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Originally Posted by brewer12345
35%?! You have drunk long and welll of the Kool Aid, my friend.
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Quote:
Originally Posted by unclemick2
So my hot blooded hormonal quest for THE ONE GREAT stock to place me in a villa in the Bahamas is not constrained by rebalancing requirements, etc.
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These quotes are from a number of what are all good points, as well as part of a continuing discussion at the Nords household. ("Hey honey, guess what Berkshire did today?") I wouldn't bring the subject up if I didn't need to check my logic and to test our resolve.
But I'm more on UncleMick's side of the fence. The only reason Berkshire's not 40-50% of the ER portfolio is because the rest of the portfolio's funds have had an outstanding year as well. You're not properly diversified when everything goes up at once, and it makes it darn hard to rebalance when everything is fully valued.
There's not much rebalancing incentive because if Berkshire went to 15% of our portfolio tomorrow it wouldn't change our lifestyle. We have the two years' expenses in cash and a few more years' expenses in a taxable account of Tweedy, Browne shares to spend down before we even get to a Berkshire decision. We should probably think about selling the 9th grader's college shares for an I bond or a CD but again the first of that portfolio to go would be Tweedy, Browne. I just really have a hard time selling an asset that's valued so near its book value, let alone below its intrinsic value. If we liquidate the kid's college fund and she wangles a USNA appointment I'll be triply pissed.
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Originally Posted by lazyday
Maybe BRK can buy back its own shares, as the foundation slowly sells?
Might make sense, since it's having trouble investing the huge cash pile and cash flow. And it's (mostly) harder to outperform when BRK is bigger.
If you're thinking of when WEB has health problems or dies, I wonder if there's a plan to make some announcement while trading is halted, about some massive spinoffs, dividends, and/or buybacks. Not that such measures would keep price at current levels, but could help reduce the panic.
I thought of buying when B shares were around $2800, but couldn't get a handle on what's the intrinsic value, and TH convinced me that price could plummet when WEB health fails.
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Well, by my calculations a buyback's not happening because there are more shares today than a year ago. IIRC one of this year's acquisitions was partially funded by issuing more BRK shares.
Before Buffett would buy back his stock you'd have to convince him that it's undervalued by a substantial percentage, right? Otherwise he'll sit on that cash pile until he finds another distressed insurer or cheap utility or who knows what in some godforsaken corner of the globe. One of the better intrinsic value calculators is the
"Intrinsivaluator". Still undervalued.
I agree that the board would ask for a trading halt until the press release goes out. And I'm almost positive it would be a combination of a buyback and a dividend to encourage the arbs to leap in with both feet. Heck, I'd probably liquidate my personal account and go on margin to join in, but that's "only" a $30K bet.
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Originally Posted by terminator
Nice strategy. If I had 35% of my portfolio in one stock I'd be pumping it too. :P
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Damn, busted. It worked for Jonathon Lebed!
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Originally Posted by terminator
Seriously, I personally wouldn't have an issue with 35% of my portfolio in BRK. Even if things go bad, it's not going to drop all that quickly and it would be easy to get out without a huge loss since it has real assets buttressing its valuation. Personally, I wouldn't worry about the increasing trading volume as BRK isn't a stock where the value is being propped up by a low trading volume (IMHO).
The only reason I don't own any is that it doesn't pay a dividend and there are too many good dividend-paying fish in the sea for me to go with BRK.
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I think it's likely that the stock would be hammered 30-50% on day one and would need a couple weeks for everyone to sort out their trading strategies. But I'm also pretty sure that the big brokerage houses have their plans in place and would soak up as much of the selling as they could.
If there's an undervalued asset out there among all the high prices, oddly enough I think it'd dividend-paying stocks. In 2008-9 investors are going to realize that dividend tax rates are expiring in 2010, the second year of a presidential election cycle, and those two factors will hit dividend-paying stocks pretty hard if Congress hasn't extended the tax rates. The smallest percentage of our portfolio is U.S. blue chips (DVY) and that's what we'd probably rebalance Berkshire into. But not just yet.
To put this conversation in context a year from now, today's price on "B" shares is around $3560.
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Originally Posted by macdaddy
I am looking forward to the Buffett biography coming out.
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Me too. Our kid has done quite well jumping in & out of Scholastic stock between Harry Potter books. I suspect the same will happen with Alice Schroeder's book...