BRK for new money when Buffet is 88, Munger is 95

[WhenIsItTime]

I've never invested in Berkshire. Obviously my loss historically. My question is, how do the wise folks of this forum view the investment prospect on go forward basis with the obvious concern the 2 key leaders are of advanced age.

 

[GrayHare]

It's more than just the founders, it's the style. I expect Berkshire's tax-efficient approach to be continued after the founders pass.

 

[fh2000]

People had the same concerns about Apple after Steve Jobs, but they survived. So, I will keep my BH for long term.

 

[Lakewood90712]

Berkshire will not fall off a cliff when they pass on. These two curmudgeons have told of succession plans in place.

That being said, S & P , or dow index fund would be my choice for new funds at this time.

 

[Jerry1]

People had the same concerns about Apple after Steve Jobs, but they survived. So, I will keep my BH for long term.

I don’t agree. I just think the degradation is a slow process. Apple has a lot going for it, but without Jobs, I don’t see the creative wherewithal to stay at the top. Someone may step in, but I don’t see it yet and I do see the signs of the company going downhill. Again, slowly, but it’s happening.

A few weeks ago, Cramer talked about Apple buying Epic. Something like that, getting into healthcare information, could be a ticket to their next upturn, but right now, it’s not happening. At least not publicly.

BH is a completely different animal. The companies they own are run on their own. I think BH will be just fine. Their problem is size and finding deals that they can capitalize on.

 

[foxfirev5]

Berkshire will not fall off a cliff when they pass on. These two curmudgeons have told of succession plans in place.

That being said, S & P , or dow index fund would be my choice for new funds at this time.

+1 Even Warren has subtlety suggesting this path for some time.

 

[NW-Bound]

BRK is so big now, the chance of it outperforming is not that good.

I do own BRK and will keep it as a more long-term conservative holding, in order to balance out the growth stocks that I hand pick.

 

[Sunset]

I have had BRK for a long time, they are old, have been old for over a decade, and the succession plan looks pretty well mapped out which is comforting.

It is an odd, but large number of businesses and investments, and the fee being nearly 0 is great.

One thing I have come to appreciate is they don't pay dividends, so the allows one to invest large sums of money, and not have yearly income showing up for that money. People can find this good for managing their income streams.

Example: IL taxes dividends, so I can buy BRK so I don't pay the IL crooks , and after we move out of State, then I can cash in my BRK.

 

[fh2000]

I don’t agree. I just think the degradation is a slow process. Apple has a lot going for it, but without Jobs, I don’t see the creative wherewithal to stay at the top. Someone may step in, but I don’t see it yet and I do see the signs of the company going downhill. Again, slowly, but it’s happening.

Steve Jobs passed away on October 5, 2011. On that day, shares of Apple closed at a split adjusted price of $50.53 per share. Last Friday, Apple closed at $172.97.

https://www.fool.com/investing/2019/02/15/warren-buffett-sold-apple-shares-berkshire.aspx
"Apple is still the largest stock holding owned by Buffett and company by a wide margin, with the 249.5 million shares the company still owns making up more than 21% of Berkshire's portfolio. "

So, I directly and indirectly own Apple shares. For now, I will keep both and watch cautiously.

 

[LOL!]

Does anybody worry about their personal succession plan when they die?

If I was holding BRK.A/B, then my heirs would get the stock and need to decide what to do with it. I read from time to time how heirs have a sentimental attachment to Mom's old stocks or grandpa's shares. That is, they don't want to sell shares no matter how crappy they are or how things have changed.

So BRK could end up being an albatross around someone's neck.

The above goes for all individual stocks. It is a problem solved by using index funds.

 

[pb4uski]

BRK is so big now, the chance of it outperforming is not that good.

I do own BRK and will keep it as a more long-term conservative holding, in order to balance out the growth stocks that I hand pick.

