What are you buying today?

[DooDiligence]

Added more BRK.B today.

 

Me 2 because it's the 1st trading day of the month.

 

This is my 2nd month in a 12 month plan (equal amounts every month.)

 

Just layin' the strategy out for any lurkers.

 

It's kind of liberating 2 have 1 company 2 buy regardless of price (might break me of chasing 1/8's & 1/4's on stuff I plan 2 hold semi-4ever...)

[John Hjorth]

Added more BRK.B today.

 

I think perhaps it would be appropriate with a correction/elaboration to this post of mine here, ref. the responses from rb and Dooligence [,and also my response to rb - especially].

 

I have added quite some cash within the last few weeks, so I have actually reduced the relative Berkshire position [, and reduced all other relative positions more, viewed over the same time horizon].

 

Right now, I'm at 22 per cent in Berkshire, and 16 per cent in cash, with no intention to reduce cash, right now.

 

- - - o 0 o - - -

 

As mentioned by longinvestor some time ago here on CoBF, we all - each individually - do what we feel comfortable with.

[DooDiligence]

Added more BRK.B today.

 

Me 2 because it's the 1st trading day of the month.

 

This is my 2nd month in a 12 month plan (equal amounts every month.)

 

Just layin' the strategy out for any lurkers.

 

It's kind of liberating 2 have 1 company 2 buy regardless of price (might break me of chasing 1/8's & 1/4's on stuff I plan 2 hold semi-4ever...)

 

I believe Berkshire itself does something like this when building a position.

 

Only that their buy parameters are a little different from ours;  a % of trading volume, daily buying, and of course a shitload more quantity of stock until they get to just under the 10% ownership of the entire damn company (we start to sweat when it gets close to 10% of our portfolio) ;D

 

I look at BRK's BV & it amazes me.

Could anyone take Berkshire's mkt cap in cash & re-create the company?

I don't think so.

 

I'm not counting on a re-rating by markets over the next decade or so but...

 

Just what, exactly, holds BRK at such levels?

 

I feel comfortable dollar cost averaging over the next year.

 

The 1/8's & 1/4's thing is really stupid (kinda like playing Lunar Lander on an old punch card machine) & I'm just not gonna do it any more.

 

I range from 3% to 6% positions & will prob wind up with 10% or more in BRK (call it a capitulation of sorts.)

[scorpioncapital]

If Berkshire is a buy at $185 now, what was it 5 years ago at half this price?

"Could anyone take Berkshire's mkt cap in cash & re-create the company?"

 

I think yes, easier than others, except the private owned businesses. From this I conclude the vast value is in the excess of goodwill over purchase price (almost always cash) over the years not accounted for (revised upward) on the balance sheet. Although the market price may reflect some of that difference. Still the input of energy, time, and opportunism definitely is the bulk of the value. In investing, unlike what some cigar butt investors claim, the bulk of the value is in factors that cannot be measured on a balance sheet or income statement. Most value is hidden which makes number crunchers somewhat uncomfortable :)

 

 

 

 

[Dynamic]

True that it is not showing up in current value on the balance sheet, but another way it is being revealed over time is in robust earnings growth. Munger put it as "trading liquid securities for illiquid ones". This is precisely where number crunchers are left behind. They are also expecting the eg to slow down but it ain't, for 20 years.

 

Not quite 20 years, but I can look back 14 years, when I made my initial purchase of the old BRK.B at $1,562 or the equivalent of $31.24 post-split on 15th July 2003 in a tax-exempt UK ISA account. I probably invested about 80-90% of my portfolio in BRK.B at the time, knowing I had less time to check my portfolio in the coming years and being comfortable with BRK representing so much of my main 2-stock portfolio to which I wouldn't be adding cash for a few years at least due to investment of money and time in a family business.

 

I realise that I didn't buy it really dirt cheap in 2003, unlike say my purchases at around $125 in Feb 2016, where I went to almost 100% position at a bargain price and felt very comfortable doing so.

 

Being 'reasonably priced' much like today, rather than 'dirt cheap' like in Feb 2016 I was hoping to slightly beat the index and comfortably outpace inflation in the long run, and not expecting anything like the 19-20% annualised returns of the previous 30+ years. As it turns out, inflation since then has been much lower than it averaged in the previous 30+ years.

 

Today, 14.25 years later, at $185.41 that initial investment is a 4.48x bagger (11.12% annualized), while the S&P500TR (Total Return index) is a 3.39x bagger (8.96% annualized). That's annualized outperformance of 2.16% for BRK.B. (all in USD)

 

That still represents sustained outperformance compared to the index (with no fees), and significant growth above inflation.

