4 ms·

Is there any realistic difference?

by mvid 4y ago

ericmay 4y ago
Yes because the company the acquired may have purchased the stock at a price that fit with Berkshire’s previous purchase prices based on their own internal financial assessments.
- strangemonad 4y ago
  Why is this being downvoted? It’s a simple explanation of Berkshire’s value investing approach
  - Dylan16807 4y ago
    To me it seems like a very strange explanation. Part of it is: If you wouldn't buy a stock at the current price, why wouldn't you sell the stock at the current price? Shouldn't the band where you do neither be very narrow? But the bigger part is: Why do you care what someone else paid? All that should matter is what you are paying for this acquisition, especially if you're only keeping the AAPL.
    - ericmay 4y ago
      > If you wouldn't buy a stock at the current price, why wouldn't you sell the stock at the current price? Taxes, portfolio position, longer-term price horizons, etc. Many business factors could potentially be at play. Why pay $150/share on the open market today for something you want to hold if you can get it for much cheaper? The fact that they added to that position though demonstrates that the considerations are not just today's price.
      - Dylan16807 4y ago
        > Why pay $150/share on the open market today for something you want to hold if you can get it for much cheaper? Did they pay much cheaper? If so, why wasn't someone else bidding up Allegheny? But that still doesn't explain why you wouldn't sell if you think it's worth significantly less than $150. Even if you only paid $2! But if you think it's close to $150 then the other factors make sense. Either way, I don't see how it matters what Allegheny paid for the stock.
        ericmay 4y ago
        > Did they pay much cheaper? Idk > If so, why wasn't someone else bidding up Allegheny? Because then they have to buy it? > But that still doesn't explain why you wouldn't sell if you think it's worth significantly less than $150. Even if you only paid $2! But if you think it's close to $150 then the other factors make sense. I think the issue is your assumption that they think it’s worth less than $150 and you aren’t factoring in time or potential business factors that will influence the price, or risk for a so citric portfolio size or exposure.
        Dylan16807 4y ago
        > Because then they have to buy it? I would love to "have to" buy a bunch of apple stock at much less than the current trading price! Most companies would also love that. > I think the issue is your assumption that they think it’s worth less than $150 and you aren’t factoring in time or potential business factors that will influence the price, or risk for a so citric portfolio size or exposure. I'm not assuming that, I'm just wondering why they wouldn't buy more if they think it's worth much more. If they think it's worth quite close to $150 I can see why they wouldn't bother. But that leads back to me being confused on why they bought more in this indirect way, because if they got a big discount I don't understand why.
        ericmay 4y ago
        > I would love to "have to" buy a bunch of apple stock at much less than the current trading price! Most companies would also love that. …Sure but they also have to buy the other assets. > I'm not assuming that, I'm just wondering why they wouldn't buy more if they think it's worth much more. I’m not sure why you are insistent about ignoring factors such as portfolio risk, price targets, time horizons, and Berkshire’s own internal financial modeling. I’m even more confused about your comment that > But that leads back to me being confused on why they bought more in this indirect way, because if they got a big discount I don't understand why. Is it because you’re forgetting that they acquired these assets by purchasing another company?
- Cpoll 4y ago
  The price at which the stock was purchased shouldn't really affect decisions about the portfolio, should it? As I understand it, from the perspective of a rational investor, inheriting a stock and not selling it is the same as inheriting the equivalent amount of money and buying that stock.
  - plonk 4y ago
    But I guess it doesn’t mechanically increase the stock’s price? Unless the buyer is Warren Buffet and it makes the news?
    - ladberg 4y ago
      If the stock would have otherwise been sold off like the others, then it's not really different because the price is higher now than it would have been. E.g. Allegheny selling AAPL + Berkshire buying AAPL == Berkshire buying Allegheny (Assuming a perfect market, which isn't the case but I don't feel qualified to say what the other effects would be)
  - ericmay 4y ago
    Selling the stock means capital gains tax. In addition to buying the business presumably for its own intrinsic reasons Berkshire may want to increase its position in Apple with a long term price target of say, idk, $500/share within 10 years (just making something up here) and getting the stock at $50/share versus $150 on the open market may have made sense to them.
jjtheblunt 4y ago
For taxes, the purchase price of "inherited" shares bought sometime ago by Allegheny (sp?) likely differs than the purchase price at the moment?

