of the Lewis school -- taking money out of something that almost certainly will go up at a satisfactory rate over the next several years and very likely will not lose a significant amount, in order to put your money into something that might appreciate at a higher rate for a while, but is in a mediocre leveraged industry that chases yield every decade or two, a business  with much more risk of principal loss.

 

Your idea would have been a better one a year ago when the upside to BAC was greater.  Why Now?  Is it because you are kicking yourself that you didn't buy it then?

[Valuebo]

Agreed twacowfca. I was very very long financials (and BAC in specific) one year ago as it was very easy to see all the hatred and uncertainty and that betting against that was likely to pay off well. After a great run-up, I can't be as certain about my analysis and prospective returns. MoS is a lot smaller now so it doesn't make sense to hold the same amount, especially since I don't have to pay taxes on my profits.

 

If it takes 4 years for BAC to double, then BRK might have grown at 8% per annum. If you believe current intrinsic value is $175,000 per A share, then it will be worth almost $240,000 by the end of 2016, which is almost a double from current prices!

[giofranchi]

I am confident BRK can do well long after WEB passes. I don't believe Berkshire needs him to run, and the way it is structured, with negative cost of float, good investment managers, and very strong operating businesses, WEB's absence IMO is not likely to be impactful.

 

Well,

if it really is so, then I don’t like it. When I invest, I want to know exactly whom I am partnering with. If Mr. Buffett is no longer essential to BRK, then I like BRK much less than I used to. I just don’t believe in sustainable outperformance, without an outstanding manager who achieves it. Look, for instance, at JNJ: it is probably the large cap company with the best historical track record in the world, and yet it is clearly underperforming (I am talking about revenue and earnings growth, not share price). Compare it, if you want, with NVS, whose Chairman Mr. Vasella is one of the most accomplished individuals in the pharma industry today. JNJ is trailing NVS both on a revue growth and on an earnings per share growth basis, both on a 5 year and on a 10 year basis.

 

My problem with BRK is only one: to make a $200 billion company grow at a very good rate, an outstanding underwriter is not enough, an outstanding stock picker is not enough, an outstanding businessman is not enough: you need all three. Mr. Buffett is that extraordinary individual, no doubt about that. But he is 82.

 

I know that you all disagree with me, but I prefer FFH, which is an $8 billion company, is led by Mr. Watsa, who is 20 years younger than Mr. Buffett, and is selling at book value.

 

giofranchi

[twacowfca]

I am confident BRK can do well long after WEB passes. I don't believe Berkshire needs him to run, and the way it is structured, with negative cost of float, good investment managers, and very strong operating businesses, WEB's absence IMO is not likely to be impactful.

 

Well,

if it really is so, then I don’t like it. When I invest, I want to know exactly whom I am partnering with. If Mr. Buffett is no longer essential to BRK, then I like BRK much less than I used to. I just don’t believe in sustainable outperformance, without an outstanding manager who achieves it. Look, for instance, at JNJ: it is probably the large cap company with the best historical track record in the world, and yet it is clearly underperforming (I am talking about revenue and earnings growth, not share price). Compare it, if you want, with NVS, whose Chairman Mr. Vasella is one of the most accomplished individuals in the pharma industry today. JNJ is trailing NVS both on a revue growth and on an earnings per share growth basis, both on a 5 year and on a 10 year basis.

 

My problem with BRK is only one: to make a $200 billion company grow at a very good rate, an outstanding underwriter is not enough, an outstanding stock picker is not enough, an outstanding businessman is not enough: you need all three. Mr. Buffett is that extraordinary individual, no doubt about that. But he is 82.

 

I know that you all disagree with me, but I prefer FFH, which is an $8 billion company, is led by Mr. Watsa, who is 20 years younger than Mr. Buffett, and is selling at book value.

 

giofranchi

 

Giofranchi, you have nearly persuaded me to reconsider my allocation to FFH.  Let me recap the history of about 80% of our portfolio for the last six years.  This great majority has been in shifting proportions of LRE, FFH, and BRK.  The proportion of LRE has been rising with their price and reinvested dividends while the combined value of FFH and BRK has also risen nicely, especially as we have shifted the allocation between them opportunistically.  Most of the time, that allocation has favored FFH.  However, for the last 15 months, almost all has been in BRK for reasons that have been discussed. 

 

Thanks to your comments, the time may be drawing nigh to reconsider our allocation to FFH.

 

Thank you very much.

 

 

[giofranchi]

I am confident BRK can do well long after WEB passes. I don't believe Berkshire needs him to run, and the way it is structured, with negative cost of float, good investment managers, and very strong operating businesses, WEB's absence IMO is not likely to be impactful.

 

Well,

if it really is so, then I don’t like it. When I invest, I want to know exactly whom I am partnering with. If Mr. Buffett is no longer essential to BRK, then I like BRK much less than I used to. I just don’t believe in sustainable outperformance, without an outstanding manager who achieves it. Look, for instance, at JNJ: it is probably the large cap company with the best historical track record in the world, and yet it is clearly underperforming (I am talking about revenue and earnings growth, not share price). Compare it, if you want, with NVS, whose Chairman Mr. Vasella is one of the most accomplished individuals in the pharma industry today. JNJ is trailing NVS both on a revue growth and on an earnings per share growth basis, both on a 5 year and on a 10 year basis.

 

My problem with BRK is only one: to make a $200 billion company grow at a very good rate, an outstanding underwriter is not enough, an outstanding stock picker is not enough, an outstanding businessman is not enough: you need all three. Mr. Buffett is that extraordinary individual, no doubt about that. But he is 82.

