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Is Berkshire more like a Mutual Fund than a stock?
@msf >> "the market" (well, 90% of it) had an average TTM P/E of 34.2 at the end of October.
Wonder what it is at the close today. The much critiqued Shiller is above 33 again.
@LewisBraham >> ... think of Apple as a high quality company with a lot of cash and a moderate to slow growth rate in 2020. It is arguably as MSF describes it—blend—a blue chip stock with its heady growth days in the past.
Maybe, but experts have been saying this for decades, peculiarly. If you compare Apple w/ say SP500, or w/ IVW, or indeed w/ QQQ, whether from two summers ago, from spring '17, from fall '16, from last Thanksgiving, or ytd, you see no such thing. It still looks like all rock 'n' roll all the time.
I wouldn't compare BRK.A to anything else. Nothing typical about it. Apple P/E = 35.6 (link) Apple earning are so huge and why it has so much cash and it's harder to show growth but it still shows it and why it's amazing. I don't think that apple is just another blue chip.
BTW, personally, Apple is the only company I ever banned. I never bought any of their products and would never do it in the future based on Steve Jobs behavior toward his employees, friends and family and its ridiculous product prices but Apple is a fabulous company
You must have a reason in mind, some point you're trying to make, by presenting this figure in isolation. Whatever it is, the point isn't clear.
If it is to show that AAPL's P/E on Nov 25 is higher than the 33.19 P/E it had on Oct 30th, well, sure. It goes without saying that over a short period when the earnings denominator (a quarterly datum) doesn't change, P/E will move in proportion to price movements. And this month, most stock prices have been going up, so most P/E's have been going up. Nothing special here.
If the point is to hint that AAPL's P/E is high, whatever "high" means, context matters. Certainly 35+ is high relative to historical stock market averages. But relative to the current (Nov. 25) TTM S&P 500 P/E of 41.34, it is low. Not bargain basement low, but notably lower than the typical large cap stock. https://www.wsj.com/market-data/stocks/peyields https://www.wsj.com/market-data/quotes/AAPL
Apple earning are so huge and why it has so much cash and it's harder to show growth but it still shows it
Certainly Apple's earnings are growing year by year. Though based on 5 year EPS growth rates, it is growing more slowly than not only the other top 10 stocks in VUG (your choice of growth index), but more slowly than eight of the top 10 stocks in VTV, including BRK.A (okay, you don't like that one), Procter & Gamble (PG), JPMorgan Chase (JPM), UnitedHealth (UNH), Verizon (VZ), Disney (DIS), Pfizer (PFE), and Comcast (CMCSA).
Moderate, steady growth. Some people call that a blue chip. You choose to call it growth. Whatever.
>> ... based on 5-year EPS growth rates, it is growing more slowly than ... Procter & Gamble (PG), JPMorgan Chase (JPM), UnitedHealth (UNH), Verizon (VZ), Disney (DIS), Pfizer (PFE), and Comcast (CMCSA).
Hmm, a remarkable fact given my more recent analyses: '... compare Apple w/ say SP500, or w/ IVW, or indeed w/ QQQ, whether from two summers ago, from spring '17, from fall '16, from last Thanksgiving, or ytd, ... It still looks like all rock 'n' roll all the time.'
Strange but true. Figures (as I noted a few posts ago) are from Fidelity's "Key Statistics" page for the respective companies. The number represents "EPS Growth (Last 5 Years)".
AAPL is no slouch, but everything is relative. Quite a period indeed.
Maybe the following 1 and 3 years performance charts of SPY,AAPL,QQQ,BRK/A,JPM will convince you that Apple IS NOT another "blend—a blue chip stock ". If they don't I give up.
It is arguably as MSF describes it—blend—a blue chip stock with its heady growth days in the past.
Agree with msf and Lewis assessment. The fast growing business (iPhones, computers, music, and AppleTV) since Steve Jobs's returned has plateaued. In some area Apple is trailing. However, they are still very profitable (compare to Samsung per unit phone sold) but they are in solid single digit growth. Apple today is pushing more in their service business while they have an business ecosystem is unmatched by their rivals.
