Berkshire Hathaway Now?

[Ed_The_Gypsy]

Nords,

I am taking a flyer on BRK-B. Bought one share this morning. I figure to hold on to it until one of us (Warren or me) croaks.

My first stock in many years. I am borrowing Uncle Mick's hormones today.

[RunningBum]

What % of BRKA and BRKB does Buffet own, and how will those be affected when those shares are liquidated by/for the Gates Foundation? Has any of that liquidation happened yet?

[windsurf]

I put an order in at Vanguard (IRA) last night for 10 shares. Already had 5 bringing the allocation up to a little over 6% of sheltered funds. I plan to hold them until Nords gives the sell signal or when Warren turns 90, whichever comes first.

[Nords]

Quote:

Originally Posted by RunningBum What % of BRKA and BRKB does Buffet own, and how will those be affected when those shares are liquidated by/for the Gates Foundation? Has any of that liquidation happened yet?

Page 42 of the annual report (http://www.berkshirehathaway.com/2007ar/2007ar.pdf) lists 1,081,024 "A" shares and 14,000,080 "B" shares outstanding at the end of 2007. (An "A" share is worth 30 "B" shares.) The report also says those are an equivalent 1,547,693 "A" shares.

Buffett's 2006 letter to the Gates foundation says that he's earmarked 10 million "B" shares for the Gates Foundation over the next 20 years, giving them up to 500,000 shares a year. (The number of donated shares actually drops each year since he gives 5% of the remaining balance. See the details at http://www.berkshirehathaway.com/donate/bmgfltr.pdf) He's also giving away a total of another 2,050,000 "B" shares to his kid's foundations and his first wife's foundation over the next 20 years in the same manner. So starting in July 2006, over the next 20 years he's giving away the equivalent of 401,667 "A" shares. All five foundations are more or less required to cash out his donations within the year, so none of the foundations will accumulate a position in Berkshire.

Buffet's SEC filing at the end of 2007 (SEC FORM 5) lists 2,564,355 "B" shares and 350,000 "A" shares, the equivalent of 435,478 "A" shares. So right now he owns 28% of the company but by the time he's nearly 96 years old he'll be down to less than 5%. Chairman/son Howard Buffett, directors, institutions, and others also have Berkshire shares which you could see summarized at places like BRK-A: Major Holders for BERKSHIRE HATH HLD A - Yahoo! Finance .

Berkshire's daily "B" share volume is rising and has already at least doubled over the last five years, which could be considered both good and bad. Volatility will be reduced and Berkshire may someday join the S&P500. But people are probably already day-trading the shares and someday an options market could start up. From the charities alone roughly an extra 600,000 "B" shares/year will hit the open market-- at least 3000 each trading day where volume is already 20,000 shares/day.

Upon further consideration of the idea hat Buffett is a one-of-a-kind with no replacement, I've decided that's hogwash. He found Lou Simpson & Ajit Jain through the typical executive-search process and he'll continue to do the same with future Berkshire execs and his CIO candidates. Buffett used to be much more reclusive & secretive but he's deliberately raised his profile over the last 10 years to attract motivated candidates. He's cherry-picking the best and I suspect that he's better at training his successors than he gets credit for. Howard Buffett is expected to assume Chairman when Buffett steps down or dies, and Howard's main job will be to preserve Berkshire's culture. It's reasonable to expect that he & Gates (also on the board) will be able to preserve the current system. But, hey, I won't complain if they start paying dividends.

We hold ~23% of our ER portfolio in Berkshire because we can handle the volatility and the single-stock risk-- I have a COLA'd pension and spouse will be getting her own in 2022. We also bought at a low in 2001-2002 and would do the same again if our allocation dropped below 18%. We have no further plans to sell unless our allocation gets above 28%, so don't depend on our signals.

Some (former) Berkshire holders have lost quite a bit of money, especially in the 1980s (when the shares dropped 50%) and again in the late 1990s. So don't buy Berkshire shares unless you're a long-term shareholder (five years or more) or you're using testosterone money. If the Buffett transition is messy then the shares could take another 50% hit in a matter of days.

Other alternatives to Berkshire include the Danaher brothers and Eddie Lampert. I fear that neither have both Buffett's reputation and his ability. (Of course I could be wrong.) If anyone is aware of another Buffett wannabe with publicly-traded shares then I'd love to hear about it, but I think that "Chainsaw Als" are much more common than Buffetts...

