Hatred is way too strong a word. I don't hate WEB and I seriously doubt that hc does either. Try disappointed. We're disappointed with him. He isn't living up to our expectations. But whose fault is that? If we mistakenly imagine him to be something that in reality he never was, nor will ever be, can we really blame him for that? Yes, to some small degree, (moving the goal posts is not a plus!), but the bulk of the blame lies with us for: [1.] creating the myth in the first place and then, [2.] talking ourselves into believing it. JMO, but it is better not to have heroes.
The word "moat" has a different meaning for me. It signifies that a company has the ability to generate excess profits by taking unfair advantage of its customers. Here's a short list for you to reflect upon, if you can't tell me how each of these companies employs its "moat", you have some homework to do: AXP, WFC, and Clayton. I have made one new purchasing decision recently, after decades of buying Heinz's ketchup, I now buy French's. I know that's being petty, but one does what one can to level the playing field. The CPUC fine on PG&E is why I own Utilities in an ETF, rather than as individual companies. My wife's family owned shares in the utility that was responsible for the « Northeast blackout of 2003 ». The local brewery even named a beer after the event: "Blackout Stout - Bold and dark as a power-less metropolis, our Russian Imperial Stout commemorates the infamous 2003 blackout that briefly left some 55 million people utterly unplugged."
Yeah, I've gone full circle. Perhaps, some day when you grow up, you will too. Believe it or not, once upon a time, I also idolized, Henry and George as well. I even had some money in one of their lieutenant's companies for a few years. Some day, when your heart begins to grow, read George Ander's "Merchants of Debt: KKR and the Mortgaging of American Business". IMO, WEB is now becoming one of the things he once despised.
« Where are your values? »
hc, I bought my first share of BRK-B on 28Sep1998.
Believe it or not, but once upon a time I too was a Berkie koolaider and a WEB fanbois.
For one year and 6 days.
On 4Oct1999, I read something on the front page of the WSJ that would be the beginning of the end for me, something that would slowly change the way I perceived BRK, WEB, and the companies that he acquires. If you care to read what I read, search the string below for the article:
« How Kirby Persuades Consumers To Shell Out $1,500 for Vacuum »
Sean, JFYI, if anyone else had asked, I would have ignored them.
I bought more VPU, at $94.00 per share on May 13th. By the way, that was not a particularly good buy at a P/T4QD of 29.6, but after selling off 15% of my portfolio I felt the need to at least put about a third of that newly raised cash back to work. Six days later and it has run up 3.1%, more than BRK-B has done year to date, a minus 3.3%. To be fair, VPU's YTD total return of -4.5% is actually worse, which is why it WAS a buy. No doubt a May 9th article in BARRON'S (see below) was the catalyst that resulted in the recent run up.
"Time to Give Utility Stocks Another Look" : "After a 10% pullback, utility stocks are looking attractive again, with total return potential of 8% to 9% a year."
With BRK trading near, if not at, the peak multiple (P/BV), there is, in my opinion, very little, to no hope for any additional expansion going forward, and the probability of a contraction due to a either a market correction and/or Le Patron's passing, or both (the Perfect Storm scenario), is a very real possibility. The quarter over year ago quarter growth in book value per share was a pathetic ~6.2%. With no hope for a dividend anytime in the next 10 to 20 years if ever, what is it you folks look forward to? Other than a few naive fanbois, who is buying this?
Yeah, I did miss a one time run up in the multiple, but I used the proceeds of that sale that very same day to buy something that has never disappointed me. I bought some more (my fifth, and last, 5% increment) just last week, after selling off the last of my traders. Enjoy your BRK.
Come on, hc, THINK (an IBM trademark). The foundations are selling the shares that they were gifted at ~148% of book. That's a ~23% premium to WEB's buyback price (120% or less). WEB is NOT the patsy in this game.
For me, the following sentence stood out:
"Accordingly, today’s “goldilocks” chatter is no different than that of 2007 or 1999."
