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Berkshire Hathaway: A mutual fund in disguise?

beebee
edited August 25 in Fund Discussions
Long, long ago, Buffett ceased being a diehard value investor, seeking instead what he regarded as great companies at good prices. It is not for me to say whether he currently owns great companies (aside from See’s, that is). But their prices are certainly moderate. Were this a fund, Morningstar would classify its portfolio as large (or possibly mid) value.
Article:
berkshire-hathaway-mutual-fund-disguise


A previous MFO discussion (2020) on the topic:
https://mutualfundobserver.com/discuss/discussion/57318/is-berkshire-more-like-a-mutual-fund-than-a-stock/p1

Comments

  • Standing hed for 2-3 decades
  • edited September 4
    Certainly, wonderful this year!

    But, in fairness, most of the outsized returns (versus say SP500) came in first 20 years, not the last ...

    Berkshire Hathaway Calendar Year Outperformance

    image


    Berkshire Hathaway Past 20-Year Growth

    image


    And without last month's August surge, SPY and BRKA dead even on this chart.
  • edited September 3
    I think BRK currently stands with roughly 45% cash after all the selling. I thought Mr. Buffett was a fan of the S&P 500. Timing maybe?
  • Yes, I'm wondering exactly what he is smelling.
  • edited September 4
    @Mark. Devish enlightened me once about BRKA's moves to cash. Unlike say Eric Cinnamond's funds, and I'm a fan, owning BRKA doesn't come with a 1.45% er. And there is no tax consequence. None that is apparent, anyway. As for not holding SP500, see comment below.
  • edited September 4
    @Joe. Buffett, like all the other axioms on investing, can support both sides. He espouses owning a company forever, until he doesn't. I'm a Buffett fan, of course. Probably mostly because of his unassuming lifestyle. But, for what it's worth, I don't believe Fama has ever conceded the reason for Buffett's investing success ...
  • 2 things happened:

    1. BRK has huge operational businesses now and lots of related economic risks.

    2. WB has gotten trigger-shy. He didn't act during 2020 or 2022. He may be waiting for a market that isn't there.

    BTW, many value investors (WB, Howard Marks, Sam Zell, etc) complained that the Fed and the Congress intervened too early in 2020 (remember pandemic, elections), so the value investors missed their "feasts" or "on the grave dances". I think that the government saw earlier than the most what was evolving in 2020 based on tax receipts (payrolls, FICA, sales, customs).
  • edited September 4
    @ybb. Don't know enough to assess point 1. But point 2, yes, seems fair.

    March 2020 unsettled even The Great One. He's in good company. He moved quickly enough to dump all the airline holdings though.

    The Fed and Congress really did respond quickly, fortunately for us. Like going to war, but instead of paying people to build airplanes and bombs, they paid them to stay home ... and, likely, not topple the government. Actually, many governments did same thing.

    Those images of stacked coffins rocked our world.

    The value investing environment you describe sounds right too.

    People only invest if they perceive there is a future. Even value investors! In March 2020, for a few short moments, it felt like an asteroid was inbound.

    So, likely took a while for WB and company to recover.

    Those who did not hesitate and jumped into BRKA (and other funds) during that time have been rewarded handsomely.

    They still believed!

    Performance Since COVID Trough - March 2020

    image
  • beebee
    edited September 4
    Berkshire labeled as a conglomerate:
    Examples of conglomerates are Berkshire Hathaway, Amazon, Alphabet, Meta (formerly Facebook), Procter & Gamble, Unilever, Diageo, Johnson & Johnson, and Warner Media.

    All of these companies own many subsidiaries. Some own subsidiaries that are all within the same industry, such as Diageo focusing on beverage alcohol, while others are diversified, like Amazon, which owns the grocery store Whole Foods, Goodreads, a social cataloging site of books, Zappos, a shoe retailer, and many more other subsidiaries.
    and regarding mutual funds:
    As mutual funds have come to dominate investment portfolios, diversification has been achieved for far cheaper than with corporate mergers and acquisitions (M&A), at least from an investors point of view, thus weakening the need for conglomerate business models.
    source:
    https://investopedia.com/terms/c/conglomeration.asp

  • edited September 5
    From my memory of the last Q, BRK has about $600b in investments + cash. So, the operating businesses are being valued by the markets at $400b. They make about $40-50b (annualized) in profits.
  • down nearly 3% today.
  • Ya the dude at Barron's wrote a piece stating Berkshire is fully valued at recent prices ...
  • edited September 5
    BF,