[brewer12345]

Quote:

Originally Posted by Nords Other alternatives to Berkshire include the Danaher brothers and Eddie Lampert. I fear that neither have both Buffett's reputation and his ability. (Of course I could be wrong.) If anyone is aware of another Buffett wannabe with publicly-traded shares then I'd love to hear about it, but I think that "Chainsaw Als" are much more common than Buffetts...

I think Lampert isn't fit to tie Warren's shoes. The only guys out there that I know of that look like Berkshire are LUK. The founding partners are no spring chickens, but its not as much of a one-man show as BRK. The moves I see LUK making now tell me that they have in no way lost their edge. But I will freely admit that I haven't any idea how to value LUK.

[katwoman]

Quote:

Originally Posted by brewer12345 I think Lampert isn't fit to tie Warren's shoes. The only guys out there that I know of that look like Berkshire are LUK. The founding partners are no spring chickens, but its not as much of a one-man show as BRK. The moves I see LUK making now tell me that they have in no way lost their edge. But I will freely admit that I haven't any idea how to value LUK.

I LUK! Till death do us part.

[AzDreamer]

I found an article where a short seller listed his reasons for avoiding Berkshire Hathaway. This is just someone's opinion, please don't shoot the messenger.



--


No. 1, there will never be another Warren Buffett. I respect and admire him considerably, but in part because of the lucrative compensation set-up in the hedge-fund industry, the investment landscape now is inhabited by a lot more smart and aggressive managers who comb for value -- far more than there were 10, 20 or 30 years ago. Berkshire Hathaway's outperformance versus the market has been narrowing in the last decade, and I expect that will continue. Investors are going to dump the shares if Buffett is no longer at the helm, though I'm not signaling that he plans to step down anytime soon.


What else concerns you about Berkshire?


More than anything, I'm short Berkshire because of Buffett's recent investment-style drift. In the past five years, Buffett frequently called derivatives "financial weapons of mass destruction." Yet, very much out of character, he immersed himself in several large and thus far unprofitable derivative transactions, leading to an unrealized $1.6 billion pretax loss in the first quarter. I'm also short Berkshire because the salad days for insurance, which is the cornerstone of Berkshire's business, are over. Also, Berkshire's premium valuation seemingly has been a byproduct of the credit crisis, and the perception of the company as a safe haven. Berkshire's shares might underperform as some of the deflated financial companies regain their footing. And Buffett is substantially exposed not only to financials -- he owns large positions in Wells Fargo [WFC], Bank of America [BAC] and American Express [AXP] -- but also to a weakening housing market through his ownership of Clayton Homes.

Barron's Online
Confessions of a Short Seller


Confessions of a Short Seller: Financial News - Yahoo! Finance

[Hamlet]

Some of this is certainly valid, but some of it is extremely silly.

I agree that Berkshire can no longer dramatically outperform the market. It's just too big. I question whether those "smart and aggressive" hedge fund managers have much to do with it though. Seems to me their responsible for giving Buffett many of his opportunities by increasing volatility.

I think that anyone that thinks of his recent large derivative bet as a negative had better think about what that means. He's basically bet that the stock market won't be lower in 15 or 20 years. He got paid $4.5 billion to make that bet.

I think his exposure to strong financials is a long term positive.

Note- Does BRK still own BAC? I thought that he had sold it.

Quote:

Originally Posted by AzDreamer No. 1, there will never be another Warren Buffett. I respect and admire him considerably, but in part because of the lucrative compensation set-up in the hedge-fund industry, the investment landscape now is inhabited by a lot more smart and aggressive managers who comb for value -- far more than there were 10, 20 or 30 years ago. Berkshire Hathaway's outperformance versus the market has been narrowing in the last decade, and I expect that will continue. Investors are going to dump the shares if Buffett is no longer at the helm, though I'm not signaling that he plans to step down anytime soon. What else concerns you about Berkshire? More than anything, I'm short Berkshire because of Buffett's recent investment-style drift. In the past five years, Buffett frequently called derivatives "financial weapons of mass destruction." Yet, very much out of character, he immersed himself in several large and thus far unprofitable derivative transactions, leading to an unrealized $1.6 billion pretax loss in the first quarter. I'm also short Berkshire because the salad days for insurance, which is the cornerstone of Berkshire's business, are over. Also, Berkshire's premium valuation seemingly has been a byproduct of the credit crisis, and the perception of the company as a safe haven. Berkshire's shares might underperform as some of the deflated financial companies regain their footing. And Buffett is substantially exposed not only to financials -- he owns large positions in Wells Fargo [WFC], Bank of America [BAC] and American Express [AXP] -- but also to a weakening housing market through his ownership of Clayton Homes. Barron's Online Confessions of a Short Seller Confessions of a Short Seller: Financial News - Yahoo! Finance