 

Now, you might perhaps argue that the S&P500 today is overpriced by a factor of, say, 1.3 while BRK is correctly priced, so the 'adjusted' performance of S&P500TR should only be 2.61x bagger (6.97% annualized), meaning BRK.B outperformed by 4.15% annually in 'adjusted' terms, perhaps giving a better indication of the 'economic' outperformance rather than the quotational outperformance. I think much more than that as an assumption of BRK's outperformance would be a stretch, but I'd be happy to hear your thoughts if you disagree.

 

If whichever level of outperformance can be expected to continue, how much more should BRK.B be worth? I guess that depends on how long you think it will continue. Perhaps 5 years outperforming by 4.15% would justify a premium of 22.5% = 100 *(1.0415^5 - 1) or 10 years outperforming would justify a premium of 50.2% = 100 *(1.0415^10 - 1) over the index, but a lower premium might be justified on a risk-adjusted basis.

 

I suspect that in the eyes of the market, they wouldn't wish to pay much of a premium for a few percent per year of 'boring' growth, when they could have glamorous and exciting companies showing recent growth of 20, 30, 40% with a commensurate record of recent stock 'performance' to get them excited about rapid gains quarter by quarter.

 

Equally, there may be other factors making the broader market shy away from BRK. I suspect the current ages of Buffett and Munger and the potential for a sudden decline if one of them died or hit serious ill-health is one. The reported GAAP P/E looks relatively high (about 21 today, unless you use look-through earnings instead, bringing it to about 16 today). These could serve to put the casual market participant off for fear of short-term quotational loss. Plus Buffett rightly warns that Berkshire cannot continue to compound at 19%+ per annum given its size.

 

For those who can look through the reported numbers and see the value, BRK seems to trade at a very reasonable price now, while the S&P500 seems pretty fully valued, but I don't think we who view BRK this way constitute a large proportion of the market and so we get to continue to have opportunities to purchase a great company at a reasonable price compared to the market at large.

 

So would I be buying now at $185? The answer for me is no, but because of my exposure, not because of valuation.

 

Reason: The deliberately concentrated portfolio I manage now has exposure to BRK.B just under 60%, and cash just under 10%, so I'm not inclined to add much right now unless the price drops quite a bit further to real bargain prices, even though we expect to add more cash in the next year. I think a price close to $150 at the moment would encourage me to weight BRK.B as much as 100% of our portfolio again. That's about 15% more than the $130 or so I would have been willing to pay in Feb 2016 when going almost all-in, reflecting mostly the growth in IV I perceive to have occurred in the meantime, with a similar discount to IV applied to my all-in buy price.

 

I might also consider increasing exposure to as much as 100% at higher prices than $150 if another holding such as AAPL gets very high-priced or represents an uncomfortably large percentage of my portfolio (currently almost 27% of my non-look-through weighting at about $154 or 29.5% of my look-through exposure, which is comfortable to me as a concentrated investor still expecting to invest a lot of additional cash over the next 15 years).

 

I did the opposite trade in May 2016, selling a good chunk of BRK.B while still undervalued at $142 to buy a 25% position in AAPL, even more deeply undervalued at $95 and with good prospects of outing some of its value. While BRK.B is up almost 31% since I sold that chunk, AAPL is up almost 62%, and both are a lot less undervalued now and I've added a lot more new cash to the portfolio too, keeping AAPL's weighting from getting out of hand.

 

I can only think of maybe one stock I'm comfortable with other than BRK.B that I might hold more than 60% of my portfolio in were it cheap enough (and that stock, HLMA.L is at least 2.7x the price for which I'd risk that exposure right now having sold it at just about 2.1x my buy price to max out my BRK.B exposure back in Feb 2016, getting a lucky 15-20% USD:GBP currency boost on top later that year by going 100% USD before the Brexit vote). HLMA.L earned me over 14% annualized total return over about 14.35 years as a simple buy quality dirt-cheap and hold position.

 

Of the companies I know, only in BRK.B would I hold a 100% weighting.

 

I'm sure I'm happy being a lot less diversified than most would be comfortable with, but I think people with 7-10 stocks and cash to invest could happily keep adding to BRK at current prices up to a 15-25% position, recognising that it has hidden value that GAAP misses and do pretty well over 5+ years. Although my spouse and I do have some modest pensions invested in index funds, one of which we add to monthly through payroll at the level to get an employer match, I think I'd rather invest additional money in BRK at $185 if we weren't already so heavily weighted.

[Dynamic]

Thanks, Phil Fisher's is a useful way to look at it.

 

I'm happy to be highly exposed to two companies I feel should do well in my time horizon at the moment (and a few dribs and drabs in other positions).