You are confusing price momentum with growth. A value or blend stock can also beat the S&P 500’s returns. They can also have price momentum. Growth is about revenues, cash flow and earnings versus the benchmark and industry peers and it’s forward looking, not from five or ten years ago.
Several past posts: 1) "MSF describes it—blend—a blue chip stock with its heady growth days in the past. "Agree with msf and Lewis assessment. The fast growing business (iPhones, computers, music, and AppleTV) since Steve Jobs's returned has plateaued. In some area Apple is trailing." 2) "Growth is about revenues, cash flow and earnings versus the benchmark and industry peers and it’s forward looking, not from five or ten years ago."
FD: reality check. After another year. Apple proved it's not just another blue chip stock. It's even more amazing to do it when it's so big already. Apple 2021 annual EPS was $5.61, a 71.04% increase from 2020. The price followed.
Several past posts: 1) "MSF describes it—blend—a blue chip stock with its heady growth days in the past. "Agree with msf and Lewis assessment. The fast growing business (iPhones, computers, music, and AppleTV) since Steve Jobs's returned has plateaued. In some area Apple is trailing." 2) "Growth is about revenues, cash flow and earnings versus the benchmark and industry peers and it’s forward looking, not from five or ten years ago."
FD: Reality check, after close to 3 years, Apple proved to be MORE THAN JUST A BLEND BLUE CHIP
One year performance......AAPL +12.3....VFINX -6.6%......JPM -23.7% Three year performance...AAPL +49.65...VFINX +14.9%...JPM +6.1%
In just 3 years AAPL made 174% more than VFINX(SP500)....221.8 vs 47.8%...see (chart)
BRK is really a post-Buffett (91) play - can really go either way.
It was also in the news recently that the potential CEO Greg Abel (60) is very light in BRK stock. He had a choice to convert his large stake in the Energy unit into BRK stock (tax free) OR cash and he chose the latter (and pay tax!). Unclear if BRK succession plan has changed but the immediate alternative Ajit Jain (71), who runs insurance operations, isn't very interested. The only thing certain is that son Howard Buffett will be the new Chairman after WB. https://www.cnbc.com/2022/08/06/berkshire-ceo-designate-abel-sells-stake-in-energy-company-he-led-for-870-million.html
@Sven, there is something going on there but I don't know what. A full tax-free or partial tax-advantaged swap into BRK would seem like a no brainer. WB is very tight with sharing control or limelight and that may start to bug people too. Abel may have as well said that he will buy whatever BRK he need to have WHEN he is the CEO but not before.
BRK is really a post-Buffett (91) play - can really go either way.
It was also in the news recently that the potential CEO Greg Abel (60) is very light in BRK stock. He had a choice to convert his large stake in the Energy unit into BRK stock (tax free) OR cash and he chose the latter (and pay tax!). Unclear if BRK succession plan has changed but the immediate alternative Ajit Jain (71), who runs insurance operations, isn't very interested. The only thing certain is that son Howard Buffett will be the new Chairman after WB. https://www.cnbc.com/2022/08/06/berkshire-ceo-designate-abel-sells-stake-in-energy-company-he-led-for-870-million.html
I could not locate this transaction in the list of latest filings at EDGAR. Do you by any chance have access to the filing for this transaction?
".....Berkshire Hathaway Energy isn’t publicly traded, but its value was highlighted in June, when it bought back a 1% stake in the business from Greg Abel, a Berkshire executive who is seen as likely to succeed Buffett as CEO. BHE paid $870 million for that 1% interest, according to Berkshire’s second-quarter 10-Q filing, which was released earlier in August.....That values the company at $87 billion.....price seems fair at roughly 22 times BHE’s net income last year, in line with other big utilities....."
If BHE redeemed his stock, then it is a taxable transaction to him. If he wanted a tax-free transaction, then they would have structured it as an exchange of BRK stock for his BHE stock. With BRK stock, he probably can get market returns but not much more in the long run. If he really wanted to cash out to invest elsewhere (e.g., good opportunities coming up in venture capital space), it is better to just take the redemption route.
