# Berkshire Hathaway (BRK.A, BRK.B)



## Cal (Jun 17, 2009)

http://www.berkshirehathaway.com/letters/2011ltr.pdf

Letter to shareholders....


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## Barwelle (Feb 23, 2011)

I like his explanation on pages 6 and 7 about why he wants stocks to underperform for long periods of time.


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## Cal (Jun 17, 2009)

Not Fans:

http://www.thestar.com/business/art...t-why-the-oracle-of-omaha-is-irrelevant-olive

http://www.theglobeandmail.com/glob...hy-buffett-has-gold-all-wrong/article2351809/


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## atrp2biz (Sep 22, 2010)

The Star article is ridiculous. Sure, there are lots of stocks that have outperformed BRK, therefore conglomerates are not the way to go? 

Also, what the article fails to point out is that BRK did not invest in traditional equities in the financial sector. BRK managed some sweet deals from JPM and others.

All in all, it was a terrible article. I'm happy to hold BRK for the long term, especially if it retains all of its earnings and doesn't pay dividends.


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## CanadianCapitalist (Mar 31, 2009)

I think a lot of the criticism by David Olive is not valid. I might be mistaken but I've never heard Buffett saying avoid bank stocks. IIRC, Buffett did get rid of a lot of derivatives that made no sense to him. The derivatives that BRK did bet on are fairly straight forward and Buffett clearly explains why he took those bets and why the mark-to-market accounting treatment of the derivatives that BRK does own makes no sense.

Still, I do agree that investors have to think for themselves and not take Buffett's or anyone else's words as gospel. Having said that, I think Buffett is going to turn out to be right on the relative values in stocks, bonds and gold at current valuation levels.


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## Financial Cents (Jul 22, 2010)

Cal, thanks for sharing the annual letter. 

Always an entertaining read!


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## 1sImage (Jan 2, 2013)

Anyone rich enough to own some? 

Berkshire Hathaway Inc.


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## maxandrelax (Jul 11, 2012)

More like, anyone savvy enough to have invested in BRK more than 30 years ago?  I couldn't imagine making a market buy for 1 BRK share lol - finding that you paid $10,000 more than you wanted.


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## 1sImage (Jan 2, 2013)

I know, I follow it an it has massive moves in a day.


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## slacker (Mar 8, 2010)

What does A provide that B lacks?


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## GoldStone (Mar 6, 2011)

Bragging rights.


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## 1sImage (Jan 2, 2013)

He never split... you wanna play you gotta pay.


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## jcgd (Oct 30, 2011)

Similar moves as any other company. Well, less if you really think about it. How often do you see >4% swing with Berkshire over any other company? I'm not sure why Buffett created class B. The whole idea, from what I can gather, was keeping the stock tracking book value by preventing speculative buying and selling. Essentially, a massive share price kept people who weren't serious about owning the company away. Creating the B class defeats the point. He might as well have just split the class a 100 for one or whatever.

The annualized return of Berkshire kinda shoots the stock split theory doesn't it?


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## Uranium101 (Nov 18, 2011)

slacker said:


> What does A provide that B lacks?


There is huge discounts to the voting rights of class B. Of course, Buffett favours the A class.

Back in the days, before class B splits, 1 class A = 30 class B, but it doesn't mean that as long as you have 30 class B shares, your voting right is just as good as a class A.
If I remember correctly, you needed like 200 class B shares in order to be equivalent to 1 class A share.
Class A can convert to class B any time they wanted, but not the other way around.

So, if you factor in the stock split for class B. You will see that 1 class A = 1500 class B, as for voting right, it's 1 class A = 10,000 class B shares.


edit: that is why you will see class B trades with a slight discount to class A.


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## Echo (Apr 1, 2011)

Found this on Wikipedia - http://en.wikipedia.org/wiki/Berkshire_Hathaway

Berkshire Hathaway is notable in that it has never split its Class A shares, which not only contributed to their high per-share price but also significantly reduced the liquidity of the stock. 

This refusal to split the stock reflects the management's desire to attract long-term investors as opposed to short-term speculators. 

However, Berkshire Hathaway has created a Class B stock, with a per-share value originally kept (by specific management rules) close to 1⁄30 of that of the original shares (now Class A) and 1⁄200 of the per-share voting rights, and after the January 2010 split, at 1⁄1,500 the price and 1⁄10,000 the voting rights of the Class-A shares. 

Holders of class A stock are allowed to convert their stock to Class B, though not vice versa. 

Buffett was reluctant to create the class B shares, but did so to thwart the creation of unit trusts that would have marketed themselves as Berkshire look-alikes. 