    On a sum of the parts basis, it is undervalued relative to current market. Insurance and utility stocks are hot. But WB thinks the current market is not undervalued; otherwise, he would be buying back BRK stock.
  • edited September 5
    I track it daily, but don’t own it. I can’t remember it sustaining a -2.85% single day hit like today in the years I’ve tracked it - but am sure there have been some. It will be interesting to watch this one in coming days and see how it performs relative to the broader market. I don’t really understand it very well, which is the main reason I don’t own it. But have tremendous admiration for Buffett and BRK’s long term stellar performance.
  • The good news is that its a trillion dollar company. The bad news is that its a trillion dollar company, that is now highly priced, and exposed to the economy, stock market, and future management at this high valuation. Like the S&P, Berkshire will have to earn its way into future price increases. And that is, if its lucky.
  • The unknown outcomes from future management of money and operations does make me nervous but not much I can do about it. I do not track it daily or even yearly, though I have owned it for more than 15 years.
  • BaluBalu said:

    I do not track it daily or even yearly, though I have owned it for more than 15 years.

    @BaluBalu - “Not looking” is commendable. But you must take note of BRK’s price movement sometimes. How else could you have known it was down 3% yesterday? Here’s your post from a day ago:
    BaluBalu said:

    down nearly 3% today.

  • edited September 6
    @hank, I looked at the change because you guys started a thread on it. Even then, I still do not know the price level. It is like something could be right in front of your eyes but you do not see it because you do not pay attention to it. There is nothing commendable about it - I could be worrying / focusing about the wrong things.
  • Thanks. Makes sense.

    I feel I learn a lot by scanning a list of 15-20 funds, stocks or indexes at the end of the day. These are things I may never own. But together they tell a story. Takes less than 60 seconds out of each day. My $1.95 monthly app from Apple makes this extremely simple. Everything updates continuously and syncs across my devices.

    The observations rarely produce “actionable” information. Rather, they add in small degree to my understanding of how various market components interact. Daily the tid-bits of data are meaningless. Over months and longer periods I think there is something to be learned.

    Many profess not to care what markets do. Say they never look. Never react. Yet, many visit boards like this where markets and approaches to investing are discussed daily. It strains credulity to think we are all passive investors blithely sitting on the same mutual funds or stocks we’ve owned for 15 years - rarely bothering to look.
  • edited September 6
    @hank,

    "Many profess not to care what markets do. Say they never look. Never react."

    If anyone says that they are not aware of the inherent contradictions in those statements, and we do not need to react to their statements.

    I assume everyone that posts here knows or wants to know what the broad markets (not necessarily individual stocks) are doing and they have a real or mental notes of watch lists. To me, BRK price level or changes in its price is not helpful to my investing activity / decisions. YMMV. But because I own it, the days of not paying attention to it may be coming to an end sooner than later.

    I think we are getting away from the OP.
  • BRK insurance chief Ajit Jain dumped lot of BRK-A stock. He still owns a respectable amount.
    https://www.cnbc.com/2024/09/12/ajit-jain-dumps-more-than-half-of-his-berkshire-hathaway-stake.html
  • The stock got a lot of tourists coming in as it got to the trillion dollar mark thinking this trillion dollar company was like the others. Berkshire isnt NVIDIA. The tourists are going to leave and its getting messy messy messy. Volatility is picking up everywhere as valuations are full.
  • edited September 12
    With short end of the curve expected to drop 2% or so in the near future, all the big Tech companies and BRK will earn less interest income on their cash hoard. Tech companies will invest (productive or unproductive) in their business (AI?). What will BRK do with its cash? APPL, reliant on hallucinating consumer AI, is using its cash to buy back stock.
  • I am not sure how the short end goes down to 2% when deficits gets this large
  • edited September 12
    Dropping 2% or so (from 5.375% to 3.375% +/-).
  • Misunderstood. Ya. That’s what the market has priced. Fun times.
  • edited September 12
    I am not sure we get there without a marked recession but that is not the topic of the thread.
  • Another standing hed, for 28 years (brk.b)
  • edited September 18
    BaluBalu said:

    With short end of the curve expected to drop 2% or so in the near future, all the big Tech companies and BRK will earn less interest income on their cash hoard. Tech companies will invest (productive or unproductive) in their business (AI?). What will BRK do with its cash? APPL, reliant on hallucinating consumer AI, is using its cash to buy back stock.

    interest income of those mentioned comes down faster with today's Fed's decision.
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