Bharper

Lessons from Benjamin Graham, Part 1

On Mar 04 06:01 PM User 369371 wrote:

> You are confusing the value of Berkshire as a conglomerate with the
> equity portion of the company. Buffet has been one of the best businessmen
> ever and as a result the book value of Bewrkshire has increased tremendously
> (so far). However, his EQUITY PORTFOLIO has been flat after 40 years
> of investing whereas SP500 has been up 8-fold since the mid-70s.
> Mr Buffet would have done much better in the equity part of his portfolio
> if he had just bought the SP500 instead of trying to outsmart the
> market.

Your statement that he would have done better buying the S&P is wildly inaccurate. For the first decade or so of operations, Berkshire did little else but buy equities, compounding book significantly over that period. And he has done a lot of selling over time, more recently he sold H&R Block at a huge profit, PetroChina, and others. This isn't reflected in the current cost basis of the portfolio. And his gross dollar value by cost has grown as Berkshire has grown, so the "breakeven" level of the equities portfolio has no resemblance to long-term performance.

Lessons from Benjamin Graham, Part 1

On Mar 04 06:01 PM User 369371 wrote:

> You are confusing the value of Berkshire as a conglomerate with the
> equity portion of the company. Buffet has been one of the best businessmen
> ever and as a result the book value of Bewrkshire has increased tremendously
> (so far). However, his EQUITY PORTFOLIO has been flat after 40 years
> of investing whereas SP500 has been up 8-fold since the mid-70s.
> Mr Buffet would have done much better in the equity part of his portfolio
> if he had just bought the SP500 instead of trying to outsmart the
> market.

Completely false, his portfolio is at cost because he engages in sales, overwhelmingly at profits, but mostly because in dollar terms he has added to berkshire's equity holdings over time, thus increasing its gross cost basis. The overwhelming majority of equity investors portfolios are now at unrealized losses simply due to the fact that nearly anything bought in the past 10 years is down in price since then.