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Joseph Blake

 
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  • Why Bother Diversifying, Just Buy Berkshire Hathaway [View article]
    A comparison that I find interesting is to look at the S&P 500 Index versus the Consumer Staples Index versus Berkshire. At November 30, 2013 I found the 10 year annualized total return to be

    S&P 500 7.67%
    Berkshire 7.67%
    XLP consumer staples index 9.78%

    The favorable comparison of XLP versus the Index holds true for most five year periods back to 1989.
    There are many reasons why Berkshire investors should be reconsidering the stock now versus the good fortune of having bought it 20 or 30 years ago.
    Jan 15 10:29 PM | Likes Like |Link to Comment
  • Why Bother Diversifying, Just Buy Berkshire Hathaway [View article]
    The bigger Berkshire gets the more average it becomes. The elephant like acquisitions just makes the company a proxy at best for the index.
    But there is a big downside when Buffett is gone. Who will be able to control the inevitable clashes among senior executives who want capital for their pet projects? The arguments for not paying a dividend no longer make sense and may well make the huge seize of the company more problematic. This is the classic reversion to the mean story which could become just another sluggish conglomerate.
    Jan 15 10:01 PM | Likes Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    Just saw this and thanks
    Very funny.
    The bigger he gets the more average the results. So why BH versus the index?
    Jun 13 12:44 PM | Likes Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    That is a fair comment. Most young people are doing this via 401 K plans which would not include Berkshire as an option. It may be expensive to accumulate if you are saving 5% of your income each month. For example, if they make $5000 a month and save 5% plus a matching amount they would buy $1000 a month. The costs of doing this may vary depending upon the plan and if it lets you buy securities of your own choosing. Most do not. It might work for a Roth or traditional IRA subject to commissions etc.
    That you say Berkshire is a "mutual fund" is probably true but it may carry a conglomerate discount unlike a true mutual fund. More importantly the original question was what should a 20 something buy today. If they share your outlook and expectation for return it might be appropriate. But I think they could also get the same returns from a Consumer Staples Index Fund. They have produced a lot of alpha since 1989. See my article. Going forward I do not think Berkshire will perform as it did prior to 2000 for reasons already given. Thx
    Mar 25 11:02 PM | Likes Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    Tax questions are always personal. If you are a long term shareholder you have to ask how much you need in income each year and then answer if Berkshire still serves your needs. Do not let5 the tax tail wag the dog. But sometimes the tax question can govern your decision and leave you subject to losses in price greater than then the capital gain loss. This is just general comments but your tax accountant can advise more competently than I. I still recall the Enron shareholder who lost it all when it failed because his tax counsel said he would have to pay too much tax. Sadly it was his only asset. But Berkshire does not represent that type of risk albeit stocks fluctuate and you get no dividend to provide a regular income stream that might compensate for the fluctuations. And no a young investor should not buy Berkshire. They probably do not have the resources to buy A or B.
    Mar 25 10:45 AM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    Your goals are good one and they are what most people should aim for. If they start soon enough they may get that. I have written elsewhere here about consumer staple stocks and why thy are a good choice for exactly the reasons you give. But an index of stocks is better than a really large company like Berkshire for various reasons already stated.
    Mar 24 01:42 PM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    In no way was I referring to you.
    Mar 24 01:37 PM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    The price appreciation for the S&P 500 cannot be looked alone. You have to include the dividends reinvested in the index or at some rate such as T Bills. Because Berkshire does not pay a dividend, I assumed reinvested in the index as the best proxy for an apples to apples comparison. You have to make a reasonable assumption of what happened to dividends to make a comprehensive comparison. Index without dividends is incomplete.
    Mar 24 01:32 PM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    Can I really prove this? Please do the total return calculation for the last ten years and five years thru 12/31/ and you will get the numbers in the article. Berkshire underperformed the S&P 500. My source is Bloomberg. If the case is that Berkshire keeps the dividends and makes the shareholder better off is the argument then lets assume the dividends are reinvested in the index. This is not my fiction. It is the reality of the numbers. I am not making this up. It is a reason why I raise the issues I have. Thanks
    Mar 24 01:28 PM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    My father started to give his children a new $10 bill each Christmas in the 1930s. Sometime around 1965 we still got $10. We all asked why it was not adjusted for inflation. He relied that he would adjust the size when his income was adjusted for inflation.
    In recent years his total returns have been below market and based on beta that means the risk adjusted number versus the index is not favorable. But I would be pleased and honored if I could join you for one of the risk adjusted dinners.
    Mar 20 09:48 AM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    Yes of course I will say that. You are right. But it is also possible that the price is discounted by what some would call the conglomerate discount. It has some very great businesses that are not going to lose their competitive advantage quickly. But there is a tendency for the market to almost always fail to fully value all of them. The larger the pie and its pieces this issue cannot be ignored. When Hanson broke up SCM some 20 plus years ago, they sold the parts they did not want for more than the purchase price. Admittedly an extreme example but it illustrates the point. The larger Berkshire gets the more that will be an issue in its valuation. The investor who wants a railroad won't buy Berkshire first even though BNSF is a superb property. You get the idea.
    Mar 20 09:42 AM | Likes Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    In the context of Neff when he said while taking less risk or risk adjusted returns is the same thing. Just as we might use duration as a metric to measure the risk level of one fixed income portfolio versus another, the same came be done with equity portfolios using a Sharpe ratio. That would be Neff's point. Enough of the theory. Neff's record speaks for itself and does not need me to defend it. Like John Bogle he did a great deal for the small investor who is not able to buy Berkshire shares. That matters a great deal in the age of 401k plans.

