Whats the point of investing when Buffett will do it for you?

[deathtoau]

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Seriously. Why bother doing the work yourself if you can buy berkshire Hathaway non voting shares for aroung $3000 a pop (assuming you want growth and not income).

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Because Warren Buffett is 75 years old and won't be running the company for much longer than the near-term, maybe the next 5-7 years. When he gets seriously sick, dies or retires, whichever comes first, the stock will get hit with a minimum of a 20-30% drop in the next trading day.

[Ray Zee]

for that reqson a much better investment would be to short berk and buy his major holdings.
or if you like his picks just buy his major holdings. which is what you should do if you like a mutual fund. just buy what they are holding less the stocks that are in fashion, as mutual funds must buy them to attract new customers at the expence of those that trust them.

[imported_bingobazza]

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Because Warren Buffett is 75 years old and won't be running the company for much longer than the near-term, maybe the next 5-7 years. When he gets seriously sick, dies or retires, whichever comes first, the stock will get hit with a minimum of a 20-30% drop in the next trading day.

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Buffett joked a couple of years ago that every year since 1970 someone has asked about what would happen if he got hit by a truck. He said he would step down if that question ever changed to what would happen if he DIDNT get hit by a truck.

He has already chosen his successor, who will be responsible for managing his billions of bequeathed wealth on behalf of his charitable foundation and his wife. He wont name him (I seriously doubt its a female). I think the succession issue has been one of the biggest over the last decade, and that its well in hand. I very much doubt that this stock will drop significantly for a prolonged period after his death simply because its share price hasnt risen because of his legend, but because of his performance.

You can be sure he has trained his successor like Ben Graham trained him, and thats good enough for me.

Bingo

[FatOtt]

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for that reqson a much better investment would be to short berk and buy his major holdings.
or if you like his picks just buy his major holdings. which is what you should do if you like a mutual fund. just buy what they are holding less the stocks that are in fashion, as mutual funds must buy them to attract new customers at the expence of those that trust them.

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Yes, that's why I shorted BRK and bought shares in See's Candies, FlightSafety, Nebraska Furniture Mart, and the rest of them: Berkshire subs

Sorry for the sarcasm, but most of Berkshire's value comes from the companies that Berkshire owns completely and that aren't traded on public exchanges. It may have been the case that Berkshire looked a lot like a mutual fund 20 years ago, but it couldn't be further from the truth now.

To the original poster: the fact that you think this is a good strategy without thinking about the price/value proposition of the current share price makes me think you should just invest in an index fund. To make it explicit, would you feel equally strong about this strategy if BRKB was at $4,500 rather than $2,800?

If I could give Buffett all of my money and have him manage it for a 2% annual fee, I'd do it in a heartbeat, but that's not at all what you're getting when you buy Berkshire.

I don't mean to sound negative towards Berkshire, because I own some B shares, but if you're going to buy shares, it should be for the right reasons.

[RYL]

oops read the question wrong [img]/images/graemlins/tongue.gif[/img].

[imported_bingobazza]

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for that reqson a much better investment would be to short berk and buy his major holdings.
or if you like his picks just buy his major holdings. which is what you should do if you like a mutual fund. just buy what they are holding less the stocks that are in fashion, as mutual funds must buy them to attract new customers at the expence of those that trust them.

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Yes, that's why I shorted BRK and bought shares in See's Candies, FlightSafety, Nebraska Furniture Mart, and the rest of them: Berkshire subs

Sorry for the sarcasm, but most of Berkshire's value comes from the companies that Berkshire owns completely and that aren't traded on public exchanges. It may have been the case that Berkshire looked a lot like a mutual fund 20 years ago, but it couldn't be further from the truth now.

To the original poster: the fact that you think this is a good strategy without thinking about the price/value proposition of the current share price makes me think you should just invest in an index fund. To make it explicit, would you feel equally strong about this strategy if BRKB was at $4,500 rather than $2,800?



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Maybe Osma Bin Laden will put a contract on the old guy and short the stock?

As for not thinking about about value, nothing could be further from the truth...see the post above...I dont believe that the value differs markedly at any time from the price, and thats not an accident.

Your right about the companies he took private. When he finds a big winner, he doesnt want to share it with the street if he can help it, and who can blame him.

The other 2 advantages that he has are the float from his insurance operations, acquired at almost zero cost, and the tax treatment that that float enjoys...this is more like a moderately geared invesmtent trust wrapped up in a tax shelter than a mutual fund.

When you say i feel strongly about this strategy, I can understand why you would think that, but to be honest, Im looking for someone to give me a good reason not to do....