 

I know that you all disagree with me, but I prefer FFH, which is an $8 billion company, is led by Mr. Watsa, who is 20 years younger than Mr. Buffett, and is selling at book value.

 

giofranchi

 

Giofranchi, you have nearly persuaded me to reconsider my allocation to FFH.  Let me recap the history of about 80% of our portfolio for the last six years.  This great majority has been in shifting proportions of LRE, FFH, and BRK.  The proportion of LRE has been rising with their price and reinvested dividends while the combined value of FFH and BRK has also risen nicely, especially as we have shifted the allocation between them opportunistically.  Most of the time, that allocation has favored FFH.  However, for the last 15 months, almost all has been in BRK for reasons that have been discussed. 

 

Thanks to your comments, the time may be drawing nigh to reconsider our allocation to FFH.

 

Thank you very much.

 

 

Well,

SharperDingaan has just pointed out something interesting:

 

Most would look for next weeks East Coast weather to generate some very big claims, & a forcing of FFH's P/BV done further because of the re-insurance exposure.

 

If so, I think it could be the right opportunity to start (or to add to) a FFH investment.

We will see!

 

giofranchi

 

[benchmark]

I think it makes sense to sell BRK, if you have better investment ideas ready to fire. I think the intrinsic value of BRK is about 1.5BV, so there's roughly 20% upside to these shares, and now that a buyback plan is in place, it will no longer be chronically undervalued. I feel like selling from time to time, but I'm going to wait till it hits the 1.5BV mark.

 

I believe BRK is easily worth 30% more. price/BV is closer to 1.2x atm, maybe 1.25x. The market has underappreciated the excellent safety and high quality this gem offers.

 

Everyone seems to believe BAC will go up to $20 in a linear way in the next 2-3 years. It might but things rarely go as expected. Given the current market level, uncertainty and lesser quality of BAC and others (nothing can compete with BRK after all...), it can definitely make sense to be heavily positioned in BRK (or FFH for that matter). Not that BAC, AIG, ... aren't great value atm, they just bear much higher risk so they require a higher potential return.

 

I don't think that the road to $20 will be smooth, but it will get there sooner (2years) or later (4 years). Comparing that with BRK's steady 8% growth, you'll double your money in less than half the time. The only thing that holds me back is about paying taxes of the gain on BRK.

 

 

Now you're thinking like a banker of the Lewis school -- taking money out of something that almost certainly will go up at a satisfactory rate over the next several years and very likely will not lose a significant amount, in order to put your money into something that might appreciate at a higher rate for a while, but is in a mediocre leveraged industry that chases yield every decade or two, a business  with much more risk of principal loss.

 

Your idea would have been a better one a year ago when the upside to BAC was greater.  Why Now?  Is it because you are kicking yourself that you didn't buy it then?

 

I bought enough BAC a year ago, but I think that BAC now has less risk and has a great chance of  doubling from here quickly.

 

But I understand what you are saying, and agree to some extent. I was thinking about selling BAC when it reaches $20, then look for other investment opportunities.

[Kraven]

I have held BRK for a while. Given its perpetual 'under value' status, now I'm considering selling it for much cheaper financial stocks, given BAC and AIG are very likely to double in 2 years. However, my BRK was intended for retirement, so there is a psychological barrier to get over. I'm wondering if anyone on the board have thought about (or have done it).

 

Is it a crime against humanity or otherwise morally repugnant to own them all?  Hell, I mean someone could actually have 4 or 5 positions.  Ok, ok, that's crazy talk.

[twacowfca]

I have held BRK for a while. Given its perpetual 'under value' status, now I'm considering selling it for much cheaper financial stocks, given BAC and AIG are very likely to double in 2 years. However, my BRK was intended for retirement, so there is a psychological barrier to get over. I'm wondering if anyone on the board have thought about (or have done it).

 

Is it a crime against humanity or otherwise morally repugnant to own them all?  Hell, I mean someone could actually have 4 or 5 positions.  Ok, ok, that's crazy talk.

 

We love to pick up deep valued bargains.  But our greatest success has been investing with owner/founder CEOs who have most of their fortunes in their companies, great long term records, and a history of treating other shareholders fairly. This narrows the field.

[Palantir]

 

Well,

if it really is so, then I don’t like it. When I invest, I want to know exactly whom I am partnering with. If Mr. Buffett is no longer essential to BRK, then I like BRK much less than I used to. I just don’t believe in sustainable outperformance, without an outstanding manager who achieves it. Look, for instance, at JNJ: it is probably the large cap company with the best historical track record in the world, and yet it is clearly underperforming (I am talking about revenue and earnings growth, not share price). Compare it, if you want, with NVS, whose Chairman Mr. Vasella is one of the most accomplished individuals in the pharma industry today. JNJ is trailing NVS both on a revue growth and on an earnings per share growth basis, both on a 5 year and on a 10 year basis.

 

My problem with BRK is only one: to make a $200 billion company grow at a very good rate, an outstanding underwriter is not enough, an outstanding stock picker is not enough, an outstanding businessman is not enough: you need all three. Mr. Buffett is that extraordinary individual, no doubt about that. But he is 82.

 

Here is where I believe you are mistaken. BRK already has these outstanding managers. They are the ones that truly run the firm, they broadly report to WEB, but he gives them total freedom in their operations. I feel you have not given his lieutenants enough credit. I confidently feel that if one of his lieutenants like Jain, Abel, Nicely, or Weschler became CEO, BRK would continue to prosper.

 

I do not know anything about FFH, so I don't have an opinion vis a vis BRK.