Is there any realistic difference?

by mvid 4y ago

Is there any realistic difference?

Yes because the company the acquired may have purchased the stock at a price that fit with Berkshire’s previous purchase prices based on their own internal financial assessments.

strangemonad 4y ago
Why is this being downvoted? It’s a simple explanation of Berkshire’s value investing approach
- Dylan16807 4y ago
  To me it seems like a very strange explanation. Part of it is: If you wouldn't buy a stock at the current price, why wouldn't you sell the stock at the current price? Shouldn't the band where you do neither be very narrow? But the bigger part is: Why do you care what someone else paid? All that should matter is what you are paying for this acquisition, especially if you're only keeping the AAPL.
  - ericmay 4y ago
    > If you wouldn't buy a stock at the current price, why wouldn't you sell the stock at the current price? Taxes, portfolio position, longer-term price horizons, etc. Many business factors could potentially be at play. Why pay $150/share on the open market today for something you want to hold if you can get it for much cheaper? The fact that they added to that position though demonstrates that the considerations are not just today's price.
    - Dylan16807 4y ago
      > Why pay $150/share on the open market today for something you want to hold if you can get it for much cheaper? Did they pay much cheaper? If so, why wasn't someone else bidding up Allegheny? But that still doesn't explain why you wouldn't sell if you think it's worth significantly less than $150. Even if you only paid $2! But if you think it's close to $150 then the other factors make sense. Either way, I don't see how it matters what Allegheny paid for the stock.
      - ericmay 4y ago
        > Did they pay much cheaper? Idk > If so, why wasn't someone else bidding up Allegheny? Because then they have to buy it? > But that still doesn't explain why you wouldn't sell if you think it's worth significantly less than $150. Even if you only paid $2! But if you think it's close to $150 then the other factors make sense. I think the issue is your assumption that they think it’s worth less than $150 and you aren’t factoring in time or potential business factors that will influence the price, or risk for a so citric portfolio size or exposure.
        Dylan16807 4y ago
        > Because then they have to buy it? I would love to "have to" buy a bunch of apple stock at much less than the current trading price! Most companies would also love that. > I think the issue is your assumption that they think it’s worth less than $150 and you aren’t factoring in time or potential business factors that will influence the price, or risk for a so citric portfolio size or exposure. I'm not assuming that, I'm just wondering why they wouldn't buy more if they think it's worth much more. If they think it's worth quite close to $150 I can see why they wouldn't bother. But that leads back to me being confused on why they bought more in this indirect way, because if they got a big discount I don't understand why.
        ericmay 4y ago
        > I would love to "have to" buy a bunch of apple stock at much less than the current trading price! Most companies would also love that. …Sure but they also have to buy the other assets. > I'm not assuming that, I'm just wondering why they wouldn't buy more if they think it's worth much more. I’m not sure why you are insistent about ignoring factors such as portfolio risk, price targets, time horizons, and Berkshire’s own internal financial modeling. I’m even more confused about your comment that > But that leads back to me being confused on why they bought more in this indirect way, because if they got a big discount I don't understand why. Is it because you’re forgetting that they acquired these assets by purchasing another company?
Cpoll 4y ago
The price at which the stock was purchased shouldn't really affect decisions about the portfolio, should it? As I understand it, from the perspective of a rational investor, inheriting a stock and not selling it is the same as inheriting the equivalent amount of money and buying that stock.
- plonk 4y ago
  But I guess it doesn’t mechanically increase the stock’s price? Unless the buyer is Warren Buffet and it makes the news?
  - ladberg 4y ago
    If the stock would have otherwise been sold off like the others, then it's not really different because the price is higher now than it would have been. E.g. Allegheny selling AAPL + Berkshire buying AAPL == Berkshire buying Allegheny (Assuming a perfect market, which isn't the case but I don't feel qualified to say what the other effects would be)
- ericmay 4y ago
  Selling the stock means capital gains tax. In addition to buying the business presumably for its own intrinsic reasons Berkshire may want to increase its position in Apple with a long term price target of say, idk, $500/share within 10 years (just making something up here) and getting the stock at $50/share versus $150 on the open market may have made sense to them.

jjtheblunt 4y ago

For taxes, the purchase price of "inherited" shares bought sometime ago by Allegheny (sp?) likely differs than the purchase price at the moment?