I don't know and I don't care (ignorance & apathy). Investing isn't a contest for me. I'm in it for income with capital preservation.
I first bought T four years ago at $25.60 when the dividend was $0.42 per share per quarter. Since then I have made two additional buys bringing it up to 10% (my limit for a stock) of my portfolio. Investment-wise it has provided a XIRR of 13.1%. The dividend has been raised four times during my ownership: 0.42 to 0.43 to 0.44 to 0.45 to the current 0.46, or about 2.3% per year, so I see it as the corporate equity equivalent of an inflation-indexed bond with a current real yield of 5.2%. The current real YTM on the 30-Yr TIPS is 1.28%, so that's an equity risk premium of about 4%. I'm happy with it.
A junk bond fund?
My fear would be that today's promise of a higher yield would eventually be offset by future capital losses.
And, someday in the far future, when Janet decides to start raising interest rates, that might induce additional capital losses. With a current duration of 3.9 years and a yield of 4.7%, an instantaneous increase of 1% in the interest rate would theoretical wipe out about a year's worth of income.
Just my opinion.
Balt, I don't understand why someone who is risk averse would favor BRK-B. What is the justification for the current trading price? Something WEB SAID? Something along the lines of: BRK is worth more than what I'm willing to pay to buy back shares and I'd consider buying back shares if the price fell below 120% of book value per share? If push came to shove, would he really buy back shares or would he just move the goal posts? And if he did buy back shares would the volume be substantial or just symbolic (a mere fraction of the shares being offered)? In BRK's case IV calculations tend to be based on fantasy distributions (the so called "Page 4, 2 Column" method, comes to mind) that are highly unlikely to ever take place in the real world. BRK, in spite of its size, looks a lot like a family business to me. If, in the next several years, Charlie dies, Warren dies, and Howard preceeds Warren in death, who is left to run the show? The "3-Ts" with an assist from Susie and Peter? And if I wanted to make a bet on America, I'd buy VTI (Vanguard's Total US Stock Market ETF), not BRK-B. Just my two cents.
Seriously hc. with regard to demand, why, other than the bragging rights ( my money is being run by the "World's Greatest Investor". So THERE! Na-nana-naa-nah! ), would anyone WANT to own BRK?
I'm not really a meany. I'm just playing the devil's advocate. Although the thought of bringing a plate full of deviled eggs to a church picnic just busts me up « Miracle Whip and Proud of It: Stacy's Deviled Eggs ».
5-Year Period (YE2008-YE2013)
BRK-A: (1 + 13.86%) * (1 + 0% - 0.74%) - 1 = 13.0%
In words: book value per share grows 13.86% per year (better than average!), BRK refuses to pay a dividend, and the multiple (P/BV) undergoes a modest contraction of 0.74% per year.
S&P500: (1 + 1.39%) * (1 + 2.64% + 13.79%) - 1 = 18.0%
In words: Revenue/Sales per share grows a pathetic 1.39% per year (less than inflation!), the "500" pays a dividend that averages 2.64% of sales per year, and the multiple (P/Rev), thanks to equity bulls & pumpers, undergoes a ridiculous expansion that averages 13.79% per year.
IMO WEB is his own worse enemy.
He knows how to turn the faucet on, but refuses to speak up when it comes time to close it off.
Five years ago, he touted equities at least twice.
Directly, "Buy American. I Am", 17Oct2008, and indirectly (Carol Loomis), "Buffett's metric says it's time to buy", 4Feb2009.
The result? The S&P 500 went from slightly undervalued at YE2008 (P/Rev of 87%) to ridiculously overvalued by YE2013 (P/Rev of 166%) and the S&P 500 outperformed BRK.
Serves him right for not having the courage to speak up.
IMO, he's no better than Alan, Ben & Janet.
At first sight, a sales growth rate of 12.8% per year over the last two years sounds impressive until one realizes that growth isn't entirely organic (growth from within) but is also partially attributable to growth from bolt-on-acquisitions, purchases made from retained earnings that could have been paid out as dividends.
Simple arithmetic, if BRK grows, on average, by about 10% per year, it will probably take another 70 years for BRK-B to grow from ~124 to ~100,000 $/share.
« Why is this not selling for around $100,000 per share?? »
Because WEB has put folks on notice that he would consider buying back shares if the price fell below 120% of book value per share.
Many years ago my sister worked for a small company (less than 30 employees) and she noticed that her 401k balance was not tracking the market. I looked into the rules for her and found the following:
« Your employer has to send the 401k plan assets to the plan trustee no later than 15 business days after the end of the month in which the money is deducted. »
In her case, her employer was in violation of the rule, went bankrupt several months later, and she lost all of her pending contributions. Apparently he had been using his employees' contributions as his "float".
Source: « Your Contributions: Long Day's Journey Into ... Your 401k »
Correct me if I'm wrong, but I believe Janet has pretty much said SHE won't let any air out of the balloon for at least another year. IMO that's good news for sellers (like WEB), but bad news for buyers (like my son, who contributes monthly to an 401(k)). The rich get richer while the poor become poorer.
The one sentence that really stands out and rings true for me is:
"flash traders are bit players compared to the biggest rigger of all which is the Fed."
Actually, 1982-1999, was the best 17 years for the S&P 500.
You buy at 17.2X the trailing dividend per share, sell at 87.7X, dividends per share grow on average by 4.3% per year (1.0% real + 3.3% inflation) and and your nominal IRR is ~18% per year.
The joys of buying low and selling high ... sigh.
Hi hc. I can handle the nonsense. Actually, it has been a source of amusement, and I have had a lot of experience, over the years, dealing with mean-spirited, hateful, spiteful, petty folks. But you're right, it is time to put the current loon on ignore.
No, but I did burn them.
Other than older, have you given any thought to what you'd like to be when you grow up?
Wrong. I bought at $81.00 and sold at $81.90 (includes commissions).
It was a TRADE (less than 5% of my portfolio) and when WEB stomped on it, I lost interest, cut anchor and moved on.
My notes, lifted directly from my spreadsheet (see if you can decipher them):
Buy at 125% BV/s, hold 1 … 3 years, BV/s grows ~10%/yr, sell at 130% BV/s, & ATR = 11 … 14%.
WEB's BB Trashes My Trade
Buy at 125% BV/s, hold 1 ... 3 years, BV/s grows ~10%/yr, sell at 115% BV/s, & ATR = 1 ... 7%.
Bought at 125% BV/s, held 390 days, BV/s grew ~9.8%/yr, sold at 115% BV/s, CTR = 1.1%, ATR = 1.0%
I thought the KBW "sum of the parts valuation" was interesting (the 2% growth rate & 7% discount rate got my attention). Bottom line: ~$122 per "B". Something for the koolaiders on the other board to consider.
I don't know about Jeremy's trees, but for the five-year period ending 31Dec2013, CUT (Guggenheim Timber ETF) "blew the doors off" both SPY and BRK. ATRs: CUT, 18.54%; SPY, 17.85%, and (bringing up the rear) BRK-A, 12.99%. If that comparison bothers you, do what WEB does, move the goal posts. Thanks for asking.