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Why are they commenting on bitcoin.. do they think they know enough? I mean the basic rule they follow is don't invest in what you don't understand. So they understand enough to trash it?
I do like the explanation that its not always Buffett making stock picks and at this point some might be picked without them knowing anything about the company. That would explain the small crypto bank investment they have.
A complete guide to everything BRK
Including this gem:
Diet: Likes steaks, and eats candies from See's, which Berkshire owns. Estimates that one-fourth of his caloric intake comes from Coca-Cola Co, a longtime Berkshire investment.
Employees: 371,653
Employees in main office: 26, including Buffett
https://www.reuters.com/business/warren-buffett-berkshire-hathaway-glance-2022-04-28/
What happens to BRK holdings of ATVI if acquisition by MSFT actually closes?
LOL! Hope you caught everything this am on CNBC, including Mario Gabelli. Jimmy Buffett and Bill Murray are there and will be on tomorrow.
PC, You revving up your private jet and heading to Omaha? Last year I watched the entire Q&A session... about 5 hours long. Pre-show starts at 9:45A ET April 30
Click to watch:
https://www.cnbc.com/brklive22/
Main advantage is class A has more voting power which means almost nothing currently, as long as Buffett lives and has control of the company,
I'm not aware that one class gets extra goodies at the SHM, Don't think so.
"How Many Berkshire Hathaway Shares Are There?
"There are 619,940 Class A (BRK.A) shares and 1.3 billion Class B (BRK.B) shares outstanding."
brkA get anything extra? One can dream...
BRK's Nebraska Furniture Mart SH Promo
"Our Berkshire sale will take place this year starting on, Wednesday, April 20 – Tuesday, May 3
Check back soon for additional sale updates and information."
"What can I use to prove shareholder status?
* A statement from an investment account showing you own Berkshire stock
* Stock certificate
* A copy of an e-mail or direct mail from us about this* year's sale
* Any previous years' shareholder badge
https://www.nfm.com/berkshire/?utm_source=DoubleClick&utm_content=BerkshireV1-Q2-22&utm_medium=display&utm_campaign=Remarketing
With BRK up 31% in past 12 months vs 9% for the S&P, its SHM will be a joyous party. Perhaps too crowded.
Not this year but always looking for good trip ideas. BRK SHM sounds like it could be fun. Thanks good advice
Not like a raffle, but it may be nearly too late to get tickets. Are you thinking of attending in Omaha? I've never gone mainly because it's not easy to get to Omaha from where I live.
Besides, it's easy to watch all or part of the SHM online live or afterwards. https://www.cnbc.com/brklive22/
As a geezer myself, I'm impressed with ability of both "boys" to sit and talk -- and drink Coke products -- for hours with nary a potty break. Munger, at 98, can hold a scowl for hours, especially when bitcoins and gamified trading apps are discussed.
The SHM meeting always includes a lengthy Q&A session with Buffett and Munger. You'll become a better investor by seeing it. And there will be some surprises.
Is like a raffle where I have better odds of getting invited if I have more shares? Omaha could be a fun trip
Be aware that owning even one share of either BRK stock class can get you tickets to the upcoming SHM in Omaha on April 30. (check on the deadline for that) There are also some shareholder discounts on products. Perhaps even from Geico Insurance and Nebraska Furniture Mart. Haven't checked on that lately. The deals come and go.
Ha ha! Don't think you'll get a discount at DQ. That's one I'd use often.
My concern was mostly that those two people won't be managing for next few decades. I started accumulating some BRK.B for holding
What a brilliant holding BRK has been for several years. I have about 17 individual stocks, plus index funds. BRK has been the best performer over most recent time frames. YTD, which includes the Ukraine war and the supply/chip bottlenecks, BRK is roughly tied for first place with fellow insurer, TRV.
I'll be watching the SHM from beginning to end.
My guess is that his one came from one of the super "T's", either Ted Weschler or Todd Combs. Buffett's decision to bring both of them on and move them to Omaha (they both profess to absolutely love Omaha) was brilliant. And when Buffett is gone they will keep right on going after being there with him for so many years. The best modern day buy on BRK shares may come on an ill-advised sell down of BRK shares when Warren passes, as BRK will not skip a beat in terms of core intrinsic value.
Full WSJ article on HP deal:
"Warren Buffett’s Berkshire Hathaway Inc. BRK.B -0.32% has built a stake of more than 11% in computer-and-printer maker HP Inc., HPQ +15.37% marking another foray into computing by the once technology-averse billionaire investor.
At Wednesday’s closing share price the holding, of nearly 121 million shares, was worth about $4.2 billion. The share purchases were disclosed in two securities filings Wednesday.
After long expressing wariness about investing in tech, the 91-year-old Mr. Buffett has taken big positions in two other storied tech brands in recent years, starting with an ill-fated bet on International Business Machines Corp. before making a far more successful investment in Apple Inc. AAPL -0.40%
Berkshire began betting on IBM IBM -1.65% in 2011 but within a few years had reversed course and had sold out most of its stake by early 2018. Mr. Buffett’s colleagues first took a $1 billion toehold in Apple in 2016, and since then Berkshire has increased its stake, to nearly 5.6% as of the end of 2021. The Apple position was worth some $161 billion at the end of last year and is among Berkshire’s biggest holdings.
HP shares rose 11% in early premarket trading Thursday. Berkshire’s Class B shares were down 0.4%.
The purchase makes Berkshire the single largest shareholder in HP. Before this, HP’s biggest investors were Vanguard Group and BlackRock Inc., with stakes of nearly 11% and slightly more than 10%, respectively, according to S&P Global Market Intelligence data.
