Would you invest in Berkshire Hathaway?

[2kids10horses]

I know the A shares are really expensive:  $150,000 or something.  The B shares are only about $100.  No dividend.

Would you consider stashing some away for the long term?

[Deleted]

I bought the B shares when they first came out thinking that there would be an immediate jump.  As I remember the price was in the high 80's.  And this was a while ago.  Obviously they haven't exploded in the interim.  I think I'm staying away.

[The Virginian]

Let's assume the shares were going for $150 per share - The answer would be maybe - Buffet is getting old and his recent purchases of many dying newspapers recently brings into question his mental faculities from my point of view. He's either such a genius that the rest of us mortal minds can never figure out his reasoning or he is just an old fool. Time will tell. In any case though he is a one man show that will come to an abrubt end in the not too distant future so I'm leaning against investing in the Fund.

[Deleted]

Buffett was the best investor in the world for decades

operative word, was

actually i will probably buy BH stock after he passes

Once new management gets in, and they see everyone selling because Buffett is no longer running the ship, they will likely start to "return" some of the money back to the investors in forms of stock repurchases/dividends

That is when the stock becomes a screaming buy in my eyes

[IPAfan]

I think the shares are set up to be a solid long term investment at these levels. The company is definitely undervalued on a sum of the parts basis. It could make big returns for shareholders from here just by spinning off minority stakes in its wholly owned subsidiaries.

This would make the operating companies easier for the market to value (since they would trade in the open market), and would let Berkshire manage its capital by buying back shares of undervalued public subsidiaries while doing capital raises at fully or overvalued subsidiaries.

As for Berkshire's inability to beat the S&P...that's comparing Berkshire's BOOK VALUE growth to the S&P market return. I highly doubt that S&P book value increased by 16% annually.

Berkshire is increasingly about the operating companies. The insurance business produces FREE FLOAT for the long term which will be invested for profit. The utilities and railroad businesses provide great captive sources of investment. These investments let Berkshire deploy billions of dollars in Capex that return fairly stable ROE.

A wide variety of other operating subsidiaries provide diversification, cashflow, and high ROE.

This isn't the Berkshire of old. This isn't going to TROUNCE the markets. It will be one of the most conservative long term investments you can make at this point. If the markets perform poorly then Berkshire will likely outperform, make tack on acquisitions, buy cheap securities for the insurance business, and/or buy back shares. If we have a bull market with 15% annual returns for the next decade then I wouldn't be surprised at all if Berkshire lags behind.

I'd consider Berkshire for a long term investment for a taxable account. However, I have several other ideas I'd pursue first if I had available funds.

EDIT

One last point...Berkshire can increase its intrinsic value faster than the S&P500 even if book value does not increase as fast as the S&P500 price. Berkshire has historically tied up a huge amount of its value in common stock positions of publicly traded companies. The value of these holdings computes book value, but only the dividends paid to berkshire would be counted as profit on Berkshire's income statements. As Berkshire grows the wholly owned operating businesses the ROE will probably increase.

Take the example of Phillip Morris, a company which has been growing its revenue/earnings but buying back shares at a premium to book value. Every share that's bought back decreases the book value per share as PM is shelling out $90 in balance sheet cash (book value) to buy shares to retire which have an asset value of less than $0.

These share buybacks INCREASE the value of Phillip Morris shares because they increase each remaining share's claim on future profit from Phillip Morris. However, they dramatically DECREASE the book value of Phillip Morris. Book value DOES NOT EQUAL intrinsic value.

Just because Berkshire's book value did not increase MORE than the S&P doesn't mean that the company fundamentally underperformed the S&P500.

[2kids10horses]

That's good analysis, IPAfan.

I'm going to have some more cash to invest, and I'm trying to figure out where to place it.

I've also heard that Warren is mapping out a plan to have B-H pay a dividend.  Perhaps after he's gone.

[Deleted]

as i said before, whoever takes the helm after he leaves will probably keep a lot of the same philosophies

but...i see them returning value to shareholders either through buybacks or dividends or both

when warren passes, i will be buying as others start to sell

the kmart blue light specials dont happen very often....but i see this event as a big one

it will become a core holding over time