 

I guess I feel I have sufficient exposure to BRK to meet my needs 15-50 years out and AAPL too, though I am less certain of the truly long-term future in the latter company. I'm willing to leave some more on the sidelines to give me optionality and some ability to trade relative valuation from one company to another, and from cash to a fairly deeply undervalued stock in future. I do realise that the latter part of value-trading is a zero-sum game, so I hope that my interpretation of discount to IV will be right more often than it's wrong and that I'll get enough opportunities to play within the universe of stocks I'm comfortable owning.

[Cardboard]

Would it be asking too much to take this to the Berkshire Hathaway category?

 

Kind of like some of you complaining about politics stuff, this cult around Berkshire could be put elsewhere.

 

Cardboard

[writser]

Would it be asking too much to take this to the Berkshire Hathaway category?

Cardboard

 

He didn't put it into Berkshire Hathaway because being long Berkshire is universally accepted: Honouring Warren Buffett, be proud of your shares.

 

Should not be any debate about it.

[Cardboard]

Really applies to you:

 

"When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid."

[Valuehalla]

Folks dont forget: someone who is now 100 % in BRK means: app 25 % in cash and app. 75 % in excellent companies. No need to keep cash by yourself, WEB and his team are investors, who will do the right actions.

 

BRK is the best cash you can keep.

 

[Pauly]

Would it be asking too much to take this to the Berkshire Hathaway category?

Cardboard

 

He didn't put it into Berkshire Hathaway because being long Berkshire is universally accepted: Honouring Warren Buffett, be proud of your shares.

 

Should not be any debate about it.

 

Hah! Absolutely love this guy! ^

[Broeb22]

NC - Even after large spike in price, the company still trades at 4-5x.

[gjangal]

Bought a small position in CAKE . Relatively cheap for a good company. They have a new store cash ROI of 17-20%. I think it's only a matter of time before they start growing same store sales again

[Valuehalla]

Concerning BRK is the best cash:

 

The argument to keep a part in cash because BRK tanked 50 % in 2008 / 09 is not logical: Because that anticipates, that you know in advance 1) a big crisis is ahead, 2) BRK is tanking in the crisis 3) further you have to know how deep the price will go and 4) on what exat day it is the lowest price. On this day you have to invest the cash.

 

Further lets see the 2 cases:

1) Full invested on 14. Sept 2008 (highest point before Lehmann) in BRK with 1 A share      147.000 $

Today you have                                                                                                              278.700 $

Multiple 1,896

 

2) You are 75 % in BRK and 25 % in cash on 14. Sept. 2008   

This means 110.250$ in BRK and in Cash 36.750

Than you are the goodblessed investment super-star and you are so smart and you find the exact point, the absolute low of BRK, on 1 Mach 2009 with  73.195 $ for a A share, and you invest your cash in it: mutilple to today 3,808

 

The result is if it turns out

110.250 $ BRK x 1,896      gets 209.025 $ today

  36.750 $ x 3,808            gets 139.930 $ today

TOTAL                                      348.955 $ ............. thats a 25 % better result compared to be all time full invested

 

If it does not trun out, because there is no lehman

you have today 209.025$ in BRK and still 36.750 $ cash = 245.775 $ ........... thats a 13,3 % gap missing, compared to be all time full invested

 

I would always choose to be full invested, because there is no method / compass to fix the lowest point in a crisis on the exact day.

 

I would never sell my house or a part of it and keep the cash because i think that there is a crisis ahead and I will be able to buy my house back for a cheaper price. think about it

 

 

 

[John Hjorth]

There are some very interesting posts about Berkshire within the last few days in this topic. They are from fellow board members, that have started going really heavy on Berkshire, long term, years ago. [Dynamic, longinvestor, Valuehalla among others, at least].

 

I hereby suggest that you repost [just cut and paste from here, and use an appropriate topic title] the relevant posts in separate topics in the Berkshire Hathaway forum here on CoBF, so we can discuss in full lenght there, under appropriate topic titles, so that this topic does not get clogged further up by Berkshire discussion, causing annoyance among other fellow board members, ref. the post from cardboard a few days ago.

 

- - - o 0 o - - -

 

In short, there is no need to annoy fellow board members not particulary interested in Berkshire, and there is no need to burry Berkshire discussion gold in this topic, when we already have a separate Berkshire forum available. [ : - ) ]

[frommi]

Puts on HCSG and RGEN. In both cases operating cashflow is shrinking since several quarters while net income is growing and both trade at absurd valuations based on net income. Additionally RGEN will lose >30% of its revenue in 2021. (source: https://www.biocentury.com/bc-extra/financial-news/2017-09-26/repligen-precarious-waters-after-ge-launches-house-resin)

[Dynamic]

As suggested above once or twice, I've copied the Berkshire discussion to the Berkshire Hathaway sub-board into its own thread, which you can find here.