The Omaha, Neb.-based conglomerate has made a string of investments this year in more traditional sectors of the economy. It agreed to buy the insurer Alleghany Corp. for about $11.6 billion last month, and recently boosted its position in Occidental Petroleum Corp. to nearly 15%.
The deals add to Berkshire’s array of railroad, energy and consumer businesses, among other holdings. It reported $90 billion in net earnings for 2021, a record.
“Whatever our form of ownership, our goal is to have meaningful investments in businesses with both durable economic advantages and a first-class CEO,” Mr. Buffett said in a letter to shareholders in February. “We own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves.”
Palo Alto, Calif.-based HP lifted its annual profit outlook in late February. It reported strong sales of computers to businesses in the first three months of its financial year but warned that Russia’s invasion of Ukraine would dent its second quarter.
Last month, the company agreed to buy Poly, a maker of workplace communications products, for $1.7 billion in a bet on the rise of hybrid work.
While HP is synonymous with Silicon Valley, the company looks more like a classic Buffett investment than many tech startups. Although HP’s share price hit a record close last month, the stock remains modestly valued when set against its expected earnings. It trades at a price of about eight times expected earnings for the next 12 months, Refinitiv data shows.
HP also has a long history, dating back to 1939 when predecessor Hewlett-Packard Co. was founded in a Palo Alto garage. That company split in two in 2015, with its business-focused division becoming the separately traded Hewlett Packard Enterprise Co."
https://www.wsj.com/articles/warren-buffetts-berkshire-hathaway-reveals-4-billion-stake-in-hp-11649324639
Had to research HP which split in two in 2015. You are correct that BRK is buying HPQ, not the HPE company. HPQ is the consumer hardware portion of the old company, PCs and printers; HPE is more enterprise and cloud focused.
HPQ (market cap 45 b) sells at 7.4 PE while HPE (market cap 20 billion) has a PE of 5.6. Both pay dividends of around 3.0%.
Got anything to add? I know very little about both firms.
This is a "wow" move for Buffett and BRK. HPQ has a 3% divi and trades at very favorable PE of 6.4 prior to the announcement and runup this am..
Consistent? Like with the same two people running it for decades, and the same core business, Insurance? And with the two execs making the same wage... $100,000 a year.
They could pay dividends TODAY but their internal surveys have always shown that about 90% of BRK shareholders -- often rich old geezers -- prefer if the firm's considerable profits are manifested as lower taxed long term capital gains (the taxation of which can be wiped out at death).
Watch the BRK SHM in a few weeks and see 40,000 utterly thrilled shareholders. Or go to the Omaha airport and see all the private jets lined up.
--
What's with BRK buying a considerable chunk of HP? Will he seek full or partial control of it? That will be interesting to see.
Woohoo now they just need to stay consistent for a few decades and I'll be happy. What stops them from issuing dividends once Munger and Buffett are no longer on the board?
Maybe he doesn't know but he is investing in photonics (silicon photonics)
"Berkshire Hathaway Builds New $4.2B HP Stake"
"(Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. bought a stake in HP Inc. valued at more than $4.2 billion. Shares of the laptop maker surged as much as 10%."
"Berkshire bought some of the stock earlier this week in multiple transactions and now holds an investment of about 121 million shares in the computer company, according to a regulatory filing Wednesday.
Berkshire has increasingly been finding ways to put its money to work, "
https://finance.yahoo.com/news/buffett-berkshire-hathaway-builds-4-002931676.html
Damn brilliant visualization of BRK's passive investment portfolio since 1994. Wholly owned subs, like the BNSF and Geico, aren't shown. Click on video to get it moving. Thanks go to Ferda for posting it first on IHUB.
https://www.reddit.com/r/dataisbeautiful/comments/tou7v2/oc_warren_buffetts_2022_portfolio_update_at/
>>> Here's the secret message from Warren Buffett's newest big deals
Yahoo Finance
by Brian Sozzi
March 21, 2022
https://finance.yahoo.com/news/heres-the-secret-message-from-warren-buffetts-newest-big-deals-155340753.html
Warren Buffett has come out of hibernation in March to make some eye-popping deals, sending a clear sign to investors more broadly, says Baird strategist Michael Antonelli.
"Buffett [is] doing Buffett things. I think it reminds me and should remind [everyone] that the world is still spinning. Companies are still planning for the future, and they are still doing the things that make them great companies," Antonelli said on Yahoo Finance Live.
Indeed, Buffett's brain appears to be spinning overtime right now.
The 91-year-old billionaire investor revealed Monday that his Berkshire Hathaway will spend $11.6 billion to buy insurance company Alleghany. The deal will expand Buffett's insurance empire further beyond auto insurance player Geico and reinsurance beast Gen Re (General Reinsurance Corporation).
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years," Buffett said in a statement.
Alleghany hauled in more than $12 billion in sales last year and $1.1 billion in net earnings.
Shares of Alleghany skyrocketed 25% on the news. The stock was among the top three trending tickers on Yahoo Finance.
While dipping into the insurance space, Buffett has also gone shopping for energy names amid soaring crude oil prices in the wake of the Russia-Ukraine crisis.
Buffett scooped up another 18.1 million shares of Occidental for close to $1 billion last week. The latest purchases come hot on the heels of Berkshire spending $6 billion or so in the prior two weeks to buy up Occidental shares.
Berkshire now owns nearly 14.6% of Occidental Petroleum through his roughly 140 million shares.
"What these deals tell me is that animal spirits are still alive," Antonelli adds.
<<<
>>> Here's what Warren Buffett's favorite stock market indicator is saying now
Yahoo Finance
by Brian Sozzi
March 17, 2022
https://finance.yahoo.com/news/heres-what-warren-buffetts-favorite-stock-market-indicator-is-saying-now-174656238.html
Stocks have endured a terrible start to the year as investors fret about soaring inflation and the Russia-Ukraine war — but the pullback still doesn't look like a great buying opportunity per a tried and true measure used by legendary investor Warren Buffett.
