Anyone selling Berkshire...........

[cardude]

at these levels??

I think some of you own Berkshire (Nords I know does), and was wondering if any of you are thinking about selling.

I keep watching Berkshire run up, and I keep thinking I should sell some. It's currently at about 93% of the "intrinsivaluator" conservative number. I always thought those numbers looked pretty high, but here we are now getting real close to it.

I looked back at previous levels of the intrinsivaluator, and he overall average valuation has been 88% of IV, with a low of 52% and a high of 128%. There have been 14 instances it has been under 88% IV, and 12 where it was over 88% of IV. The trend lately is to overvaluation (over the 88%) in the last few years, as 11 out of 12 times since 1993 it has been over the 88% of IV level.

My problem is, if I sell some I really don't have any use for the money other than paying off the new house loan or sticking it in a cash account that's paying about 6.5% currently.

[windsurf]

I have only a handful of B shares but I am not parting with them. Why part with a share of a company that does well when much of the rest of the world is headed south? I want quality into the future so why sell it? For what? Cash is going south to bail out the coming election year. To time the run up of a company that is still down after the recent hyperventilating?

[travelover]

Naw, I'm invested for the long haul - that is WB's advice and I bought the stock 'cause I respect his opinion.

[Nords]

Quote:

Originally Posted by cardude I looked back at previous levels of the intrinsivaluator, and he overall average valuation has been 88% of IV, with a low of 52% and a high of 128%. There have been 14 instances it has been under 88% IV, and 12 where it was over 88% of IV. The trend lately is to overvaluation (over the 88%) in the last few years, as 11 out of 12 times since 1993 it has been over the 88% of IV level. My problem is, if I sell some I really don't have any use for the money other than paying off the new house loan or sticking it in a cash account that's paying about 6.5% currently.

It's ironic that you're planning to sell an asset and stick the proceeds in cash. That's exactly what Buffett's been doing for the last $45B or so.

It's at an all-time high, so if you sell you might look like a genius. (Of course the same conviction might lead you to short the stock.) Your next challenge would be waiting for the intrinsivaluator to tell you when the 15th undervaluation occurs.

We don't necessarily have a better use for the money either, but we don't know of a better money manager. And the moves have all been unpredictable. If the economy contracts over the next 6-12 months, there'll be a lot of financial managers window-dressing their accounts with Berkshire Hathaway. When he starts snorkeling up subprime mortgage companies (or selling them reinsurance) there'll be more Berkshire buyers. Any demand for this thinly-traded stock will send it soaring again, an event that'll be completely irrelevant from whatever the intrinsic value says the stock's price "should" be.

Another question would be why you're selling. Deathwatch? Single-stock risk? Reversion to the mean? Volatility? If you're not applying this same sell discipline to the rest of your portfolio then it's worth determining why you feel that way about Berkshire Hathaway. The intrinsivaluator is just an estimate, not a precision measuring device, and it doesn't predict. It certainly can't help you sleep at night.

I read plenty of stories of people crying about selling Berkshire Hathaway for what turned out to be low prices. I'd like to hear stories of those who've successfully made short-term money out of trading the stock. And frankly, with Berkshire now at 35% of our ER portfolio (and 54% of the kid's college portfolio), I'd be happy to read a solid assessment of the stock's intrinsic value resulting in a sell decision.

[cardude]

Why am I considering selling?

Berkshire has grown to 52% of my portfolio, so some of the worry is elevated single stock risk.

And yes, the "deathwatch" is another concern. I can see Buffett running Berkshire for another 5 years, but the probability of 10 years out is lower, so there is risk of a good sized share price correction imo, and that would hurt if I had to rely on selling Berkshire for living expenses.

Do you sell off any Berkshire for living expenses, or do you sell other assets (or just use cash) to fund your living expenses?

I'm really not excited about the idea of selling any Berkshire right now, so I guess I'm looking for someone to talk me out of it. I've only sold once to shift some money to another manager, and that has not gone well so far.

If I quite tomorrow I would have enough cash to last me about 5 years using current living expenses (high), so maybe I shouldn't even be worrying about it.

Thanks for the input..............

[Nords]

Quote:

Originally Posted by cardude Do you sell off any Berkshire for living expenses, or do you sell other assets (or just use cash) to fund your living expenses?

Not yet. We keep two years' expenses in cash and we've been skimming off our last mutual fund. We've been liquidating Tweedy, Browne Global Value into ETFs (this summer and the last couple months) and we took a year's expenses out of that. We're just about at our "final" asset allocation (still getting rid of a few individual stocks), but at some point we're going to have to do something about Berkshire.

I guess in January we'll cash out the Tweedy Browne in the kid's college fund (she's a sophomore now), and then think about the Berkshire.

