Author Topic: Will you sell BRK?  (Read 14787 times)

giofranchi

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Re: Will you sell BRK?
« Reply #20 on: October 28, 2012, 07:45:27 AM »
I am confident BRK can do well long after WEB passes. I don't believe Berkshire needs him to run, and the way it is structured, with negative cost of float, good investment managers, and very strong operating businesses, WEB's absence IMO is not likely to be impactful.

Well,
if it really is so, then I don’t like it. When I invest, I want to know exactly whom I am partnering with. If Mr. Buffett is no longer essential to BRK, then I like BRK much less than I used to. I just don’t believe in sustainable outperformance, without an outstanding manager who achieves it. Look, for instance, at JNJ: it is probably the large cap company with the best historical track record in the world, and yet it is clearly underperforming (I am talking about revenue and earnings growth, not share price). Compare it, if you want, with NVS, whose Chairman Mr. Vasella is one of the most accomplished individuals in the pharma industry today. JNJ is trailing NVS both on a revue growth and on an earnings per share growth basis, both on a 5 year and on a 10 year basis.

My problem with BRK is only one: to make a $200 billion company grow at a very good rate, an outstanding underwriter is not enough, an outstanding stock picker is not enough, an outstanding businessman is not enough: you need all three. Mr. Buffett is that extraordinary individual, no doubt about that. But he is 82.

I know that you all disagree with me, but I prefer FFH, which is an $8 billion company, is led by Mr. Watsa, who is 20 years younger than Mr. Buffett, and is selling at book value.

giofranchi

Giofranchi, you have nearly persuaded me to reconsider my allocation to FFH.  Let me recap the history of about 80% of our portfolio for the last six years.  This great majority has been in shifting proportions of LRE, FFH, and BRK.  The proportion of LRE has been rising with their price and reinvested dividends while the combined value of FFH and BRK has also risen nicely, especially as we have shifted the allocation between them opportunistically.  Most of the time, that allocation has favored FFH.  However, for the last 15 months, almost all has been in BRK for reasons that have been discussed. 

Thanks to your comments, the time may be drawing nigh to reconsider our allocation to FFH.

Thank you very much.


Well,
SharperDingaan has just pointed out something interesting:

Most would look for next weeks East Coast weather to generate some very big claims, & a forcing of FFH's P/BV done further because of the re-insurance exposure.

If so, I think it could be the right opportunity to start (or to add to) a FFH investment.
We will see!

giofranchi
Portfolio: AAPL, AMZN, BABA, BOSS, BRK.B, FB, FFH, FIH.U, FINX, FWONA, GOOG, IBB, JPM, LBRDA, MKL, NKE, QQQ, SFTBF, SMH, TCEHY, V, XBI, XT


benchmark

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Re: Will you sell BRK?
« Reply #21 on: October 28, 2012, 10:14:39 AM »
I think it makes sense to sell BRK, if you have better investment ideas ready to fire. I think the intrinsic value of BRK is about 1.5BV, so there's roughly 20% upside to these shares, and now that a buyback plan is in place, it will no longer be chronically undervalued. I feel like selling from time to time, but I'm going to wait till it hits the 1.5BV mark.

I believe BRK is easily worth 30% more. price/BV is closer to 1.2x atm, maybe 1.25x. The market has underappreciated the excellent safety and high quality this gem offers.

Everyone seems to believe BAC will go up to $20 in a linear way in the next 2-3 years. It might but things rarely go as expected. Given the current market level, uncertainty and lesser quality of BAC and others (nothing can compete with BRK after all...), it can definitely make sense to be heavily positioned in BRK (or FFH for that matter). Not that BAC, AIG, ... aren't great value atm, they just bear much higher risk so they require a higher potential return.

I don't think that the road to $20 will be smooth, but it will get there sooner (2years) or later (4 years). Comparing that with BRK's steady 8% growth, you'll double your money in less than half the time. The only thing that holds me back is about paying taxes of the gain on BRK.


Now you're thinking like a banker of the Lewis school -- taking money out of something that almost certainly will go up at a satisfactory rate over the next several years and very likely will not lose a significant amount, in order to put your money into something that might appreciate at a higher rate for a while, but is in a mediocre leveraged industry that chases yield every decade or two, a business  with much more risk of principal loss.

Your idea would have been a better one a year ago when the upside to BAC was greater.   Why Now?  Is it because you are kicking yourself that you didn't buy it then?