The “Buffett Indicator” as it’s called by legions of devotees — which takes the Wilshire 5000 Index (viewed as the total stock market) and divides it by the annual U.S. GDP — is still hovering around a record high even as stock prices are well off their record levels.
In looking at the numbers, the Buffett Indicator stands at about 168.1% — down sharply from highs above 202% in August 2021, per data from GuruFocus.
“The stock market is significantly overvalued according to the Buffett Indicator,” said researchers at GuruFocus. “Based on the historical ratio of total market cap over GDP (currently at 168.1%), it is likely to return 0% a year from this level of valuation, including dividends.”
The Buffett Indicator rose to fame after a 2001 Fortune Magazine article written by Buffett and long-time Fortune writer and Buffett insider Carol Loomis.
“The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment,” explained Buffett in the article.
Seeing the Buffett Indicator still in significantly overvalued territory is interesting for a few reasons.
First, stocks have been walloped in 2022.
The S&P 500 entered Thursday's session down 10.6% for the year. That is the sixth worst start to a year for the S&P 500 ever, says strategists at LPL Financial. Further, household names such as Meta (down 39%) and Netflix (down 40%) have been pummeled.
And secondarily, Buffett himself is out there buying shares during this potential period of overvaluation.
The billionaire investor has been adding to his stake in oil giant Occidental Petroleum this month ahead of a key analyst day next week. Buffett just scooped up 18.1 million additional shares of Occidental, giving him a 14.6% stake in the company.
Shares of Occidental are up 98% year-to-date in part fueled by Buffett's involvement.
<<<
Buffett Indicator - >>> Warren Buffett On The Stock Market
What's in the future for investors--another roaring bull market or more upset stomach? Amazingly, the answer may come down to three simple factors. Here, the world's most celebrated investor talks about what really makes the market tick--and whether that ticking should make you nervous.
Fortune Magazine
By Warren Buffett; Carol Loomis
December 10, 2001
https://archive.fortune.com/magazines/fortune/fortune_archive/2001/12/10/314691/index.htm
(FORTUNE Magazine) – Two years ago, following a July 1999 speech by Warren Buffett, chairman of Berkshire Hathaway, on the stock market--a rare subject for him to discuss publicly--FORTUNE ran what he had to say under the title "Mr. Buffett on the Stock Market" (Nov. 22, 1999). His main points then concerned two consecutive and amazing periods that American investors had experienced, and his belief that returns from stocks were due to fall dramatically. Since the Dow Jones Industrial Average was 11194 when he gave his speech and recently was about 9900, no one yet has the goods to argue with him.
So where do we stand now--with the stock market seeming to reflect a dismal profit outlook, an unfamiliar war, and rattled consumer confidence? Who better to supply perspective on that question than Buffett?
The thoughts that follow come from a second Buffett speech, given last July at the site of the first talk, Allen & Co.'s annual Sun Valley bash for corporate executives. There, the renowned stockpicker returned to the themes he'd discussed before, bringing new data and insights to the subject. Working with FORTUNE's Carol Loomis, Buffett distilled that speech into this essay, a fitting opening for this year's Investor's Guide. Here again is Mr. Buffett on the Stock Market.
The last time I tackled this subject, in 1999, I broke down the previous 34 years into two 17-year periods, which in the sense of lean years and fat were astonishingly symmetrical. Here's the first period. As you can see, over 17 years the Dow gained exactly one-tenth of one percent.
Dow Jones Industrial Average
ï Dec. 31, 1964: 874.12
ï Dec. 31, 1981: 875.00
And here's the second, marked by an incredible bull market that, as I laid out my thoughts, was about to end (though I didn't know that).
Dow Jones Industrial Average
ï Dec. 31, 1981: 875.00
ï Dec. 31, 1998: 9181.43
Now, you couldn't explain this remarkable divergence in markets by, say, differences in the growth of gross national product. In the first period--that dismal time for the market--GNP actually grew more than twice as fast as it did in the second period.
Gain in Gross National Product
ï 1964-1981: 373%
ï 1981-1988: 177%
So what was the explanation? I concluded that the market's contrasting moves were caused by extraordinary changes in two critical economic variables--and by a related psychological force that eventually came into play.
Here I need to remind you about the definition of "investing," which though simple is often forgotten. Investing is laying out money today to receive more money tomorrow.
That gets to the first of the economic variables that affected stock prices in the two periods--interest rates. In economics, interest rates act as gravity behaves in the physical world. At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset. You see that clearly with the fluctuating prices of bonds. But the rule applies as well to farmland, oil reserves, stocks, and every other financial asset. And the effects can be huge on values. If interest rates are, say, 13%, the present value of a dollar that you're going to receive in the future from an investment is not nearly as high as the present value of a dollar if rates are 4%.
So here's the record on interest rates at key dates in our 34-year span. They moved dramatically up--that was bad for investors--in the first half of that period and dramatically down--a boon for investors--in the second half.
Interest rates, Long-term government bonds
ï Dec. 31, 1964: 4.20%
ï Dec. 31, 1981: 13.65%
ï Dec. 31, 1998: 5.09%
The other critical variable here is how many dollars investors expected to get from the companies in which they invested. During the first period expectations fell significantly because corporate profits weren't looking good. By the early 1980s Fed Chairman Paul Volcker's economic sledgehammer had, in fact, driven corporate profitability to a level that people hadn't seen since the 1930s.
