What replaces Berkshire Hathaway in an equity portfolio?

[james22]

Commodities!

You might also consider Consumer Staples and Healthcare.

Siegel (The Future for Investors) suggests an equity allocation of something like:

30% TSM
20% TISM
12.5% High-Dividend Strategies (including REITS)
12.5% Global Firms
12.5% Sector Strategies (Oil and natural resources, pharmaceuticals, Brand-name consumer staples)
12.5% Low Price to Growth (including BRK)

 

[NW-Bound]

Today, my lot of BRK/B shares is in the green for the first time. Never owning it before, in Nov 08, I thought about getting 1 or 2 A shares, and might even buy more with the money I got from "firing" some MFs that I have held for many years. Good thing I didn't, and decided to DCA into it with B shares instead. I started buying at prices as high as 3890 and the last buy was as low as 2883. Of course I missed the all-time low of 2241.

As of this writing, at the price of 3369, I am breaking even for the whole lot. I will not be selling these, nor any other equities for a while.

 

[free4now]

For tax reasons I need to sell some stock this year, and I decided that I'd whittle down my BRK position, which is 20% of my total portfolio right now, the only single stock. I'll sell BRK once a month until the end of the year, and by then I'll be down to having BRK be about 14% of my portfolio.

My concern with BRK is mostly psychological: The recession showed me that while I can tolerate big price swings and continue to hold, it's not much fun. I didn't like the downswing one bit, and it did cause a few sleepless nights. The higher-than-market volatility of BRK, combined with the single-stock risk make me a bit more wary these days than in the past. And I'm sure volatility will temporarily increase when Warren passes on as all the psychological investors (like me ) get freaked out because people tell them at cocktail parties that they were fools to own BRK when his death was so predictable. I do think in the long term BRK will continue to perform well, but I'm just not sure if the volatility is worth the slight edge over market returns.

As for what to replace it with, for me the money is going into cash, as the recession pointed out to me that my cash position was a bit slim.

Nords, if I were you and looking at selling BRK, I might use the proceeds to pay down the mortgage.

 

[Nords]

Nords, if I were you and looking at selling BRK, I might use the proceeds to pay down the mortgage.

Good one!

It was impressive how every one of our equity assets rose and then collapsed in almost perfect correlation. Berkshire was the "least" volatile of the bunch. We did some tax-loss swapping in late 2008 but we haven't rebalanced since early 2008.

We might sell a few Berkshire shares if it goes above its asset-allocation band, but it'll be the first time since late 2007 that we've replenished our two-year cash stash. It's breakin' my heart to cash in those PenFed 6.25% CDs for their 3-4% successors. We'll probably stick with terms down around 2-3 years.

Lots of flexibility with a 4.5% mortgage, although I'll be 78 years old when it's paid off...

 

[cardude]

I might sell some Berkshire B at $4500 and up and pay off the mortgage, but not at current prices. I sold a little bit when it got closer to 5K awhile back and rebought a little back when it fell recently, but not really enough to make me all proud.

It is nice to have an investment where you *think* you know what's going on and know when to get in and out. This is a core holding for me so I can stand the normal volatility, but a black swan type event would hurt me so I do try to watch for that. Speaking of that, what did you Berkshire followers think about the Santulli exodus? That was strange IMO. Berkshire has always kind of been like Hotel California, where you can check in but you never leave, so I was a little taken aback when I read that he was leaving to "be with his family" or whatever. Something else is up I suspect, but the market seems to have shrugged it off.

 

[Free To Canoe]

It is nice to have an investment where you *think* you know what's going on and know when to get in and out. This is a core holding for me so I can stand the normal volatility, but a black swan type event would hurt me....

Good point that when key people are leaving it is time to worry.

What does one do about a "black swan event". Sell and go to gold? Sell and go to freeze dried food? I guess that it depends upon the event.

Free to canoe

 

[ziggy29]

For tax reasons I need to sell some stock this year, and I decided that I'd whittle down my BRK position, which is 20% of my total portfolio right now, the only single stock. I'll sell BRK once a month until the end of the year, and by then I'll be down to having BRK be about 14% of my portfolio.

I've sold a little recently, too. I loaded up back in November at prices ranging from 2300 to 2500 or so, and I figured no one ever went broke by locking in some quick profits of 40-50% or so...

BRK is a core holding for me, but I was more overweight in one stock than I usually allow myself to be due to the ridiculously low valuation late last year. Now BRK is down to about 10% of my portfolio, which is roughly the outer limits of my "comfort zone" with an individual stock -- and even then, only because of the fairly unique and highly diversified operations Berkshire owns.

 

[Free To Canoe]

Focus on the customer.
Once Munger and Buffett move on, the culture of the organization will carry on. This could last a few years or generations. One example of this is Walmart. I can see it in their stores that they are becoming less customer focused and this IMHO will cause them to lose their leadership. However, their size, business model and efficient methods are still unparalleled. Walking into Kmart the other day reminded me of this fact. It may be decades before they stop growing.

Free to canoe

 

[NW-Bound]

I keep BRK to have exposure to the financial, insurance, as well as other businesses in it. BRK complements my other stock holdings. I don't think there is such a thing as "buy and never sell" anymore. When the time comes to sell I hope I can tell, but that is a long way off, meaning not within 5-10 years, I believe.

 

[Nords]

Speaking of that, what did you Berkshire followers think about the Santulli exodus? That was strange IMO. Berkshire has always kind of been like Hotel California, where you can check in but you never leave, so I was a little taken aback when I read that he was leaving to "be with his family" or whatever. Something else is up I suspect, but the market seems to have shrugged it off.

I'd love to learn more about that.

Berkshire CEOs have retired before, and it's possible that Santulli's had enough with the NetJets recession. Or his health may not be very good. Berkshire's buyout solved most of his estate-planning concerns, so he might have chosen to step aside while the stepping was good.

I think if there was an ethics scandal that journalists would be all over it. Or maybe that's just what I'm hoping.

 

[Nords]

I'll be darned-- Buffett's using a personal trainer:
Everything Warren Buffett: OMAHA WORLD-HERALD: Warren Watch: Bite into this, Mr. Buffett

 

[Nords]

We don't have to worry anymore about septuagenarian Buffett running Berkshire Hathaway.

He just turned 80 today.

He claims he's going to try for the Rose Blumkin model of working past 100. The odds are greatly stacked against that, of course, but it'll still be interesting to read the media analyses of why it should never happen.