Why cant you get him to manage all your money for 2% a year? Surely it will only cost you what you pay to acquire the shares? Have I misunderstood something here thats peculiar to the US?

Bingo

[AceHigh]

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Why cant you get him to manage all your money for 2% a year? Surely it will only cost you what you pay to acquire the shares? Have I misunderstood something here thats peculiar to the US?

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You've convinced me that it's a good idea for you.

Most of us on the board don't like mutual funds because they are more interested in generating fees than making good investments.

Did you know most mutual funds overturn there whole portfolio every year? This makes sense for some funds, but a lot do it because they want to generate fees for the rest of the company. So we have a healthy distrust of fund managers and can out perform the majority of them by doing our own investing.

YMMV.

[FatOtt]

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As for not thinking about about value, nothing could be further from the truth...see the post above...I dont believe that the value differs markedly at any time from the price, and thats not an accident.

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Do you recognize the implication? If the price is always roughly equal to the value, there's no point in buying shares. If the price is "fair", that price anticipates the possibly superior investment returns of Warren Buffett. You should only be buying if you think the price isn't roughly equal to the value.

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The other 2 advantages that he has are the float from his insurance operations, acquired at almost zero cost

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Take a look at the last 5 years of underwriting results - it's anything but "almost zero cost" because of Gen Re's horrible record.

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Why cant you get him to manage all your money for 2% a year? Surely it will only cost you what you pay to acquire the shares? Have I misunderstood something here thats peculiar to the US?

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Do you really not understand this? Here's an analogy: Warren Buffett is going to manage $1,000 for you (at some acceptable expense, let's say 1% per year). That would be fantastic if you could just give him $1,000 and let him go. The problem is that it costs far more because you're not writing the check for $1,000, you're writing the check for whatever the share price is trading at. So if the stock is overvalued, you may be paying $3,000 for the privilege of managing only $1,000. If this still doesn't make sense to you, at a minimum you should understand the difference between "regular" mutual funds and closed-end funds and figure out how that applies to this situation.

[imported_bingobazza]

The insurance situation seems to be on the mend, apart from the SEC issues. I dont know if problem this was cyclical or if Buffett found some problem that made him want to buy to fix, to release earnings. But things seem to be moving in the right direction in relation to the bottom line now. I think that insurance is very cyclical. Buffet has been enjoying almost free floats through Geico for a few decades, with a few bumps here and there.

I read somewhere that his stock for equity swap is with hindsight considered a master stroke when he took General Re, due to the bond portfolio that General Re had and the valuations he placed on bonds and equities at the time. He dumped ton of overvalued stock, and got a load of bargain bonds in their place. Maybe in a few years, when the dust settles at General Re, and we see how its running under Buffett, we will be better placed to judge for the longer term.

http://www.insurancejournal.com/news...3/08/39892.htm

Berkshire is a gowth stock now and has always been. Its set up like that. I just want to make sure that its not overvalued. Theres a link earlier in the thread that gives a liquidation valuation model for Berkshire. If you dont think you can make money paying fair current value, go to Omaha next year and you'll fnd about 20,000 very happy punters who will tell you different. If this liquidation model is right, (did I already say I was too lazy to work it out?), Berkshire has a PEG factor that never moves far from zero and earnings growth consistently in double digits. This makes it an absolute bargain.

I dont consider this a unit trust or mutual fund of any kind...he isnt subject to 5 or 10% rules, he isnt forced to make short term decisions to keep a sales force happy with good figures, he doesnt charge a bid/offer spread, he can borrow to gear....oh, and he beats the index. I dont understand your point here.

Bingo.

[FatOtt]

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If you dont think you can make money paying fair current value, go to Omaha next year and you'll fnd about 20,000 very happy punters who will be very happy to disagree with you.

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I've been to Omaha for two annual meetings already, thanks. The point is, if the stock is valued fairly, it won't beat the index. That's the essence of being valued fairly. If it is undervalued, it will outperform (in expectation, or probabilistically). If it's overvalued, it will underperform.

I still think you are seriously misunderstanding what you're getting when you invest in Berkshire, but good luck with it.

By the way, this is hugely false:
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The long term nature of the owners of the shares essentially make sure that there is never a specualtive bubble in the share price.

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It's not at all a stretch of the imagination to say that there was a bubble in Berkshire's share price in 1998. In fact, that overvaluation is one of the factors that resulted in Berkshire issuing shares for Gen Re - they got to use overvalued currency in much the same way that AOL did when they acquired Time Warner.