4 ms·

Seems unnecessarily reckless to put almost all of your net worth into a single stock.

jannotti 9y ago
True, but less so for BRK, because your money is in a single stock, but not a single business. (I understand there are still plenty of things that might make the BRK price change in a single direction despite all those disparate businesses.)
hellogoodbyeeee 9y ago
BRK.B is closer to a mutual fund than a "single stock"
- TheAdamAndChe 9y ago
  It's also has a single Board of Directors, meaning there is still a single point of failure. It's not like putting all of your money on Tesla, but it's still riskier than a mutual fund.
  - gbacon 9y ago
    As a BRK.B owner, the elephant in the room is the advanced age of Warren Buffett. No matter how much he and Munger talk soothingly about continuity and succession plans, the unknown is how the company’s stock will fare after Mr. Buffett heads for the great Dairy Queen in the sky.
    - wahern 9y ago
      I think upon his passing there'd be plenty of time to exit without missing a beat. The value of BRK stock is the net present value of Berkshire's existing holdings, plus perhaps a small and diminishing premium for the convenience of holding stock at the moment of Buffett's future sale and acquisition choices. Because Berkshire is fairly hands-off in terms of managing their holdings, and because its investments have fairly low volatility, in the short-term the stock price should hold steady upon Buffett's exit. Thus, if owning BRK made sense 10 years ago, then it makes sense to own it until the very last day that Buffett[1] controls the company, and even afterward to the extent the pipeline is filled with his choices. But maybe I'm misunderstanding something about market dynamics related to how end games play out. [1] Presuming that Buffett remains Buffet, in control of his faculties and in particular his prescience.
valuearb 9y ago
Berkshire has more than 100 subsidaries and a massive stock portfolio. I understand it fairly well, and it doesn't have any significant risks, other than Buffett dying. And if the price tanks when he dies, I'll use that as an opportunity to buy more. Because I have a good grasp of what it's actual intrinsic value is, I can wait to buy more until it's cheap which increases my long term returns. That's much harder to do with an index fund, indexes don't get as cheap as BRK gets, and tend to remain overpriced. For example, 15 PE used to be considered a fairly priced stock market, but for the last 20 years or so the market has mostly been much higher than that.
- berberous 9y ago
  >> " it doesn't have any significant risks, other than Buffett dying." That's somewhat comical given that he's 87 years old. Life expectancy tables show an expectancy of 5 years. Probably should cut that back a fair bit given his taste for Coca Cola, See's Candies, and burgers.... All that said, given the nature of his business and the strength of those in succession behind him, hopefully Berkshire continues to do well.
  - valuearb 9y ago
    To put my point more clearly, when Warren passes away Berkshire's value isn't going to change. It's probably not going to add value at the same pace as it would with him leading it, but it's value is still likely to continue to compound significantly faster than the market. What Warren has built is embedded deep in the core of how the entire company operates. So that's not much of a risk at all.
- gbacon 9y ago
  The question is to what degree fickle investors will return without the perceived Buffett magic.
  - valuearb 9y ago
    Berkshire has never been highly valued. It's never gotten a premium because of the "Buffett magic". If investors want to spurn it and let it trade close to book value, I'll happily buy even more.
logfromblammo 9y ago
It is acceptable to put all your eggs in one basket if the basket has been engineered to preserve the eggs through a variety of catastrophes. But in this instance, the single stock is a holding company that is already diversified across several industries. Anything that would negatively impact Berkshire Hathaway to a greater extent than the market as a whole is likely to be the product of intentional malice. As it is now, it's akin to an extremely actively managed mutual fund, in that they generally have at least one seat on the board--or at least VIP seats at the shareholder meeting--for anything they invest in.

True, but less so for BRK, because your money is in a single stock, but not a single business. (I understand there are still plenty of things that might make the BRK price change in a single direction despite all those disparate businesses.)

hellogoodbyeeee 9y ago

BRK.B is closer to a mutual fund than a "single stock"

TheAdamAndChe 9y ago
It's also has a single Board of Directors, meaning there is still a single point of failure. It's not like putting all of your money on Tesla, but it's still riskier than a mutual fund.
- gbacon 9y ago
  As a BRK.B owner, the elephant in the room is the advanced age of Warren Buffett. No matter how much he and Munger talk soothingly about continuity and succession plans, the unknown is how the company’s stock will fare after Mr. Buffett heads for the great Dairy Queen in the sky.
  - wahern 9y ago
    I think upon his passing there'd be plenty of time to exit without missing a beat. The value of BRK stock is the net present value of Berkshire's existing holdings, plus perhaps a small and diminishing premium for the convenience of holding stock at the moment of Buffett's future sale and acquisition choices. Because Berkshire is fairly hands-off in terms of managing their holdings, and because its investments have fairly low volatility, in the short-term the stock price should hold steady upon Buffett's exit. Thus, if owning BRK made sense 10 years ago, then it makes sense to own it until the very last day that Buffett[1] controls the company, and even afterward to the extent the pipeline is filled with his choices. But maybe I'm misunderstanding something about market dynamics related to how end games play out. [1] Presuming that Buffett remains Buffet, in control of his faculties and in particular his prescience.

valuearb 9y ago

Berkshire has more than 100 subsidaries and a massive stock portfolio. I understand it fairly well, and it doesn't have any significant risks, other than Buffett dying. And if the price tanks when he dies, I'll use that as an opportunity to buy more. Because I have a good grasp of what it's actual intrinsic value is, I can wait to buy more until it's cheap which increases my long term returns. That's much harder to do with an index fund, indexes don't get as cheap as BRK gets, and tend to remain overpriced. For example, 15 PE used to be considered a fairly priced stock market, but for the last 20 years or so the market has mostly been much higher than that.

berberous 9y ago
>> " it doesn't have any significant risks, other than Buffett dying." That's somewhat comical given that he's 87 years old. Life expectancy tables show an expectancy of 5 years. Probably should cut that back a fair bit given his taste for Coca Cola, See's Candies, and burgers.... All that said, given the nature of his business and the strength of those in succession behind him, hopefully Berkshire continues to do well.
- valuearb 9y ago
  To put my point more clearly, when Warren passes away Berkshire's value isn't going to change. It's probably not going to add value at the same pace as it would with him leading it, but it's value is still likely to continue to compound significantly faster than the market. What Warren has built is embedded deep in the core of how the entire company operates. So that's not much of a risk at all.
gbacon 9y ago
The question is to what degree fickle investors will return without the perceived Buffett magic.
- valuearb 9y ago
  Berkshire has never been highly valued. It's never gotten a premium because of the "Buffett magic". If investors want to spurn it and let it trade close to book value, I'll happily buy even more.

logfromblammo 9y ago

It is acceptable to put all your eggs in one basket if the basket has been engineered to preserve the eggs through a variety of catastrophes. But in this instance, the single stock is a holding company that is already diversified across several industries. Anything that would negatively impact Berkshire Hathaway to a greater extent than the market as a whole is likely to be the product of intentional malice. As it is now, it's akin to an extremely actively managed mutual fund, in that they generally have at least one seat on the board--or at least VIP seats at the shareholder meeting--for anything they invest in.