I agree... their outperformance was in the long past... since 2008 they have generally underperformed the S&P 500.

https://www.portfoliovisualizer.com...cation1_1=100&symbol2=BRK.A&allocation2_2=100

https://www.portfoliovisualizer.com...cation1_1=100&symbol2=BRK.A&allocation2_2=100

https://www.portfoliovisualizer.com...cation1_1=100&symbol2=BRK.A&allocation2_2=100

 

[athena53]

I do own BRK and will keep it as a more long-term conservative holding, in order to balance out the growth stocks that I hand pick.

That's my attitude. When I first looked at buying it 15+ years ago and was concerned about Buffet's age, my advisor said that once when there were rumors he was seriously ill the stock dropped about 10%. I found that risk manageable so I bought it. And, like Sunset, I LOVE the tax-efficiency. I haven't put new money into it since my original purchases.

I haven't attended a meeting in awhile (I live 3 hours away) but I remember that Buffet once said that the people he had ID'd to succeed him were busy running their companies and that bringing them into the office in Omaha to somehow "shadow" him would be counter-productive. As with just about everything else he says, it makes perfect sense.

Of course, for the life of me I can't figure out why he and Charlie won't ER!

 

[Cassius King]

One of the best write-ups you will read on Berkshire Hathaway. A large part of my portfolio is and will be Berkshire stock.

https://static.fmgsuite.com/media/documents/a7b56d26-b22e-4d16-8b65-7fe23f0ea19d.pdf

 

[free2020]

I agree... their outperformance was in the long past... since 2008 they have generally underperformed the S&P 500.

https://www.portfoliovisualizer.com...cation1_1=100&symbol2=BRK.A&allocation2_2=100

https://www.portfoliovisualizer.com...cation1_1=100&symbol2=BRK.A&allocation2_2=100

https://www.portfoliovisualizer.com...cation1_1=100&symbol2=BRK.A&allocation2_2=100

True, the past 10-year performance has been lagging.

But, much of the index outperformance versus BRK can be explained by the wild swing between 2008 and 2009. There is data to suggest that BRK is breaking away from the index over the past 3- year and 5-year periods. Understand those are short term but if my thinking is correct, 10 year performance comparisons starting 2010, 2011..etc should look better. Cautiously optimistic that Berkshire materially outperforms over the next decade.

2013----https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults
2016 -----https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults

 

[Totoro]

I don't see it really, but who knows. Return on equity is roughly on par with the S&P 500, and recently a very big oops with Kraft Heinz.


Risk adjusted it should do a bit better, 1 to 2% on top of SPY would be quite an achievement I think. At the same time, if Buffet goes I seem to remember his funds will be divested in a 10 year time frame or so. That in itself could change the character quite a bit.

 

[sengsational]

If one wished to really delve into if a personality is responsible for a company's success, you could read a book called "Good to Great". A good fraction of the book covers why some companies continue to become "Great" after earlier leaders are gone. I'm sure I'm doing an injustice to the more nuanced concepts in the book, and this might be considered a "spoiler", but I recall the gist was that if there wasn't a strong culture that survived past the earlier leaders leaving, the continued success of the company was less assured. The book seemed scientific in it's selection and analysis of historical companies and came up with compelling thoughts on the factors that caused some to continue on to greatness, and others to flounder.

 

[WhenIsItTime]

Concerns me that Buffet still does all the talking for company. If succession plan so solid, why not bring those folks out from behind curtain to built trust?

Also, Buffett recently said it takes a big acquisition to make it worth BRK’s time. With all the cash, easy for successor to make big mistakes. Think about GE doing deals to hit #’s, now selling to get back to growth profile.

 

[free2020]

If one wished to really delve into if a personality is responsible for a company's success, you could read a book called "Good to Great". A good fraction of the book covers why some companies continue to become "Great" after earlier leaders are gone. I'm sure I'm doing an injustice to the more nuanced concepts in the book, and this might be considered a "spoiler", but I recall the gist was that if there wasn't a strong culture that survived past the earlier leaders leaving, the continued success of the company was less assured. The book seemed scientific in it's selection and analysis of historical companies and came up with compelling thoughts on the factors that caused some to continue on to greatness, and others to flounder.