As Buffett said in his 1995 shareholder letter: "The unit trusts that have recently surfaced fly in the face of these goals. They would be sold by brokers working for big commissions, would impose other burdensome costs on their shareholders, and would be marketed en masse to unsophisticated buyers, apt to be seduced by our past record and beguiled by the publicity Berkshire and I have received in recent years. The sure outcome: a multitude of investors destined to be disappointed."


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## underemployedactor (Oct 22, 2011)

Yes, I own 1000 shares of BRK. Oh wait, you didn't mean the Brick, did you.....:tongue-new:


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## james4beach (Nov 15, 2012)

Yeah he defeated many purposes with the B shares. He said he wouldn't split, but he eventually split the B shares. This also let them be included into the S&P 500 for the first time. To me it looks like Buffett compromised some of his long-held beliefs: he split in order to finance a typical Wall Street stock-payment deal *and* get the short-term pump offered by index addition.

I do hold BRK.B. It's performed at +0.9% annualized over the years I've held it, meaning it has underperformed my cash. Not a big surprise... most stocks have underperformed cash over the last few years. I still can't figure out why people love stocks so much.


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## Sampson (Apr 3, 2009)

james4beach said:


> I do hold BRK.B. It's performed at +0.9% annualized over the years I've held it, meaning it has underperformed my cash. Not a big surprise... most stocks have underperformed cash over the last few years. I still can't figure out why people love stocks so much.


You're kidding right? Which stocks have return annualized 0.9% over a few years? Most indicies are above their 2008 levels, so unless you bought at the last market top, any money investing over the past 5 years would have returned much more than cash over that period.


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## james4beach (Nov 15, 2012)

I guess I was thinking of the TSX (admittedly the wrong benchmark for Berkshire). Let me actually calculate to get a fair picture of the last few years... I'm curious now. For my 'cash' proxy I'll use XSB, reasonable considering it's similar to a cash/GIC mix.

These numbers are non-annualized, TSX Composite versus XSB

1 year: +2.2% vs XSB +2.0% [tie]
2 years: -3.5% vs XSB +6.7% [CASH wins]
3 years: +12.8% vs XSB +8.5% [STOCKS win]
4 years: +48.3% vs XSB +14.1% [STOCKS win]
5 years: +1.1% vs XSB +22.2% [CASH wins]
6 years: -0.9% vs XSB +28.1% [CASH wins]
7 years: +9.0% vs XSB +32.5% [CASH wins]
8 years: +40.8% vs XSB +36.5% [tie, difference is 0.5% annualized]
9 years: +48.7% vs XSB +43.2% [tie, difference is 0.6% annualized]
10 years: +89.9% vs XSB +53.5% [STOCKS win]

In the 10 periods looking back from today, the TSX beats 'cash' in only 3 ! That's a pretty terrible track record. It's like you have a 30% chance of succeeding in stocks, if you arbitrarily pick an entry year.
In the last 5 periods (what you suggested), TSX beats in 2 ... better track record, but hardly impressive.


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## Sampson (Apr 3, 2009)

In what way is XSB similar to cash? No institution will give yields on cash that are close to the debt they own. They wouldn't make money that way.

One question, what happens to your comparison if you extend the time frame beyond 10 years? 20, 30 years? It's widely acknowledged (and 2009 reinforced this) that periods of 10 years have shown that equities may not necessarily outperform. Beyond this time frame, pick any rolling 20 year period. This is why people invest in equities.

Will equities produce similar returns going forward? No one knows, but unless you believe there will be no real organic growth in the World economy, then equities should continue to outperform cash over long periods. Selecting a single country's cap-weighted index is not a good proxy for equity investing as a whole. What happens compare your equities vs. cash portfolio if you now add the S&P500, emerging markets, EAFE etc into the mix. This would have outperformed cash.


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## Sampson (Apr 3, 2009)

james4beach said:


> In the last 5 periods (what you suggested), TSX beats in 2 ... better track record, but hardly impressive.


The problem with your interpretation of this is that you chose 2 static points. People hardly invest this way. People typically add money into investments as they have cash on hand. Internal rates of return on equity portfolios over the past few years have been very high for most people brave enough to put money in. A single investment into the TSX anytime during mid-2009 to mid 2010 would easily outpace a similar fixed income investment.


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## Uranium101 (Nov 18, 2011)

james4beach said:


> Yeah he defeated many purposes with the B shares. He said he wouldn't split, but he eventually split the B shares. This also let them be included into the S&P 500 for the first time. To me it looks like Buffett compromised some of his long-held beliefs: he split in order to finance a typical Wall Street stock-payment deal *and* get the short-term pump offered by index addition.