I bought enough BAC a year ago, but I think that BAC now has less risk and has a great chance of  doubling from here quickly.

But I understand what you are saying, and agree to some extent. I was thinking about selling BAC when it reaches $20, then look for other investment opportunities.

Kraven

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Re: Will you sell BRK?
« Reply #22 on: October 28, 2012, 10:59:32 AM »
I have held BRK for a while. Given its perpetual 'under value' status, now I'm considering selling it for much cheaper financial stocks, given BAC and AIG are very likely to double in 2 years. However, my BRK was intended for retirement, so there is a psychological barrier to get over. I'm wondering if anyone on the board have thought about (or have done it).

Is it a crime against humanity or otherwise morally repugnant to own them all?  Hell, I mean someone could actually have 4 or 5 positions.  Ok, ok, that's crazy talk.
Buy cheap and something good might happen.

twacowfca

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Re: Will you sell BRK?
« Reply #23 on: October 28, 2012, 01:17:04 PM »
I have held BRK for a while. Given its perpetual 'under value' status, now I'm considering selling it for much cheaper financial stocks, given BAC and AIG are very likely to double in 2 years. However, my BRK was intended for retirement, so there is a psychological barrier to get over. I'm wondering if anyone on the board have thought about (or have done it).

Is it a crime against humanity or otherwise morally repugnant to own them all?  Hell, I mean someone could actually have 4 or 5 positions.  Ok, ok, that's crazy talk.

We love to pick up deep valued bargains.  But our greatest success has been investing with owner/founder CEOs who have most of their fortunes in their companies, great long term records, and a history of treating other shareholders fairly. This narrows the field.
« Last Edit: October 28, 2012, 01:19:10 PM by twacowfca »

Palantir

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Re: Will you sell BRK?
« Reply #24 on: October 28, 2012, 01:49:32 PM »

Well,
if it really is so, then I don’t like it. When I invest, I want to know exactly whom I am partnering with. If Mr. Buffett is no longer essential to BRK, then I like BRK much less than I used to. I just don’t believe in sustainable outperformance, without an outstanding manager who achieves it. Look, for instance, at JNJ: it is probably the large cap company with the best historical track record in the world, and yet it is clearly underperforming (I am talking about revenue and earnings growth, not share price). Compare it, if you want, with NVS, whose Chairman Mr. Vasella is one of the most accomplished individuals in the pharma industry today. JNJ is trailing NVS both on a revue growth and on an earnings per share growth basis, both on a 5 year and on a 10 year basis.

My problem with BRK is only one: to make a $200 billion company grow at a very good rate, an outstanding underwriter is not enough, an outstanding stock picker is not enough, an outstanding businessman is not enough: you need all three. Mr. Buffett is that extraordinary individual, no doubt about that. But he is 82.

Here is where I believe you are mistaken. BRK already has these outstanding managers. They are the ones that truly run the firm, they broadly report to WEB, but he gives them total freedom in their operations. I feel you have not given his lieutenants enough credit. I confidently feel that if one of his lieutenants like Jain, Abel, Nicely, or Weschler became CEO, BRK would continue to prosper.

I do not know anything about FFH, so I don't have an opinion vis a vis BRK.
My Portfolio: AMZN, PAGP, FSLR, OKE, PYPL, RHT, MSFT

biaggio

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Re: Will you sell BRK?
« Reply #25 on: October 28, 2012, 04:16:56 PM »
I have held BRK for a while. Given its perpetual 'under value' status, now I'm considering selling it for much cheaper financial stocks, given BAC and AIG are very likely to double in 2 years. However, my BRK was intended for retirement, so there is a psychological barrier to get over. I'm wondering if anyone on the board have thought about (or have done it).

Is it a crime against humanity or otherwise morally repugnant to own them all?  Hell, I mean someone could actually have 4 or 5 positions.  Ok, ok, that's crazy talk.

I own them all.
Add in gradually with price weakness over the long term.
My experience has taught me that I am not smart enough to have just a couple positions, or sell one to buy another (unless valuation is grossly out of line)

I would be happy to do as well as Mr Watsa , Buffet, etc.
I am impressed though with some of the posters here that run a very concentrated portfolio, especially with some of their picks over the last few years. They have been instructive + fun to read and follow along.