Jim Collins in the G2G book came upon a seminal idea that he saw in those 15 companies: The hedgehog. All of these companies had a hedgehog principle that was one of the keys to their success. For example Walgreens: 5 mile drive max in those markets they chose to serve, the corner store entry/exit, intersection lot etc. Not that Collins has described Berkshire but it has to be their ability to move capital between subs in a tax efficient manner. I would also like to think that their loyal shareholder community is another one, a result of the earned trust. This will be put to test post-Buffett.

 

[Cassius King]

Buffett stated that he had a whale on the hook this past 4th quarter. Unfortunately there was a private equity/hedge fund also interested and he won't get into a bidding war with an entity that will leverage up to overpay for a company. As a result of this, he gave a shareholders quite a strong message in the last annual that he'll be buying back stock plentifully during 2019.

Greg Abel and Ajit Jain will be mic'd up for the shareholders meeting, just not sitting at the table with Charlie and Warren.

*I own BRK stock and will continue to add B shares sub $200.

 

[aja8888]

One of the best write-ups you will read on Berkshire Hathaway. A large part of my portfolio is and will be Berkshire stock.

https://static.fmgsuite.com/media/documents/a7b56d26-b22e-4d16-8b65-7fe23f0ea19d.pdf

Thanks, great read.

 

[kgtest]

I've never invested in Berkshire. Obviously my loss historically. My question is, how do the wise folks of this forum view the investment prospect on go forward basis with the obvious concern the 2 key leaders are of advanced age.

The founder of the company I work for passed away long ago. Like in 1920 or something. The company still rolls on along with record profits this year.

It's Berkshire, they will always retain top talent. Top talent is supposed to make good decisions, which in turn means profitability for the shareholders.

 

[Totoro]

The book seemed scientific in it's selection and analysis of historical companies and came up with compelling thoughts on the factors that caused some to continue on to greatness, and others to flounder.

After the fact explanations are easy, and usually wrong.

Among those stalwarts brought up as shining examples: Fannie Mae, Circuit City and Pitney Bowes. Likewise, earlier book "Built to Last": Motorola, Sony, Citicorp, Ford. Better off throwing darts.

 

[ziggy29]

It's Berkshire, they will always retain top talent. Top talent is supposed to make good decisions, which in turn means profitability for the shareholders.

Plus, the nature of their business is to find good businesses with good management, and leave them alone to do their job. I suspect this philosophy, and people capable of executing it, will largely remain in place after Messrs. Buffett and Munger are gone. That said, anything that results in a leadership change at the to could produce some panic selling that might make for a buying opportunity. Nothing will change about the underlying business or their management structure when that happens. At worst, decisions regarding allocation of capital might be made slightly differently.

 

[sengsational]

After the fact explanations are easy, and usually wrong.

Among those stalwarts brought up as shining examples: Fannie Mae, Circuit City and Pitney Bowes. Likewise, earlier book "Built to Last": Motorola, Sony, Citicorp, Ford. Better off throwing darts.

I had exactly that reaction. That's why I said "seemed scientific". Although it couldn't be a double blind it was formulted as one. But, as we agree, the findings in such an arrangement are suspect. The reason I mentioned it was because, despite the overall flaws, there is a lot of insight about the factors that change when leadership changes that I never would have come up with on my own.

 

[pb4uski]

True, the past 10-year performance has been lagging.

But, much of the index outperformance versus BRK can be explained by the wild swing between 2008 and 2009. There is data to suggest that BRK is breaking away from the index over the past 3- year and 5-year periods. Understand those are short term but if my thinking is correct, 10 year performance comparisons starting 2010, 2011..etc should look better. Cautiously optimistic that Berkshire materially outperforms over the next decade.

2013----https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults
2016 -----https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults

Your links don't work. After you get the parameters that you want and analyze them and have results, you need to click on the Link button.... that will redo the website address to include the parameters... and then include that website address (the one with the parameters) in your post.