When class A hit 100k, the tax implication for donating or gifting anything over 100k is severely taxed in the US.
Class B was originally created to mitigate that problem. That is why people can convert their class A to class B. 
Class B was also created that funds wouldn't be created to extract investor money for those who wanted to invest with Berkshire.
The inclusion in S&P500 was to replace the railroad company they acquired.
The slit of class B was intended that Burlington Northern Santa Fe small shareholders can swap their shares tax free.



james4beach said:


> I do hold BRK.B. It's performed at +0.9% annualized over the years I've held it, meaning it has underperformed my cash. Not a big surprise... most stocks have underperformed cash over the last few years. I still can't figure out why people love stocks so much.


We love stocks because they kick asses.


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## james4beach (Nov 15, 2012)

Good replies everyone, thanks - especially regarding time period selection and diversification of indexes. I also admit I use the term cash loosely, when I really am looking at short-term fixed income.

To be honest I was surprised at how that (hastily done) XSB vs TSX comparison ended up looking.

What would be very interesting would be a more thorough comparison, going back more years, and rolling through different time periods to capture the effect that investors arrive at many times - not just one start/end. You would still compare the cash-equivalent return of that day to the stock return, and (as Sampson said) look at several major stock indices (don't forget the Nikkei! lol).

That would give you a good idea of investment performance, or seen another way: the kinds of returns an average stock investor, arriving at arbitrary times, would experience in diversified global investments.

I suspect the result would show that stock investors did well in 1974-2000, with somewhat flat returns post-2000.


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## Echo (Apr 1, 2011)

Uranium101 said:


> When class A hit 100k, the tax implication for donating or gifting anything over 100k is severely taxed in the US.
> Class B was originally created to mitigate that problem. That is why people can convert their class A to class B.


Exactly. That's how Buffett has been donating all his money to the Gates Foundation. I read that he drove to the bank and picked up a class A share certificate worth over 1 billion from his safe deposit box so that he could convert them to class B shares for the initial donation. Crazy.


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## 1sImage (Jan 2, 2013)

Up $2472 today!!


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## zylon (Oct 27, 2010)

*2014 letter to shareholders*

http://www.berkshirehathaway.com/letters/2014ltr.pdf



> A note to readers: Fifty years ago, today’s management took charge at Berkshire. For this Golden Anniversary,
> Warren Buffett and Charlie Munger each wrote his views of what has happened at Berkshire during the past 50
> years and what each expects during the next 50. Neither changed a word of his commentary after reading what the
> other had written. Warren’s thoughts begin on page 24 and Charlie’s on page 39. Shareholders, particularly new
> ones, may find it useful to read those letters before reading the report on 2014.


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## james4beach (Nov 15, 2012)

I've owned BRK.B for a while, and it's performed nicely, about the same as the S&P 500 total return. However, over the years I've paid more attention to indexing and asset allocation. Now I'm finding that BRK.B is a sole position (and a pretty big one for me) that is awkward to manage within my asset allocation approach. It also throws off my sector exposure since it's mostly a financial/insurance company.

Now I'm trying to decide when to sell BRK.B and roll the money back into the index. I still have to work through the tax effect since there will be a significant capital gain. I pulled up a chart of BRK.B price divided by SPY as shown here: http://schrts.co/hzwkzBnp

Do you think it's a reasonable approach to wait until this ratio gets above the average line (e.g. above 0.75) and sell then? Due to the tax situation, either this year or next year might be good times for me to sell.


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## Butter (Nov 26, 2017)

I've owned in the past, and somewhat follow it, and somewhat find it attractive right now.

OFF THE TOP OF MY HEAD

I believe in the last few months it has under-performed the S&P

Also, I think Warren said he would be interested in buying back stock is book was 1.3 or lower... looks to be about 1.4 which looks about average

I liked your idea of holding a bit longer. I like selling it in the next couple years. GL j4b hope you make the right decision!


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## sags (May 15, 2010)

Berkshire bought more than $1 Billion in stock buybacks last quarter.

They plan to continue buybacks at the right price. BRK is sitting on $114 billion in cash reserves, which is about 20% of their market cap.

Apparently they don't have any better places to employ the cash. Buffet has long said cash buybacks happen when CEOs have no other ideas.

Or it could be that Buffet and Munger think a recession is in the near future and will wait for better deals.

https://finance.yahoo.com/news/berkshire-hathaway-warren-buffett-buybacks-204207103.html


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## james4beach (Nov 15, 2012)

I still think it's a good company, but I don't like holding a single outlier individual stock and complicating my asset allocation and rebalancing approach.

I've marked BRK for disposal. I will watch for an opportunity over the next 2 years to sell my position.


