Thoughts on BRK.B? Might be a little overvalued right now, but I think their longstanding record of consistency and durability are priced into the stock. Pretty safe bet, eh?
Dan Naumov: Somewhat limited downside considering the buyback trigger at low PB
Evan Lea: Agreed. Heads, I win. Tails, I don’t lose much.
Tiziano Frateschi: My thought is that I hope will reach the current value of BRK.A in some years. So we will all stop to work 😀
Evan Lea: Why wait for that when you can buy B now?
Tiziano Frateschi: already have it
Peter Lim Cheng Teik: How do u conclude its a little overvalued ?
Evan Lea: Good question. Upon checking my numbers (Peter Lynch line, DCF model), looks like they are actually fairly valued. A great business at a fair price. Also, their book value and earnings basically increase quarter after quarter, year after year. Even in downturns, their decreases are smaller and they bounce back more quickly than most companies. They’re in businesses that don’t change quickly (banking, insurance, energy). The staying power of this stock is undeniable. A safe bet, and a good balance between growth and value. Also run by an extremely talented management team with significant depth. Great brands as well.
Evan Lea: Louis, I agree. You’re basically buying WFC, KO, IBM, and AXP and a bunch of other awesome companies without the fees and the trouble of having to manage it yourself (over 63% of his portfolio in those 4 stocks).
H.K. Kang: I already have it, it seems fairly valued, means the stock price increase and book value increase will be around the same. I guess that BRK will manage about 10-15% in the future. Seems like a good, though not spectacular,return for my taste. The share buyback trigger at a PBR of 1.2 is a great additional bonus, of course.
H.K. Kang: The only risk that I see is that Buffett’s successor might suck at capital allocation. Capital allocation is really important because BRK subsidiaries produce so much cash flow & float… And I think about everyone is worse than Mr. Buffett at the capital allocation game. But Mr. Buffett seem to enjoy good health, he might last for another 20 years..
Evan Lea: Do you see owning a large portion of BRK.B (40-70% of a portfolio) as an effective strategy of offsetting potential losses from higher growth companies that don’t pan out?
H.K. Kang: My allocation is much smaller, but why not try it out? A long term return of 10-15% is nothing to be ashamed of.
Evan Lea: I know that Berkshire needs to be more conservative these days because they are so large and so many people’s lives and nest eggs depend on his decisions. I wonder if hand picking Buffett’s more speculative picks of smaller cap companies could prove to be a more effective strategy these days. I wonder if these companies reflect how Buffett might have behaved when he was younger and investing his own money rather than others’.
H.K. Kang: Well, he responded in the last annual report the smaller picks might come from Todd Combs and the other investment guy(forgot his name) he has recently hired. For example, DirecTV was chosen by Mr. Combs.
Evan Lea: I’m thinking if these guys work for Buffett, they are no slouches and live religiously by the same investing tenets that made Buffett a legend. Although they are no Buffett, they have access to his insights and can make their decisions based on his feedback.
H.K. Kang: Yes, true, they are probably great investors. However, they will pick their fair share of losers as well, so buying the whole thing(BRK.B) is probably the safer bet.
Tian Wei Brandon Lau: Well the only risk would be if Warren passes away… Touch wood. I’d like to work for him after going to university
Dan Naumov: It’s worth noting that Buffett has said that Todd Combs and Ted Weschler, his future “replacements” have been beating him by double digits every year. It remains to be see just how good they will do once they have to deal with managing the entire capital pool of Berkshire, but it is clear that they are great capital allocators.
Tian Wei Brandon Lau: Well I still believe that if he passes away. The older generation that holds his A shares would sell as they trust him. However, after they come to see that Buffett’s successors are a very capable bunch, I believe the share would rise again.
Sal LaMagna: Has been my best investment and my largest holding for years. I remember the A shares selling for 9k when I was in college 30 years ago.
Shawn Christopher: I’m going to buy 1 share so I can attend the Berkshire Hathaway Shareholder Meeting next year (Y)