 

http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/berkshire-buying-position-size-cash-(from-generalwhat-are-you-buying-today)/

 

For general comments like "I bought more BRK.B today", keep posting here, but the stuff about position sizing and whether BRK cash is better than actual cash etc., perhaps move the discussion to the thread linked above.

[Cardboard]

Thank you Dynamic!

 

I believe that this thread was about new ideas or new trading opportunities coming up.

 

Here is one T-CF.

 

Stock has been harshly punished for a weak Q1. However, all fundamentals are turning for them and their growth in wealth management which is a stable and profitable business typically trades at high multiple. Company is way too cheap.

 

Cardboard

[John Hjorth]

Thank you Dynamic!

 

I believe that this thread was about new ideas or new trading opportunities coming up. ...

 

+1, Cardboard - agreed. Personally, I speculate this is one of the most valueable topics on this board for fellow board members.

 

If we try to be constructive and responsive to input achieved, we will most likely all fare better.

 

Peace.

[writser]

Small block of PERF. Somebody wrote a nice blog post about it here.

 

Prepackaged deal approved. I tendered my position, bought a few extra shares today. From the disclosure statement:

AFTER THE EFFECTIVE DATE, THE DEBTORS WILL PROVIDE HOLDERS OF INTERESTS IN PERFUMANIA AN ADDITIONAL OPPORTUNITY TO OPT-IN TO THE STOCKHOLDER RELEASE AND RECEIVE THE RELEASING STOCKHOLDER CONSIDERATION FOR A LIMITED TIME. HOLDERS OF INTERESTS IN PERFUMANIA WILL BE PROVIDED WITH NOTICE OF SUCH OPPORTUNITY AND INSTRUCTIONS FOR PARTICIPATION AFTER THE EFFECTIVE DATE HAS OCCURRED

 

Buy now at $1.87 and you should receive $2 in a few weeks (assuming your broker doesn't fuck things up). Looks decent.

[DooDiligence]

Bumped DVA to 5% & trying to buy some Jan 2020 $60 Calls (my bid will probably not be met.)

 

I want to hear Cramer yell, SELL, SELL, SELL so I can bid on some lower strikes.

 

---

 

Scared to do anything more with my 4.8% ESRX (kinda wish it was <3%)

(crap, the market may make it so.)

[SnarkyPuppy]

Small block of PERF. Somebody wrote a nice blog post about it here.

 

Prepackaged deal approved. I tendered my position, bought a few extra shares today. From the disclosure statement:

AFTER THE EFFECTIVE DATE, THE DEBTORS WILL PROVIDE HOLDERS OF INTERESTS IN PERFUMANIA AN ADDITIONAL OPPORTUNITY TO OPT-IN TO THE STOCKHOLDER RELEASE AND RECEIVE THE RELEASING STOCKHOLDER CONSIDERATION FOR A LIMITED TIME. HOLDERS OF INTERESTS IN PERFUMANIA WILL BE PROVIDED WITH NOTICE OF SUCH OPPORTUNITY AND INSTRUCTIONS FOR PARTICIPATION AFTER THE EFFECTIVE DATE HAS OCCURRED

 

Buy now at $1.87 and you should receive $2 in a few weeks (assuming your broker doesn't fuck things up). Looks decent.

 

Ang idea what the "shareholder release form" entails?  Is this simply like a corporate action (eg gender) where you tell your brokerage to tender?

[Sunrider]

Small block of PERF. Somebody wrote a nice blog post about it here.

 

Prepackaged deal approved. I tendered my position, bought a few extra shares today. From the disclosure statement:

AFTER THE EFFECTIVE DATE, THE DEBTORS WILL PROVIDE HOLDERS OF INTERESTS IN PERFUMANIA AN ADDITIONAL OPPORTUNITY TO OPT-IN TO THE STOCKHOLDER RELEASE AND RECEIVE THE RELEASING STOCKHOLDER CONSIDERATION FOR A LIMITED TIME. HOLDERS OF INTERESTS IN PERFUMANIA WILL BE PROVIDED WITH NOTICE OF SUCH OPPORTUNITY AND INSTRUCTIONS FOR PARTICIPATION AFTER THE EFFECTIVE DATE HAS OCCURRED

 

Buy now at $1.87 and you should receive $2 in a few weeks (assuming your broker doesn't fuck things up). Looks decent.

 

Ang idea what the "shareholder release form" entails?  Is this simply like a corporate action (eg gender) where you tell your brokerage to tender?

 

And, moreover, if I buy PERF.TEN today, will they automatically get swapped for $2.00 shortly?

[writser]

The tendered line (i.e. opted-in shared) is not tradable afaik. As for the shareholder release form, I think that that will be something similar to the opt-in nominee form, i.e. a corporate action that your broker should present to you.

[wachtwoord]

The effective date in the above text is today correct?