    This article appeared in 2008 in re Neff.
    http://bit.ly/WBDfli
    His comments then are interesting but his love affair with Citibank not so interesting. But he believed that its retail presence globally was a great asset. Like many he did not see the rest of the iceberg.

    Thanks for your very constructive comments.

    I will revisit the reports as you suggest but I would ask if after five or ten years your total return is less than the index, that does beg the question if its enormous size prevents Berkshire from replicating its earlier performance in the future? Someone talked about 21% since day one but it is 0.78% under the index for ten years and 2,75% under the index for the last five years thru 12/31/12 inclusive of dividends on the index or total return basis. Dividends are 2% to 3% of the return on the index. They cannot be ignored. Berkshire does not pay dividends but that fact means that reinvestment outside of Berkshire would have made more. As said previously, from being a consistent outperformer of the index for most of the last 40 plus years, the record is now around average for ten years and less than that for the last five years. That is food for thought. As many know reversion to the mean is often inevitable with huge size. And that seems to be happening even under Buffett's watch. Will the future be better? This is a legitimate question that only time will tell. In five years so much will be revealed.
    Mar 19 01:44 PM | Likes Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    Even the Roman Empire divided because it was too big to manage.
    Is there a lesson for the shareholders there? I think so.
    Mar 19 10:25 AM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    I think this is a place for constructive comments and dialog. Anyone can be a bully on the internet. That said Neff's comment was based on risk adjusted returns and many have pointed this out over the years. He also ran a mutual fund whose investors come and go more readily than Berkshire's. Plus the Penn Endowment which had plenty of "experts" to second guess him at the business school and the board. Not easily done when you are not a major stakeholder. That also makes performance harder to do especially in the period of the 70s which older readers will recall as a horrible market. The Dow reached 1000 in 72 and did not see that again for the rest of the decade. I will simply state that on a total return basis Berkshire has underperformed the S&P for both the last five and ten years thru 12/31/12. Likewise in five of those ten years as well. I have yet to hear anyone here address that in the context of long term value investing. I understand the technical way to decide intrinsic value or how stocks build book value. But I do not accept that some theoretical intrinsic value is better than market after five or ten years. That is my opinion based on the facts of the returns for that period. It does not take away from Berkshire in the past or the enormous wealth created for him and his loyalists. But every so often it pays to take a deep breathe and take another look. If you want to shoot the messenger because I forgot the second "t", Ok do it but that is largely an ad hominem argument. And messengers are sometimes right even if they forget the second "t".
    Mar 19 09:48 AM | 1 Like Like |Link to Comment
  • Is Berkshire Hathaway Just Another Disappointing Conglomerate? [View article]
    My brother was an accomplished cross county runner albeit not world class.
    Mar 18 11:11 PM | 1 Like Like |Link to Comment
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