[Enuf]

Anyone think BRK B is a good buy right now? The wife went all cash in Oct/Nov and BRK B was near 5,000 when she sold and now is near 3,800.

Looks bargain to me.

[windsurf]

Gulp . . . I sure hope so.

[ziggy29]

I'm close to buying more BRK at these levels. The funny thing about Berkshire is that with its acquisition strategy and $50 billion in cash, bad markets like these create opportunities for great future growth for Berkshire. In other words, the worse things are in the market NOW, the better they will likely be for Berkshire in the next few years. So when the market takes BRK down with the entire market, it's a great opportunity.

Buffett made money hand-over-fist for Berkshire after the 1973-74 bear market allowed him to buy a lot of blue chip companies for ridiculous bargain prices. A bet on Berkshire now would largely be a bet that he could repeat that performance.

[Nords]

Quote:

Originally Posted by windsurf Gulp . . . I sure hope so.

Heck, I'm tempted to buy at these prices.

Quarterly report should be out the first weekend in August.

[Enuf]

Yeah, the price is attractive and my wife really feels the timing is right to get back into the market, but is volatility an issue.

I notice for instance that end of 1st qtr 07, BRK B got really volatile. Any idea of events within Berkshire that might have triggered that.

[kcowan]

Quote:

Originally Posted by Enuf I notice for instance that end of 1st qtr 07, BRK B got really volatile. Any idea of events within Berkshire that might have triggered that.

Insurance underwriting losses and writedown of derivative holdings.

[Nords]

Quote:

Originally Posted by Enuf I notice for instance that end of 1st qtr 07, BRK B got really volatile. Any idea of events within Berkshire that might have triggered that.

Quote:

Originally Posted by kcowan Insurance underwriting losses and writedown of derivative holdings.

The current thinking is that Buffett has switched his tone to talking down the stock in order to manage expectations. The lastest annual letter is a good example, and one of the reasons for the 20% drop.

Daily share volume has more than doubled over the last decade. I don't know if that's been proven to contribute to a stock's volatility.

[Art G]

We hold ~23% of our ER portfolio in Berkshire because we can handle the volatility and the single-stock risk-- I have a COLA'd pension and spouse will be getting her own in 2022. We also bought at a low in 2001-2002 and would do the same again if our allocation dropped below 18%. We have no further plans to sell unless our allocation gets above 28%, so don't depend on our signals.

I don't think I'd classify Berkshire as a single stock holding. That's like calling a mutual fund a single stock.

[Enuf]

Glad someone brought up the caveat about retirees with COLA'd pensions. It's a bit less stressful to those of us with COLA'd pensions. As I watch my Bernsteinian portfolio drop 21% in 9 months, I sleep pretty easy knowing I have a pension that covers 95% of my expenses. And should continue to do so.

Not so easy for those who are counting 100% on their invested nestegg to return a 4% SWR.

My question about BRK B is not intended to suggest that I suggest it. I figured some had good insight from being long term holders and appreciate their sharing it.

The volatility seems vexing because Buffett looks fit to me and vigorous and would love to go out on a high. So maybe he stays a bit longer.

[Milton]

Quote:

Originally Posted by FinanceDude Charlie Munger is also in his 70's, and he won't live forever either.

Actually he is 84 (born January 1, 1924): 6.5 years older than Buffett.

[james22]

Tomorrow?

[unclemick]

Grrrr - one of those I've watched for twenty plus years and for whatever reason never bought - and kicked myself for at least the same amount of time for lack of hindsight.

JNJ is another one.

heh heh heh - could be a long winter hormone wise.