"Berkshire Hathaway BRK.B +2.16% Vice Chairman Greg Abel, the likely successor to CEO Warren Buffett, bought about $68 million of the company’s shares last Thursday in what appears to be his first purchases of Berkshire stock since he assumed the position in 2018.
In several Form 4 filings Monday with the Securities and Exchange Commission, Abel disclosed that he purchased 168 Berkshire Hathaway (ticker: BRK/A, BRK/B) Class A shares through the Gregory Abel Revocable Trust on behalf of his wife, children, and other family members...."
I don't understanding his strategy. If I understand, he first took huge amount of cash ($870 million?) for his stake in BRK subsidiary, paid tax, and bought BRK stock on the open market with small fraction ($68 million?). He could have just exchanged his subsidiary-stake into BRK tax free and then could have gifted BRK stock to any of his family trusts. May be there is more than what is reported. May be he couldn't get partial cash and partial BRK stock.
Whatever he did with his stake, I think he still has enough to live comfortably after retirement by withdrawing only 2.26% each year. Such incredible sums blur my vision and affect my thinking.
@yogibearbull, theoretically even $1 cash would have tainted any exchange of Energy stock for BRK stock to make the entire exchange taxable. He could have taken all stock and later sold some but that would have been seen as future CEO cashing out. One of the less discussed insider trading is how much MSFT stock Nadella sells.
I’ve thought about this one. But 40%+ in one holding (AAPL)? Kinda shoots holes in the old “diversification” theory. Nothing against their products. There are experienced bears out there who think AAPL is overvalued by a lot / ripe for shorting. Not that I would know.
From what I’ve seen, you could duplicate half of Buffet’s portfolio by buying just 2 stocks - AAPL and BAC. A “mutual fund” with that much concentration would need be categorized as “non-diversified”. I was thinking that perhaps with Berkshire’s size and stature they’d have better access to company records giving them advance warnings of any problems and time to get out. But that would be a violation of insider trading rules ….
Not meant to diminish or deny the huge success of Berkshire over the years. Good discussion. Hope those who own it fare well.
"Warren Buffett has famously said he is against diversification. "Diversification is a protection against ignorance," Buffett once said. "[It] makes very little sense for those who know what they're doing."
"Warren Buffett has famously said he is against diversification. "Diversification is a protection against ignorance," Buffett once said. "[It] makes very little sense for those who know what they're doing."
Of course @Mark - I shall assume both you and Warren know what you’re doing and I am in the dark. Forgive my raising the issue.
"Warren Buffett has famously said he is against diversification. "Diversification is a protection against ignorance," Buffett once said. "[It] makes very little sense for those who know what they're doing."
And I agree with him. Since 2000 when I started using my system, I never diversified and I used only several funds. For years I used 5 funds. Then I changed to only 2-3 funds and they are not equal. In 2000-2010, the SP500 lost money, in 2010-20, US LC , mainly growth were the best.
Warren Buffett believes that the vast majority of investors should diversify extensively and not trade.
"If you are not a professional investor; if your goal is not to manage money in such a way that you get a significantly better return than the world, then I believe in extreme diversification. I believe that 98 or 99 percent - maybe more than 99 percent - of people who invest should extensively diversify and not trade. That leads them to an index fund with very low costs. All they're going to do is own a part of America. They've made a decision that owning a part of America is worthwhile. I don't quarrel with that at all. That is the way they should approach it."
Comments
>> "the market" (well, 90% of it) had an average TTM P/E of 34.2 at the end of October.
Wonder what it is at the close today. The much critiqued Shiller is above 33 again.
@LewisBraham
>> ... think of Apple as a high quality company with a lot of cash and a moderate to slow growth rate in 2020. It is arguably as MSF describes it—blend—a blue chip stock with its heady growth days in the past.