The upshot is that investors lost their confidence in the American economy: They were looking at a future they believed would be plagued by two negatives. First, they didn't see much good coming in the way of corporate profits. Second, the sky-high interest rates prevailing caused them to discount those meager profits further. These two factors, working together, caused stagnation in the stock market from 1964 to 1981, even though those years featured huge improvements in GNP. The business of the country grew while investors' valuation of that business shrank!
And then the reversal of those factors created a period during which much lower GNP gains were accompanied by a bonanza for the market. First, you got a major increase in the rate of profitability. Second, you got an enormous drop in interest rates, which made a dollar of future profit that much more valuable. Both phenomena were real and powerful fuels for a major bull market. And in time the psychological factor I mentioned was added to the equation: Speculative trading exploded, simply because of the market action that people had seen. Later, we'll look at the pathology of this dangerous and oft-recurring malady.
Two years ago I believed the favorable fundamental trends had largely run their course. For the market to go dramatically up from where it was then would have required long-term interest rates to drop much further (which is always possible) or for there to be a major improvement in corporate profitability (which seemed, at the time, considerably less possible). If you take a look at a 50-year chart of after-tax profits as a percent of gross domestic product, you find that the rate normally falls between 4%--that was its neighborhood in the bad year of 1981, for example--and 6.5%. For the rate to go above 6.5% is rare. In the very good profit years of 1999 and 2000, the rate was under 6% and this year it may well fall below 5%.
So there you have my explanation of those two wildly different 17-year periods. The question is, How much do those periods of the past for the market say about its future?
To suggest an answer, I'd like to look back over the 20th century. As you know, this was really the American century. We had the advent of autos, we had aircraft, we had radio, TV, and computers. It was an incredible period. Indeed, the per capita growth in U.S. output, measured in real dollars (that is, with no impact from inflation), was a breathtaking 702%.
The century included some very tough years, of course--like the Depression years of 1929 to 1933. But a decade-by-decade look at per capita GNP shows something remarkable: As a nation, we made relatively consistent progress throughout the century. So you might think that the economic value of the U.S.--at least as measured by its securities markets--would have grown at a reasonably consistent pace as well.
That's not what happened. We know from our earlier examination of the 1964-98 period that parallelism broke down completely in that era. But the whole century makes this point as well. At its beginning, for example, between 1900 and 1920, the country was chugging ahead, explosively expanding its use of electricity, autos, and the telephone. Yet the market barely moved, recording a 0.4% annual increase that was roughly analogous to the slim pickings between 1964 and 1981.
Dow Industrials
ï Dec. 31, 1899: 66.08
ï Dec. 31, 1920: 71.95
In the next period, we had the market boom of the '20s, when the Dow jumped 430% to 381 in September 1929. Then we go 19 years--19 years--and there is the Dow at 177, half the level where it began. That's true even though the 1940s displayed by far the largest gain in per capita GDP (50%) of any 20th-century decade. Following that came a 17-year period when stocks finally took off--making a great five-to-one gain. And then the two periods discussed at the start: stagnation until 1981, and the roaring boom that wrapped up this amazing century.
To break things down another way, we had three huge, secular bull markets that covered about 44 years, during which the Dow gained more than 11,000 points. And we had three periods of stagnation, covering some 56 years. During those 56 years the country made major economic progress and yet the Dow actually lost 292 points.
How could this have happened? In a flourishing country in which people are focused on making money, how could you have had three extended and anguishing periods of stagnation that in aggregate--leaving aside dividends--would have lost you money? The answer lies in the mistake that investors repeatedly make--that psychological force I mentioned above: People are habitually guided by the rear-view mirror and, for the most part, by the vistas immediately behind them.
The first part of the century offers a vivid illustration of that myopia. In the century's first 20 years, stocks normally yielded more than high-grade bonds. That relationship now seems quaint, but it was then almost axiomatic. Stocks were known to be riskier, so why buy them unless you were paid a premium?
And then came along a 1924 book--slim and initially unheralded, but destined to move markets as never before--written by a man named Edgar Lawrence Smith. The book, called Common Stocks as Long Term Investments, chronicled a study Smith had done of security price movements in the 56 years ended in 1922. Smith had started off his study with a hypothesis: Stocks would do better in times of inflation, and bonds would do better in times of deflation. It was a perfectly reasonable hypothesis.
But consider the first words in the book: "These studies are the record of a failure--the failure of facts to sustain a preconceived theory." Smith went on: "The facts assembled, however, seemed worthy of further examination. If they would not prove what we had hoped to have them prove, it seemed desirable to turn them loose and to follow them to whatever end they might lead."
Now, there was a smart man, who did just about the hardest thing in the world to do. Charles Darwin used to say that whenever he ran into something that contradicted a conclusion he cherished, he was obliged to write the new finding down within 30 minutes. Otherwise his mind would work to reject the discordant information, much as the body rejects transplants. Man's natural inclination is to cling to his beliefs, particularly if they are reinforced by recent experience--a flaw in our makeup that bears on what happens during secular bull markets and extended periods of stagnation.
To report what Edgar Lawrence Smith discovered, I will quote a legendary thinker--John Maynard Keynes, who in 1925 reviewed the book, thereby putting it on the map. In his review, Keynes described "perhaps Mr. Smith's most important point ... and certainly his most novel point. Well-managed industrial companies do not, as a rule, distribute to the shareholders the whole of their earned profits. In good years, if not in all years, they retain a part of their profits and put them back in the business. Thus there is an element of compound interest (Keynes' italics) operating in favor of a sound industrial investment."
It was that simple. It wasn't even news. People certainly knew that companies were not paying out 100% of their earnings. But investors hadn't thought through the implications of the point. Here, though, was this guy Smith saying, "Why do stocks typically outperform bonds? A major reason is that businesses retain earnings, with these going on to generate still more earnings--and dividends, too."
