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Buffett beats his own Berkshire Hathaway performance
Old 11-19-2007, 08:02 PM   #1
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Buffett beats his own Berkshire Hathaway performance

Our ER portfolio is still up 6.4% YTD, but Berkshire Hathaway is up 24% YTD and has grown to 35% of our ER portfolio. We'd be losers without Buffett.

Yet apparently Berkshire Hathaway is a loser even with Buffett. Two researchers have tracked three decades of his stock picks and found that just riding his publicly-filed coattails would have produced returns better than buying & holding BRK. This despite the insurance float and the privately-held companies, which could indicate once again that Berkshire Hathaway is significantly discounted from its intrinsic value. If this study has been done properly I think it'll validate that Buffett has achieved a market-beating performance without coin-flipping benefit.

Following Buffett to profit - International Herald Tribune

"Martin said he and Puthenpurackal initiated their study because they wanted to know whether it was better to purchase the stocks that Buffett was buying or invest in Berkshire. The market- beating returns on copycat investing are based on buying and selling at the end of the month following disclosure over 31 years."

It'll be interesting to see this study when it comes out, hopefully in a publicly-accessible release. It'll be especially interesting to see if their 31-year period starts in 1975 or if it includes 1973-4.

"On average, 73 percent of Berkshire's equity portfolio was in five stocks during the past 31 years, the professors found. Martin said long-term returns show the easiest way to mimic Buffett is to invest in Berkshire. The stock rose at an annual rate of 27.7 percent during the past three decades, he said. "For someone like me, it's better to just buy Berkshire shares," said Martin, who owns Berkshire's Class B shares."

BTW Charlie Munger recently sold two hundred "A" shares. He's more likely to be making a charitable donation than rebalancing, but I suspect future filings will show that Buffett, Simpson, and their four understudies will have been shopping like crazy at this month's blue-light specials. And if I was Wells Fargo I'd be making Omaha phone calls...
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Old 11-19-2007, 09:28 PM   #2
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I don't know all of BRK's holdings, but here's a plot of BRK vs some of their holdings: USG, USB, WFC, and UHG:



I don't know if that means anything.
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Old 11-19-2007, 10:57 PM   #3
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Plot BRK against WTF and I think you'll have a better understanding.
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Old 11-19-2007, 11:04 PM   #4
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I'm reserving that ticker for my IPO.

I think BRK has been viewed as a safe haven. It'll be interesting to see how the stock does after their next earnings release. Insurers are getting beat up, and BRK's holdings don't look so hot either.
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Old 11-20-2007, 07:58 AM   #5
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I think the only major holding of BRK that has done better than BRK over the past year is KO. Some others have done pretty well, but had lesser returns. Clearly this means that BRK's discount to intrinsic value has gone down over the past year. (That's sort of a joke.)
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Old 11-20-2007, 10:50 AM   #6
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Quote:
Originally Posted by Nords View Post

"On average, 73 percent of Berkshire's equity portfolio was in five stocks during the past 31 years, the professors found.
Blind squirrels and acorns! Or as Warren is often quoted - 'my favorite holding period is forever.'

Postscript chapter of Ben Graham's Intelligent Investor.

Now having been an on and off Buffett watcher since the 1980's - Warren has bought and sold a lot of stocks - BUT! - when he finds a keeper - he keeps it!. silly boy.

Since real money is in my balanced index funds - I can putz.

Pssst Budweiser!

heh heh heh - resistance is futile, it's da hormones, even watching football is not enough - so a few hobby stocks here and there. I probably will never buy Berkshire - but you can count me as a Buffett watcher and sometime putzer in his selections.
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Old 11-21-2007, 09:15 AM   #7
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Berkshire is widely seen as a hedge against a bear market. It has a knack for rising in a terrible market (like this one). Why? Probably because bear markets are really good for Berkshire. They have a huge wad of cash just sitting there, waiting for opportunities to buy into great companies on the cheap. So when everything is melting down, it's time for Berkshire to do what Buffett, Simpson et al do best -- get the elephant gun and go hunting. And it allows them to buy a LOT of future earnings for a low price.

IMO, Berkshire is an asset class unto itself since it doesn't strongly correlate with any other asset class.
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Old 11-21-2007, 12:54 PM   #8
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IMO, Berkshire is an asset class unto itself since it doesn't strongly correlate with any other asset class.
And a fairly illiquid one at that.
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Old 11-21-2007, 02:37 PM   #9
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And a fairly illiquid one at that.
Which is exactly why it's not an official part of my asset allocation. Well, that and because the asset allocation portfolios are in our IRAs and 401Ks and BRK is mostly held on our taxable accounts.
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