Maybe, but experts have been saying this for decades, peculiarly. If you compare Apple w/ say SP500, or w/ IVW, or indeed w/ QQQ, whether from two summers ago, from spring '17, from fall '16, from last Thanksgiving, or ytd, you see no such thing. It still looks like all rock 'n' roll all the time.
Apple P/E = 35.6 (link)
Apple earning are so huge and why it has so much cash and it's harder to show growth but it still shows it and why it's amazing.
I don't think that apple is just another blue chip.
BTW, personally, Apple is the only company I ever banned. I never bought any of their products and would never do it in the future based on Steve Jobs behavior toward his employees, friends and family and its ridiculous product prices but Apple is a fabulous company
Apple P/E = 35.6 (link)
You must have a reason in mind, some point you're trying to make, by presenting this figure in isolation. Whatever it is, the point isn't clear.
If it is to show that AAPL's P/E on Nov 25 is higher than the 33.19 P/E it had on Oct 30th, well, sure. It goes without saying that over a short period when the earnings denominator (a quarterly datum) doesn't change, P/E will move in proportion to price movements. And this month, most stock prices have been going up, so most P/E's have been going up. Nothing special here.
If the point is to hint that AAPL's P/E is high, whatever "high" means, context matters. Certainly 35+ is high relative to historical stock market averages. But relative to the current (Nov. 25) TTM S&P 500 P/E of 41.34, it is low. Not bargain basement low, but notably lower than the typical large cap stock.
https://www.wsj.com/market-data/stocks/peyields
https://www.wsj.com/market-data/quotes/AAPL
Apple earning are so huge and why it has so much cash and it's harder to show growth but it still shows it
Certainly Apple's earnings are growing year by year. Though based on 5 year EPS growth rates, it is growing more slowly than not only the other top 10 stocks in VUG (your choice of growth index), but more slowly than eight of the top 10 stocks in VTV, including BRK.A (okay, you don't like that one), Procter & Gamble (PG), JPMorgan Chase (JPM), UnitedHealth (UNH), Verizon (VZ), Disney (DIS), Pfizer (PFE), and Comcast (CMCSA).
Moderate, steady growth. Some people call that a blue chip. You choose to call it growth. Whatever.
Hmm, a remarkable fact given my more recent analyses: '... compare Apple w/ say SP500, or w/ IVW, or indeed w/ QQQ, whether from two summers ago, from spring '17, from fall '16, from last Thanksgiving, or ytd, ... It still looks like all rock 'n' roll all the time.'
What a period this is, huh.
AAPL is no slouch, but everything is relative. Quite a period indeed.
AAPL: 7.31%
PG: 10.14%
JPM: 15.17%
UNH: 20.25%
VZ: 13.95%
DIS: 8.04%
PFE: 15.27%
CMCSA: 12.08%
and the subject of this thread, BRK.A tops this collection at 32.74%.
(I post this as much to check my previous post as to make the figures concrete. It's always possible I could have made a mistake.)
1) "MSF describes it—blend—a blue chip stock with its heady growth days in the past.
"Agree with msf and Lewis assessment. The fast growing business (iPhones, computers, music, and AppleTV) since Steve Jobs's returned has plateaued. In some area Apple is trailing."
2) "Growth is about revenues, cash flow and earnings versus the benchmark and industry peers and it’s forward looking, not from five or ten years ago."
FD: reality check. After another year. Apple proved it's not just another blue chip stock. It's even more amazing to do it when it's so big already.
Apple 2021 annual EPS was $5.61, a 71.04% increase from 2020. The price followed.
1) "MSF describes it—blend—a blue chip stock with its heady growth days in the past.
"Agree with msf and Lewis assessment. The fast growing business (iPhones, computers, music, and AppleTV) since Steve Jobs's returned has plateaued. In some area Apple is trailing."
2) "Growth is about revenues, cash flow and earnings versus the benchmark and industry peers and it’s forward looking, not from five or ten years ago."