That finding ignited an unprecedented bull market. Galvanized by Smith's insight, investors piled into stocks, anticipating a double dip: their higher initial yield over bonds, and growth to boot. For the American public, this new understanding was like the discovery of fire.
But before long that same public was burned. Stocks were driven to prices that first pushed down their yield to that on bonds and ultimately drove their yield far lower. What happened then should strike readers as eerily familiar: The mere fact that share prices were rising so quickly became the main impetus for people to rush into stocks. What the few bought for the right reason in 1925, the many bought for the wrong reason in 1929.
Astutely, Keynes anticipated a perversity of this kind in his 1925 review. He wrote: "It is dangerous...to apply to the future inductive arguments based on past experience, unless one can distinguish the broad reasons why past experience was what it was." If you can't do that, he said, you may fall into the trap of expecting results in the future that will materialize only if conditions are exactly the same as they were in the past. The special conditions he had in mind, of course, stemmed from the fact that Smith's study covered a half century during which stocks generally yielded more than high-grade bonds.
The colossal miscalculation that investors made in the 1920s has recurred in one form or another several times since. The public's monumental hangover from its stock binge of the 1920s lasted, as we have seen, through 1948. The country was then intrinsically far more valuable than it had been 20 years before; dividend yields were more than double the yield on bonds; and yet stock prices were at less than half their 1929 peak. The conditions that had produced Smith's wondrous results had reappeared--in spades. But rather than seeing what was in plain sight in the late 1940s, investors were transfixed by the frightening market of the early 1930s and were avoiding re-exposure to pain.
Don't think for a moment that small investors are the only ones guilty of too much attention to the rear-view mirror. Let's look at the behavior of professionally managed pension funds in recent decades. In 1971--this was Nifty Fifty time--pension managers, feeling great about the market, put more than 90% of their net cash flow into stocks, a record commitment at the time. And then, in a couple of years, the roof fell in and stocks got way cheaper. So what did the pension fund managers do? They quit buying because stocks got cheaper!
Private Pension Funds % of cash flow put into equities
ï 1971: 91% (record high)
ï 1974: 13%
This is the one thing I can never understand. To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the "Hallelujah Chorus" in the Buffett household. When hamburgers go up, we weep. For most people, it's the same way with everything in life they will be buying--except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
That sort of behavior is especially puzzling when engaged in by pension fund managers, who by all rights should have the longest time horizon of any investors. These managers are not going to need the money in their funds tomorrow, not next year, nor even next decade. So they have total freedom to sit back and relax. Since they are not operating with their own funds, moreover, raw greed should not distort their decisions. They should simply think about what makes the most sense. Yet they behave just like rank amateurs (getting paid, though, as if they had special expertise).
In 1979, when I felt stocks were a screaming buy, I wrote in an article, "Pension fund managers continue to make investment decisions with their eyes firmly fixed on the rear-view mirror. This generals-fighting-the-last-war approach has proved costly in the past and will likely prove equally costly this time around." That's true, I said, because "stocks now sell at levels that should produce long-term returns far superior to bonds."
Consider the circumstances in 1972, when pension fund managers were still loading up on stocks: The Dow ended the year at 1020, had an average book value of 625, and earned 11% on book. Six years later, the Dow was 20% cheaper, its book value had gained nearly 40%, and it had earned 13% on book. Or as I wrote then, "Stocks were demonstrably cheaper in 1978 when pension fund managers wouldn't buy them than they were in 1972, when they bought them at record rates."
At the time of the article, long-term corporate bonds were yielding about 9.5%. So I asked this seemingly obvious question: "Can better results be obtained, over 20 years, from a group of 9.5% bonds of leading American companies maturing in 1999 than from a group of Dow-type equities purchased, in aggregate, around book value and likely to earn, in aggregate, about 13% on that book value?" The question answered itself.
Now, if you had read that article in 1979, you would have suffered--oh, how you would have suffered!--for about three years. I was no good then at forecasting the near-term movements of stock prices, and I'm no good now. I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two.
But I think it is very easy to see what is likely to happen over the long term. Ben Graham told us why: "Though the stock market functions as a voting machine in the short run, it acts as a weighing machine in the long run." Fear and greed play important roles when votes are being cast, but they don't register on the scale.
By my thinking, it was not hard to say that, over a 20-year period, a 9.5% bond wasn't going to do as well as this disguised bond called the Dow that you could buy below par--that's book value--and that was earning 13% on par.
Let me explain what I mean by that term I slipped in there, "disguised bond." A bond, as most of you know, comes with a certain maturity and with a string of little coupons. A 6% bond, for example, pays a 3% coupon every six months.
A stock, in contrast, is a financial instrument that has a claim on future distributions made by a given business, whether they are paid out as dividends or to repurchase stock or to settle up after sale or liquidation. These payments are in effect "coupons." The set of owners getting them will change as shareholders come and go. But the financial outcome for the business' owners as a whole will be determined by the size and timing of these coupons. Estimating those particulars is what investment analysis is all about.
Now, gauging the size of those "coupons" gets very difficult for individual stocks. It's easier, though, for groups of stocks. Back in 1978, as I mentioned, we had the Dow earning 13% on its average book value of $850. The 13% could only be a benchmark, not a guarantee. Still, if you'd been willing then to invest for a period of time in stocks, you were in effect buying a bond--at prices that in 1979 seldom inched above par--with a principal value of $891 and a quite possible 13% coupon on the principal.
How could that not be better than a 9.5% bond? From that starting point, stocks had to outperform bonds over the long term. That, incidentally, has been true during most of my business lifetime. But as Keynes would remind us, the superiority of stocks isn't inevitable. They own the advantage only when certain conditions prevail.