Spouse has pointed out that we'll feel stupid either way about her college fund-- we'll feel stupid for cashing out the Berkshire if she gets a free ride through USNA/NROTC, or we'll feel stupid for cashing out the Berkshire when it zooms up another 20% over the rest of high school. The only way we'd feel less stupid about Berkshire would be if it crashed, and then we'd feel stupid about its effect on our ER portfolio.

Sounds like I'm talking myself into making 2008 a socko cap gains year. Probably no better year to do so.

Quote:

Originally Posted by cardude If I quite tomorrow I would have enough cash to last me about 5 years using current living expenses (high), so maybe I shouldn't even be worrying about it.

Yep. As long as you can sleep at night!

[cute fuzzy bunny]

Heroes and zeroes are made on heavy single stock bets...diversity gives you staying power.

I retired because I got out of the stock that wouldnt stop going up. Stupid decision the first 7 years that I sold, smart decision over the last 7.

[Darryl]

Just bought some B a few weeks ago and it's up over 6% since then I Just wish I would have bought it 6 months ago. I expect to own this stuff for a long time.

[windsurf]

Berkshire is a pretty unusual "single stock." I sure don't look at it the way I look at, say, Starbucks or Washington Mutual.

[Olav23]

Wouldn't it be closer to classify it as a CEF, or possibly an activist hedge-fund of sorts?

[ziggy29]

Quote:

Originally Posted by Olav23 Wouldn't it be closer to classify it as a CEF, or possibly an activist hedge-fund of sorts?

It's certainly fairly unique in terms of a single-company stock. Berkshire is a conglomeration of many strong and diverse businesses and provides more diversification on one stock than just about any other. That's at least true in terms of operating results, not necessarily short-term stock price action.

In the long term I'm comfortable having a lot of money in Berkshire. In the short term I have less confidence about Mister Market's pricing decisions. I'd hate to have to sell at a time when BRK was out of favor even if its businesses were performing well.

If I needed to fund retirement income for the next five years, I'd consider selling a little BRK to build that cash and fixed income "bucket" of income. If I didn't need anything for 5+ years, I'd probably hold everything. Though there is a temptation to sell some, keep the cash aside and buy a lot more BRK if the stock was ravaged by fear and uncertainty about Buffett's health or continued leadership in the company. The businesses Berkshire owns are not dependent on him for operations and they all have fine managers.

[cute fuzzy bunny]

All of this seems to ignore the plausibility that a lot of fear, uncertainty, and selling would occur if something bad happened to one guy. And while that might create a buying opportunity it might be years before the price recovery took place. A lot of people would want to see for themselves that things kept running well without him before they'd come back in.

Had I never seen a Berkshire annual meeting I might not feel this way. I saw a bunch of groupies, not investors.

I'm figuring the institutional holders will dump the microsecond they get any bad health news. Fairly huge institutional holdings of this item.

Dont get me wrong: its a really good investment and a terrific diversifier. I just wouldnt hold more than 15-25% of my assets in it (or any one single holding) unless I could afford to get by without a chunk of that money on the flimsiness of one persons health.

But then again, I could be totally mistaken. Warren might retire or die and people might see that as a buying opportunity, the price might shoot up, and everyone might be loaded.

[Nords]

Quote:

Originally Posted by cute fuzzy bunny All of this seems to ignore the plausibility that a lot of fear, uncertainty, and selling would occur if something bad happened to one guy. And while that might create a buying opportunity it might be years before the price recovery took place. A lot of people would want to see for themselves that things kept running well without him before they'd come back in.

I think the stock's price trades below intrinsic value precisely because of this uncertainty. Buffett has to show that he can train a few disciples before people will relax. It'll be interesting to read the update in the next annual report.

Quote:

Originally Posted by cute fuzzy bunny Had I never seen a Berkshire annual meeting I might not feel this way. I saw a bunch of groupies, not investors.

People keep confusing the term "annual meeting" with "blowout party & sales convention". (Borsheim's does more business that May weekend than any other time of the year, including Christmas & Valentine's.) If this was Sturgis or a Intel chip launch then no one would be fretting about Harley's or Otellini's health. I think a lot of companies are missing an opportunity to jazz up their annual revenues meetings with displays, sales discounts, and other social events. But maybe the key is free beer...

[ziggy29]

Quote:

Originally Posted by cute fuzzy bunny Had I never seen a Berkshire annual meeting I might not feel this way. I saw a bunch of groupies, not investors.

Well, heck, Buffett himself has called the annual meeting "the Woodstock of capitalism" in his annual letters. I do agree that Berkshire, like Apple, has a more cult-like following than virtually any other business (but that fact doesn't invalidate the soundness of the investment). Nevertheless, I do agree that the "chairman's mortality" issue might make it a good idea to lighten up and look for a deeply discounted business when he's no longer in the picture. It could take a while to unlock the value but those with a longer-term view will probably see their patience rewarded.