I vividly remember the second half of 1999. I ordered a pre-publication copy of "Dow 36,000" and picked it up on the very day it was released for sale. The financial equation (The Gordon growth model) that they had used was, and still is, acceptable to me, but I had no way of knowing at the time that their inputs were overly optimistic. IIRC, they argued that a "perfectly reasonable price, PRP" for the DJIA would produce a dividend yield of about 0.5%, at a time when it was closer to 2%, implying that the DOW was "worth" four times the price. it would take me years to discover that the discount rate that they had used was way too low (the real yield on a treasury bond with no equity risk premium added to it, for the simple, laughable reason, that "stocks are safer than bonds"). They had also used a questionably high real growth rate which, in combination with the low discount rate, resulted in a ridiculously low capitalization rate, "r-g".
If you take a look at the chart (use the string below to search for multpl's copy) you can see that that type of thinking actually worked for a while, folks paid up, dropping the yield down to 1.11% by August 2000. But by August 2002 (two years later) the yield had risen once again to 1.74% due to falling prices, resulting in a cumulative capital loss of about 38% for the two year period.
« multpl S&P 500 Dividend Yield »
Is the argument promoted by today's equity bulls (use a low discount rate because today's interest rates are low to near zero, in combination with a high, "financially engineered", thanks to buybacks, growth rate) really all that different?
And, to beat my critics to the punch, yes, if you plan, like WEB, to hold your equities "forever", the preceding does not apply to you.
As always, just my opinion.
And then again, it is not out of the realm of possibility that by year's end BRK-B could be trading around $114 per share.
• In sympathy with a general market correction, BRK's equity portfolio losses 20% of its market value,
• but, add in 3 quarters worth of net income,
• and last, but not least, BRK trades at the buy back threshold (120% of book value per share) because WEB has finally made his very last buy, he's bought ... "THE FARM".
If you're willing to ride it out to the end, Jeremy believes 2250 for the "500" is possible. That's another 8% up. That's too close for me, I'm trimming now. By the way 2250 would be a P/BV of about 3.1. Take a look at the chart (search for it using the string between the guillemets below) and tell me what you think.
« multpl S&P 500 Price to Book Value »
I thought her comments were surprisingly candid, but like the two fed chiefs before her, when the subject of bubbles came up, she was quick to adopt the Sergeant Schultz defense: "I know nothing! I see nothing! I hear nothing!".
But were Janet's comments to Christine the catalyst that triggered the drop?
« i wouldnt expect 6% going forward »
Well, give this some thought.
If the equity market stagnates, i.e., "goes flat", for the next several years, then the only growth BRK will see will be generated by retaining net earnings to book. Adding ~20 B$ in net earnings per year to a starting base book value of about ~241 B$ should increase book value by about 8.3% per year (hey, isn't that what BRK actually did for the year ended 2014?) and if the equity markets undergo a correction (which I sincerely hope they do) the growth rate could easily hit your 6% (or less) per year due to losses inflicted on BRK's own equity portfolio.
No, THAT wasn't right.
As of 31Mar2015 book value per share was $146,963 per "A," or $97.98 per "B".
Divide 241,458 million dollars in Berkshire Hathaway shareholders' equity (see page 2) by 1.642982 million shares outstanding on the exact, same date, "On an equivalent Class A common stock basis, there were 1,642,982 shares outstanding as of March 31, 2015 ..." (see page 20).
That's a year-over-year-ago-quarter gain of only 6.17%, or a quarterly increase of 0.53%, which annualizes to 2.14% (and yes, Tom, I still maintain that only idiots annualize periods less than a year).
Now you know why the cheerleaders are so quiet.
That puts the 120% buyback threshold at $117.57 per "B" share.
By the way, It's a good thing WEB moved the goalposts, because for the five year period ended 30Apr2015, the S&P 500 outperformed BRK-B by 139 basis points per year (5-Year ATRs: VFIAX, 14.29%; BRK-B, 12.90%).
Is it just me, or is BRK looking tired, really really tired.
« ... 200 mid term is right around the corner. »
Midterm of what year?
I seriously doubt that anyone considers yearend 2018, "around the corner".
Generally speaking, high payout + low growth stocks also have a lower Price/Dividend ratio which makes them safer. They have a lower duration.
Search for Hussman's 23Feb2004 write up on the subject : « Buy-and-Hold For the Duration? - Hussman Funds »
Clearly, the sooner an investment pays you back your original investment stake, the better.
The last thing on earth that I would ever want to own is the mythical zero coupon console - it makes no payments before maturity and it never matures. You just trade it like gold, or fine art, or ...