Let me show you another point about the herd mentality among pension funds--a point perhaps accentuated by a little self-interest on the part of those who oversee the funds. In the table below are four well-known companies--typical of many others I could have selected--and the expected returns on their pension fund assets that they used in calculating what charge (or credit) they should make annually for pensions.
Now, the higher the expectation rate that a company uses for pensions, the higher its reported earnings will be. That's just the way that pension accounting works--and I hope, for the sake of relative brevity, that you'll just take my word for it.
As the table shows, expectations in 1975 were modest: 7% for Exxon, 6% for GE and GM, and under 5% for IBM. The oddity of these assumptions is that investors could then buy long-term government noncallable bonds that paid 8%. In other words, these companies could have loaded up their entire portfolio with 8% no-risk bonds, but they nevertheless used lower assumptions. By 1982, as you can see, they had moved up their assumptions a little bit, most to around 7%. But now you could buy long-term governments at 10.4%. You could in fact have locked in that yield for decades by buying so-called strips that guaranteed you a 10.4% reinvestment rate. In effect, your idiot nephew could have managed the fund and achieved returns far higher than the investment assumptions corporations were using.
Why in the world would a company be assuming 7.5% when it could get nearly 10.5% on government bonds? The answer is that rear-view mirror again: Investors who'd been through the collapse of the Nifty Fifty in the early 1970s were still feeling the pain of the period and were out of date in their thinking about returns. They couldn't make the necessary mental adjustment.
Now fast-forward to 2000, when we had long-term governments at 5.4%. And what were the four companies saying in their 2000 annual reports about expectations for their pension funds? They were using assumptions of 9.5% and even 10%.
I'm a sporting type, and I would love to make a large bet with the chief financial officer of any one of those four companies, or with their actuaries or auditors, that over the next 15 years they will not average the rates they've postulated. Just look at the math, for one thing. A fund's portfolio is very likely to be one-third bonds, on which--assuming a conservative mix of issues with an appropriate range of maturities--the fund cannot today expect to earn much more than 5%. It's simple to see then that the fund will need to average more than 11% on the two-thirds that's in stocks to earn about 9.5% overall. That's a pretty heroic assumption, particularly given the substantial investment expenses that a typical fund incurs.
Heroic assumptions do wonders, however, for the bottom line. By embracing those expectation rates shown in the far right column, these companies report much higher earnings--much higher--than if they were using lower rates. And that's certainly not lost on the people who set the rates. The actuaries who have roles in this game know nothing special about future investment returns. What they do know, however, is that their clients desire rates that are high. And a happy client is a continuing client.
Are we talking big numbers here? Let's take a look at General Electric, the country's most valuable and most admired company. I'm a huge admirer myself. GE has run its pension fund extraordinarily well for decades, and its assumptions about returns are typical of the crowd. I use the company as an example simply because of its prominence.
If we may retreat to 1982 again, GE recorded a pension charge of $570 million. That amount cost the company 20% of its pretax earnings. Last year GE recorded a $1.74 billion pension credit. That was 9% of the company's pretax earnings. And it was 2 1/2 times the appliance division's profit of $684 million. A $1.74 billion credit is simply a lot of money. Reduce that pension assumption enough and you wipe out most of the credit.
GE's pension credit, and that of many another corporation, owes its existence to a rule of the Financial Accounting Standards Board that went into effect in 1987. From that point on, companies equipped with the right assumptions and getting the fund performance they needed could start crediting pension income to their income statements. Last year, according to Goldman Sachs, 35 companies in the S&P 500 got more than 10% of their earnings from pension credits, even as, in many cases, the value of their pension investments shrank.
Unfortunately, the subject of pension assumptions, critically important though it is, almost never comes up in corporate board meetings. (I myself have been on 19 boards, and I've never heard a serious discussion of this subject.) And now, of course, the need for discussion is paramount because these assumptions that are being made, with all eyes looking backward at the glories of the 1990s, are so extreme. I invite you to ask the CFO of a company having a large defined-benefit pension fund what adjustment would need to be made to the company's earnings if its pension assumption was lowered to 6.5%. And then, if you want to be mean, ask what the company's assumptions were back in 1975 when both stocks and bonds had far higher prospective returns than they do now.
With 2001 annual reports soon to arrive, it will be interesting to see whether companies have reduced their assumptions about future pension returns. Considering how poor returns have been recently and the reprises that probably lie ahead, I think that anyone choosing not to lower assumptions--CEOs, auditors, and actuaries all--is risking litigation for misleading investors. And directors who don't question the optimism thus displayed simply won't be doing their job.
The tour we've taken through the last century proves that market irrationality of an extreme kind periodically erupts--and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak. What's needed is an antidote, and in my opinion that's quantification. If you quantify, you won't necessarily rise to brilliance, but neither will you sink into craziness.
On a macro basis, quantification doesn't have to be complicated at all. Below is a chart, starting almost 80 years ago and really quite fundamental in what it says. The chart shows the market value of all publicly traded securities as a percentage of the country's business--that is, as a percentage of GNP. The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment. And as you can see, nearly two years ago the ratio rose to an unprecedented level. That should have been a very strong warning signal.
For investors to gain wealth at a rate that exceeds the growth of U.S. business, the percentage relationship line on the chart must keep going up and up. If GNP is going to grow 5% a year and you want market values to go up 10%, then you need to have the line go straight off the top of the chart. That won't happen.
For me, the message of that chart is this: If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200%--as it did in 1999 and a part of 2000--you are playing with fire. As you can see, the ratio was recently 133%.