PlanMaestro

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Re: Will you sell BRK?
« Reply #26 on: October 28, 2012, 07:18:58 PM »
It is no just about overconfidence, a lack of ego can be a problem too — Howard Marks

rmitz

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Re: Will you sell BRK?
« Reply #27 on: October 29, 2012, 06:55:52 AM »
It is no just about overconfidence, a lack of ego can be a problem too — Howard Marks

But a problem for whom?

DCG

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Re: Will you sell BRK?
« Reply #28 on: October 29, 2012, 07:10:28 AM »

We love to pick up deep valued bargains.  But our greatest success has been investing with owner/founder CEOs who have most of their fortunes in their companies, great long term records, and a history of treating other shareholders fairly. This narrows the field.
[/quote]

BRK is basically a collection of these types of companies.

giofranchi

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Re: Will you sell BRK?
« Reply #29 on: October 29, 2012, 10:38:25 AM »

Well,
if it really is so, then I don’t like it. When I invest, I want to know exactly whom I am partnering with. If Mr. Buffett is no longer essential to BRK, then I like BRK much less than I used to. I just don’t believe in sustainable outperformance, without an outstanding manager who achieves it. Look, for instance, at JNJ: it is probably the large cap company with the best historical track record in the world, and yet it is clearly underperforming (I am talking about revenue and earnings growth, not share price). Compare it, if you want, with NVS, whose Chairman Mr. Vasella is one of the most accomplished individuals in the pharma industry today. JNJ is trailing NVS both on a revue growth and on an earnings per share growth basis, both on a 5 year and on a 10 year basis.

My problem with BRK is only one: to make a $200 billion company grow at a very good rate, an outstanding underwriter is not enough, an outstanding stock picker is not enough, an outstanding businessman is not enough: you need all three. Mr. Buffett is that extraordinary individual, no doubt about that. But he is 82.

Here is where I believe you are mistaken. BRK already has these outstanding managers. They are the ones that truly run the firm, they broadly report to WEB, but he gives them total freedom in their operations. I feel you have not given his lieutenants enough credit. I confidently feel that if one of his lieutenants like Jain, Abel, Nicely, or Weschler became CEO, BRK would continue to prosper.

I do not know anything about FFH, so I don't have an opinion vis a vis BRK.


Palantir,
of course you might be very well right! I have never actually managed something as big and as complex as BRK is today! Not even something that is 1/1000 of BRK! So, I cannot be sure… All I can do is to try an educated guess with my business knowledge and experience.

To paraphrase Mr. Munger, BRK’s success lies in their abilities (his and Mr. Buffett’s) to constantly shift capital from failing businesses to thriving businesses. And I tend to believe it is true. Mr. Schumpeter’s “creative destruction” is becoming more and more relevant in today’s hyper-competitive world, and the best way to deal with this reality is to embrace and to apply Mr. Munger’s lesson.
I see those outstanding managers you referred to as a part (maybe the most important part!) of each thriving business Mr. Buffett acquired. But neither Jain, nor Abel, nor Nicely, nor Weschler have ever applied Mr. Munger’s lesson. At least, not to such a complex organization as BRK is today. Each one of them knows extremely well his own business… but what about the remaining 74 businesses of the BRK family? Can you be sure whoever succeeds Mr. Buffett will be able to take the right decisions in shifting capital among 75 different businesses? And among all the other acquisitions that will come in the future? It will be a collection of businesses studied and put together, during the course of a lifetime, by an extraordinarily gifted individual… his successor’s task won’t be an easy one!

Most of all, the more I study the performances of outstanding business founders/owners the more I realize that each one of them achieved extreme success in his or her own way. Each one of them did what really worked for him/herself, what most fitted his or her own personality. Not one of them copied another, and was as successful! They were all originals. So, I cannot believe in replicating Mr. Buffett, or in finding someone who will be so intimate with BRK in the future, as Mr. Buffett is today.

Please, remember that I am not talking about a good and safe business: BRK will always be a good and safe business! I am talking about outperformance (very, very, very tough!).

As I said at the beginning, I might very well be completely wrong! But it is a long time that I have been studying the lives, the habits, and the achievements of outstanding business founders/owners, and I hope my perspective could at least be some food for thought!

giofranchi
Portfolio: AAPL, AMZN, BABA, BOSS, BRK.B, FB, FFH, FIH.U, FINX, FWONA, GOOG, IBB, JPM, LBRDA, MKL, NKE, QQQ, SFTBF, SMH, TCEHY, V, XBI, XT