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## agent99 (Sep 11, 2013)

*BRK Annual Meeting*
While wide-moat-rated Berkshire Hathaway's (BRK.A/BRK.B) annual meeting has always been entertaining, it hasn't generally been a big source of meaningful insights into the firm's operations. This year's event, which was a significantly smaller affair with no shareholders in attendance in Omaha and just CEO Warren Buffett and Greg Abel (vice chairman of Berkshire's noninsurance business operations) taking questions from a remotely located Becky Quick (of CNBC), who was collating all of the questions for the three journalists on the journalist panel, was relatively subdued. The meeting not only started later in the day, but Buffett spent much of the first two hours of the five-hour event speaking about his thoughts about the COVID-19 pandemic and its potential economic impacts, touching on everything from monetary and fiscal policy to consumer and commercial behavior.

The main thing we took away from Buffett's preamble, as well as the question-and-answer segment, was that Berkshire (much as we heard from Charlie Munger in a _Wall Street Journal_ interview in mid-April) is being extremely cautious right now, given all of the uncertainties surrounding the COVID-19 pandemic and subsequent shutdown/recession. Unlike Buffett's famous maxim to "*Be fearful when others are greedy and greedy when others are fearful" *Berkshire actually dumped some stocks, did not pursue any deals, and let its cash balances expand during the first quarter.

While it was no surprise to see Berkshire dump the airlines, we were shocked to see that Buffett stopped buying back Berkshire's shares on March 10 and didn't repurchase any of the company's common stock between then and the end of April. Our general feeling has been that with cash reserves being guarded, distressed opportunities few and far between, and many of Berkshire's stock holdings either struggling with the COVID-19 pandemic or subsequent shutdown/recession, the best option for the company's excess cash may be Berkshire's own common stock.


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## Rusty O'Toole (Feb 1, 2012)

Not only has Berkshire never split the stock, they never pay a dividend (except one 10 cent dividend in the early sixties). Now you know why the stock is so high, and why they have over $100 billion in cash. Warren keeps it all, every penny, in his own hands.

Meanwhile investors who bought Berkshire stock in the sixties and seventies and eighties for their retirement, can live on dog food or sell their shares for all Warren Buffett cares.


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## james4beach (Nov 15, 2012)

james4beach said:


> I've marked BRK for disposal. I will watch for an opportunity over the next 2 years to sell my position.


Following up on this. I sold all my BRK.B on February 24 at $222.95 after holding for over 12 years. Luckily, this was before the crash and actually just 4% off its all time high; before the pandemic. I'd say that's reasonably good timing on an exit after holding more than a decade.

Looking at my asset allocation at the time, I was overweight US stocks so I did not buy back into the index. Instead, the money got redeployed as per my targets. Basically I sold BRK.B and bought gold. Man, do I love asset allocation.

As mentioned before, I had planned to sell it for a while. What pushed my hand was the COVID-19 outbreak and the ages of Buffett (89) and Munger (96). I worried that one of them might die soon, so I figured it's as good a point as any to sell, given that I planned to exit this year anyway.

In any case, it remains an excellent company and has a very bright future, but I'm out of the stock. It's kind of ironic that my proceeds of the sale got rolled into gold, which Buffett hates.


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## OneSeat (Apr 15, 2020)

Searched but can't find any recent discussion on BRK.B. 
Is it time to give up on them? I was half expecting good things after covid
but just the opposite.

They well outperformed the S&P over 20 years, 10 years, 5 years, even 2 years
then now, last three months, complete opposite.

Comments? Advice?


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## MrMatt (Dec 21, 2011)

OneSeat said:


> Searched but can't find any recent discussion on BRK.B.
> Is it time to give up on them? I was half expecting good things after covid
> but just the opposite.
> 
> ...


Yeah, investing in equities should be for years, not weeks.

There are a lot of companies hurting for investment, I'm sure BRK will make some great deals.


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## moderator2 (Sep 20, 2017)

I merged this into the existing Berkshire thread


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## alexincash (May 27, 2020)

OneSeat said:


> Searched but can't find any recent discussion on BRK.B.
> Is it time to give up on them? I was half expecting good things after covid
> but just the opposite.
> 
> ...


Depends on your trading strategy imo, and how soon you need access to funds. BRK is not a company you swing trade - you go long and forget (assuming the company fundamentals match what you're looking for)


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## MrBlackhill (Jun 10, 2020)

I don't know much about this stock, but do you think that the investor sentiment will decrease once Buffett passes away? I guess he's already not so much involved anymore?

Fun fact... Backtesting BRK-B since 1996, you would've done as good by contributing $1000/month in SPY instead.


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## doctrine (Sep 30, 2011)

Fun fact, Buffet is worth $100B. But he's already donated $90B worth of stock. Had he held, he would be the richest person in the world. And given the value discount at Berkshire, it's not a stretch to see him maintain it.


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