Even so, that is a good-sized drop from when I was talking about the market in 1999. I ventured then that the American public should expect equity returns over the next decade or two (with dividends included and 2% inflation assumed) of perhaps 7%. That was a gross figure, not counting frictional costs, such as commissions and fees. Net, I thought returns might be 6%.
Today stock market "hamburgers," so to speak, are cheaper. The country's economy has grown and stocks are lower, which means that investors are getting more for their money. I would expect now to see long-term returns run somewhat higher, in the neighborhood of 7% after costs. Not bad at all--that is, unless you're still deriving your expectations from the 1990s.
<<<
Ha! Swearing allegiance to a stock isn't required for my sake. This isn't one of IHUB's scammy stock boards. But it's amazing how many "players" pass thru here expressing their love for BRK... and then disappear. There's so much about these players I don't understand. Mostly gambling addiction, I assume.
BTW, some claim to own the class A shares. If that's true I think many of them just own fractional shares.
Anyway, nice to see yet another record high this morning. $339.
I have never sold a single share of BRK and do not plan to any time soon.
I was beginning to wonder whether you sold and maybe went to AMC LOLOL! What a great stock BRK is and exactly when it's needed. I saw BRK-A at $506,XXX earlier.
Only one of my 18 stocks is doing as well and that's TRV, another boring low Beta (0.78) insurance issue. BRK's Beta is 0.90.
"The Annual Meeting...
"Clear your calendar! Berkshire will have its annual gathering of capitalists in Omaha on Friday, April 29th
through Sunday, May 1st. The details regarding the weekend are laid out on pages A-1 and A-2. Omaha eagerly awaits you, as do I.
I will end this letter with a sales pitch. “Cousin” Jimmy Buffett has designed a pontoon “party” boat that is now being manufactured by Forest River, a Berkshire subsidiary. The boat will be introduced on April 29 at our Berkshire Bazaar of Bargains. And, for two days only, shareholders will be able to purchase Jimmy’s masterpiece at a 10% discount. Your bargain-hunting chairman will be buying a boat for his family’s use. Join me.
February 26, 2022 Warren E. Buffett
Chairman of the Board"
Buffett releases his "2022 Annual Letter"
* "Warren Buffett called Apple the second-most important business after Berkshire’s cluster of insurers.
* The “Oracle of Omaha” made clear he is a fan of CEO Tim Cook’s stock repurchase strategy.
* Berkshire’s Apple stake is now worth more than $160 billion, taking up 40% of its equity portfolio.
In this article"
[much more]
https://www.cnbc.com/2022/02/26/warren-buffett-in-annual-letter-calls-apple-one-of-four-giants-driving-the-conglomerates-value.html
"Berkshire Stake in AmEx Is Poised to Hit_20%. That Could Trigger an Accounting Change and Boost Berkshire’s Earnings."
Berkshire Hathaway‘s longstanding stake in American Express is set to hit the 20% threshold in the coming months. That could prompt an accounting change that would boost Berkshire’s earnings.
Berkshire Hathaway (ticker: BRK.A and BRK.B) holds 151.6 million shares of American Express (AXP) worth $29 billion, its third-largest equity investment behind Apple (AAPL) and Bank of America (BAC).
https://investorshub.advfn.com/secure/post_reply.aspx?message_id=167795897
Kicking myself for not getting my kids their own chunks of BRK. Not so much for the additional profit involved, but to instill Warren and Charlie's investing mindset more strongly in my sons.
A main goal should be to think like them and certainly not like the local slobbering stock addicts.
Cramer says Berkshire Hathaway is a "superior, terrific buy"!
Love the good press Buffett's getting and how he's somewhat pushed Cathie off the front page. Some reports have said Buffett's the only one in the ten wealthiest Americans getting richer recently.
My Traveler's Insurance is hitting new highs so BRK's insurance holdings should be doing well too.
Warren Buffett's Berkshire Hathaway Is Now Bigger Than Meta -- Barrons.com
12:21 pm ET February 3, 2022 (Dow Jones)
Andrew Bary
Warren Buffett has pulled ahead of Mark Zuckerberg in stock-market bragging rights.
Berkshire Hathaway stock has been on a roll this year, and the company on Thursday reclaimed its title as the sixth largest company by market value in the U.S. after a steep decline in Meta Platforms' shares.
Berkshire's class A shares (ticker BRK.A) were down 0.9% Thursday, to $475,159, but are up 5.5% so far this year. This values Buffett's company at about $708 billion. Berkshire's class B shares (BRK.B) were off 0.9%, to $316.66 Thursday.
Meta Platforms (FB), formerly Facebook, is now valued at around $677 billion, with its stock down 25%, at $242, following an earnings miss and weak guidance late Wednesday. Zuckerberg is Meta's CEO and controlling shareholder.
In market value, Berkshire is now behind only Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG and GOOGL), Amazon.com (AMZN) and Tesla (TSLA).
Write to Andrew Bary at andrew.bary@barrons.com
Dow Jones Newswires
"Buffett Strikes Gold as Japan Trading Houses See Record Profits"
"(Bloomberg) -- Warren Buffett’s surprise bet on Japan’s trading houses is paying off as the companies expect a record-breaking rebound in profits."
"The trading companies, known as “sogo shosha” in Japan, boosted their net income outlook after the rebound in prices of everything from crude oil to iron ore. Buffett shocked the world in 2020 when Berkshire Hathaway Inc. announced that it bought stakes in five of Japan’s biggest trading companies, which at the time were grappling with declining profits as the Covid-19 pandemic reduced demand for fuel and raw materials.
The firms have been among the biggest winners in the red-hot rally in commodities. Supply constraints and geopolitical tensions, coupled with a rebound in demand, has resulted in an eye-watering price surge in energy, metals and crops.