FD: Reality check, after close to 3 years, Apple proved to be MORE THAN JUST A BLEND BLUE CHIP
One year performance......AAPL +12.3....VFINX -6.6%......JPM -23.7%
Three year performance...AAPL +49.65...VFINX +14.9%...JPM +6.1%
In just 3 years AAPL made 174% more than VFINX(SP500)....221.8 vs 47.8%...see (chart)
It was also in the news recently that the potential CEO Greg Abel (60) is very light in BRK stock. He had a choice to convert his large stake in the Energy unit into BRK stock (tax free) OR cash and he chose the latter (and pay tax!). Unclear if BRK succession plan has changed but the immediate alternative Ajit Jain (71), who runs insurance operations, isn't very interested. The only thing certain is that son Howard Buffett will be the new Chairman after WB.
https://www.cnbc.com/2022/08/06/berkshire-ceo-designate-abel-sells-stake-in-energy-company-he-led-for-870-million.html
I ran into this Barron's piece TODAY that says that the transaction was mentioned in BRK filing. As the article may require subscription, I am providing relevant excerpts below. https://www.barrons.com/articles/warren-buffett-berkshire-hathaway-utility-51661548484?mod=bol-social-tw
".....Berkshire Hathaway Energy isn’t publicly traded, but its value was highlighted in June, when it bought back a 1% stake in the business from Greg Abel, a Berkshire executive who is seen as likely to succeed Buffett as CEO. BHE paid $870 million for that 1% interest, according to Berkshire’s second-quarter 10-Q filing, which was released earlier in August.....That values the company at $87 billion.....price seems fair at roughly 22 times BHE’s net income last year, in line with other big utilities....."
If BHE redeemed his stock, then it is a taxable transaction to him. If he wanted a tax-free transaction, then they would have structured it as an exchange of BRK stock for his BHE stock. With BRK stock, he probably can get market returns but not much more in the long run. If he really wanted to cash out to invest elsewhere (e.g., good opportunities coming up in venture capital space), it is better to just take the redemption route.
"Berkshire Hathaway BRK.B +2.16% Vice Chairman Greg Abel, the likely successor to CEO Warren Buffett, bought about $68 million of the company’s shares last Thursday in what appears to be his first purchases of Berkshire stock since he assumed the position in 2018.
In several Form 4 filings Monday with the Securities and Exchange Commission, Abel disclosed that he purchased 168 Berkshire Hathaway (ticker: BRK/A, BRK/B) Class A shares through the Gregory Abel Revocable Trust on behalf of his wife, children, and other family members...."
I don't understanding his strategy. If I understand, he first took huge amount of cash ($870 million?) for his stake in BRK subsidiary, paid tax, and bought BRK stock on the open market with small fraction ($68 million?). He could have just exchanged his subsidiary-stake into BRK tax free and then could have gifted BRK stock to any of his family trusts. May be there is more than what is reported. May be he couldn't get partial cash and partial BRK stock.
From what I’ve seen, you could duplicate half of Buffet’s portfolio by buying just 2 stocks - AAPL and BAC. A “mutual fund” with that much concentration would need be categorized as “non-diversified”. I was thinking that perhaps with Berkshire’s size and stature they’d have better access to company records giving them advance warnings of any problems and time to get out. But that would be a violation of insider trading rules ….
Not meant to diminish or deny the huge success of Berkshire over the years. Good discussion. Hope those who own it fare well.
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Warren Buffett on diversification:
"Warren Buffett has famously said he is against diversification. "Diversification is a protection against ignorance," Buffett once said. "[It] makes very little sense for those who know what they're doing."
Forgive my raising the issue.
"If you are not a professional investor; if your goal is not to manage money in such a way
that you get a significantly better return than the world, then I believe in extreme diversification.
I believe that 98 or 99 percent - maybe more than 99 percent - of people
who invest should extensively diversify and not trade.
That leads them to an index fund with very low costs.
All they're going to do is own a part of America.
They've made a decision that owning a part of America is worthwhile.
I don't quarrel with that at all.
That is the way they should approach it."
- Warren Buffett, speaking to MBA students
Article
Video
APPL - 19% YTD
BRK - 12& YTD
Does diversification work ? Looks like over YTD it does.
Have a good day, Derf