Shares of Marubeni Corp. surged to the highest ever on Thursday after the firm raised its full-year forecast and announced a buyback plan. Its peers Mitsubishi Corp., Itochu Corp. and Mitsui & Co. also boosted their forecasts, while Sumitomo Corp. is scheduled to release results on Friday.
“These are pretty outrageous figures,” said Masumi Kakinoki, chief executive officer at Marubeni. “We are calmly assessing. The outlook could be uncertain. All the other companies also don’t want to depend too much on commodities.”
The firms are Japan’s top investors in overseas energy and metals assets, and have developed sophisticated trading desks to profit from regional price arbitrage."
https://finance.yahoo.com/news/buffett-strikes-gold-japan-trading-083422245.html
Hilarious. Google announces 20 for one split. BRK shoots up in sympathy
Thanks PC for pointing out how large BRK's stake is in AXP, third now behind Apple and BAC.
I took out an AXP credit card a few months ago and really like it.
American Express (AXP) +9% today on blowout earnings. Berkshire Hathaway owns 20% of AXP and receives over $260 Million per year in dividends from AXP
"Buffett plans in-person Berkshire annual meeting as Omicron wave crests"
"(Reuters) - Warren Buffett's Berkshire Hathaway Inc plans this year to let shareholders attend the company's annual meeting for the first time in three years, amid signs the Omicron wave may have peaked in the United States.
In a statement on Tuesday, the Omaha, Nebraska-based conglomerate said "we are planning for an in-person meeting" on April 30, while also webcasting the event for a seventh straight year.
The plan was announced even as many large corporate gatherings remain online or are delayed as the highly infectious Omicron variant spreads around the world."
https://finance.yahoo.com/news/buffett-plans-person-berkshire-annual-131700570.html
Noticed the A shares spike up AH to close at $491,787 or +$6,408 after hours, from its close of $485,379 in the regular session. I do not see any news or other reason for the spike.
Both BRK share classes have traded impressively afterhours this week. $324.50 is an all-time high for class B, I believe.
Class A is nearing $500,000 a share.
Meanwhile, the usual IHUB penny junk is faltering terribly this year. It's been a tough time for Reddit/Robinhood newbies.
My son has the RH app on his phone. I've told him to not even think of buying stocks that are popular on HOOD, and consider using it as a contrarian indicator, which it certainly has been lately. RH users are getting killed with their picks which is one reason HOOD is $15 vs >$60 right after the IPO.
BRK-owned BNSF rotary plow at work
Only problem is that Warren Buffett did not make that pick and initial investment decision. It was either Todd Combs or Ted Weschler but then Warren got on board and approved the large increases in the position. One of the smartest things Warren ever did was to bring Todd and Ted on Board at a time when they were 2 of the most respected investment minds in the business to groom then and bring them along to eventually take over the investment side of BRK. When WB passes on there will likely be an initial unwarranted precipitous drop in the share price, and smart money will be all over that accumulating BRK shares as it will bounce back quick and the 2 "t's" will carry on the investment side of the business without a hitch. There has probably never been a publicly traded entity in American history that is set up better for the eventual death of the key founder and CEO.
"Buffett’s out-of-character bet on Apple may end up being one of his winningest investments, making more than $120 billion on paper as the tech giant shattered yet another record to top a $3 trillion market valuation this week.
"Berkshire Hathaway began buying Apple stock in 2016 and by mid-2018, the conglomerate accumulated a 5% ownership in the iPhone-maker, a stake that cost $36 billion. Flash forward to 2022 and the Apple investment is now worth $160 billion as the massive rally extended into the new year.
“Without a doubt, it is one of the strongest investments that Berkshire has made in the last decade,” said James Shanahan, Berkshire analyst at Edward Jones.
Other than Apple’s giant appreciation in share price, it has also been a lucrative bet for Berkshire because of its hefty payouts. Berkshire has enjoyed regular dividends, averaging about $775 million annually..."
https://www.cnbc.com/2022/01/04/warren-buffett-makes-over-120-billion-on-apples-trot-to-3-trillion-among-his-best-bets-ever.html
Finally $300+! I've heard of many "New Berkshires" over the years. Many are just patched together mishmashes, conglomerates without any sound reason to exist and none of BRK's float from its many insurance holdings. Most "New Berkshires" have more in common with the failed conglomerates of the 1970s than with our Berkshire Hathaway.
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BERKSHIRE HATHAWAY INC.
Charles Munger (Charlie), BRK Vice Chairman Warren Buffett, BRK Chairman/CEO Photo circa 1970
Berkshire Hathaway, Inc NYSE Symbols: BRK-A Class A shares BRK-B Class B shares | Berkshire Hathaway, which began in 1839 as a textile mill, neared collapse in 1962 when 32-year old Warren Buffett started buying control in the belief the company could be saved. Buffett initially maintained Berkshire’s textile business, but by 1967, he was expanding into other investments. Berkshire bought stock in the Government Employees Insurance Company (GEICO) that now forms the core of its colossal insurance operations. Other early acquisitions included See's Candies, Blue Chip Trading Stamps and Dairy Queen. BRK moved from the OTC to the NYSE in 1988. Today Berkshire is a combination of 66 wholly owned subsidiaries such as the BNSF Railroad and 47 passive minority investments, notably its huge stake in Apple. As of 2021, BRK has a market cap of >$600 billion and 360,000 employees. Berkshire Hathaway is the nation's 7th largest business. |
Useful Links Berkshire Subsidiary Companies Buffett's Famous Annual Letters BRK Portfolio Tracker CNBC Buffett Archive http://www.BerkshireHathaway.com/ Buffett's office in Omaha. His desk has no computer Headquarters Address:: 3555 Farnam Street Omaha, NE 68131 b | |
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