What Happened to Berkshire Hathaway?

I started buying shares of Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) in 2005. It's been a wild ride ever since. I remember going to Berkshire's 2009 annual meeting in Omaha -- a gathering of shareholders Buffett's skill has made rich over the years -- and thinking to myself, "I'm probably the only one here who has lost money investing in Berkshire."

That probably wasn't true back then, but it's definitely not true today. Just read some of the headlines and opinions over the last week. "[Buffett's] track record since 2008 has not been very good," one analyst told CNBC. "Buffett is out of step," wrote The Wall Street Journal. "Berkshire keeps missing the mark," wrote another.

It's true in a way. Berkshire shares have been duds over the last decade, especially given the hype that comes with Buffett. Blogger Eddy Elfenbein noted yesterday that Berkshire has underperformed the Wilshire 5000 Total Return Index by almost 25% since 1998 -- 14 years of underperformance. Shares have barely kept up with the S&P 500 over the last decade and have underperformed the index by 30% over the last three years. Among current members of the S&P 500, Berkshire's 10-year performance sits in 345th place.

You would have been better off investing in Treasuries over the last decade. Sorry, Warren -- it's true.

What does that tell us? The standard answer is that Buffett has lost his touch. But that doesn't tell the whole story.

The CEO of any company has control over its operations, but not its share price. The company does business, earns profits, and reports to the public. It's up to the market to decide what shares are worth.

There's been a big divergence between internal results and share performance at Berkshire over the last decade. Buffett has done an excellent job managing Berkshire's assets in recent years. The market just hasn't rewarded him for it.

Think about this. Berkshire's shares have returned 4.7% a year since 2002. But net income per share more than double that during the period -- 10% a year, or three percentage points a year faster than the S&P 500's earnings. Berkshire's book value grew 9.8% a year over the last decade. How many equity mutual funds performed as well? According to Morningstar, just 15 (out of more than 4,000). According to the EDHEC-Risk Institute, the average global macro hedge fund earned an annual return of 7.1% over the last decade, not including those that shut down due to poor returns. Buffett's investing performance over the last 10 years still makes him one of the best investors in the world. -- easily.

And despite its size, think about some of the investments Berkshire made in just the last five years. It made deals in Goldman Sachs (NYSE: GS  ) , GE (NYSE: GE  ) , and Bank of America (NYSE: BAC  ) that loan sharks would envy. It spent $36 billion buying Burlington Northern and $9 billion on Lubrizol. Nearly $86 billion has been plopped down on new investments over the last five years alone. For those worried that size would put a damper of Buffett's ability to make new investments, the verdict is clear: It hasn't.

So what happened to shares? It's simple: valuations dropped. Berkshire's price-to-book ratio -- arguably the best way to value the company -- has fallen near the lowest level in at least two decades:

Source: S&P Capital IQ.

Part of this makes sense. Shares were probably overvalued in the 1990s, so recent poor performance may be more about a return to normalcy than a drop in confidence. Then there's Buffett's mortality. Shareholders will be lucky to have him managing Berkshire's portfolio for another decade. While vice-chairman Charlie Munger claimed on Friday that he's "never been more comfortable about succession or duration of culture than I am right now," investors may be totally justified to disagree. There will never be another Buffett, and valuations need to reflect it.

But given all that, what's a fair price for Berkshire shares today? There's no definitive answer, but several smart investors think it's somewhere between a lot and a whole lot higher than current prices.

Buffett himself is one of them. When he announced last fall that Berkshire was trading "demonstrably lower than intrinsic value" and began a rare buyback plan, shares traded for 1.09 times book value. They closed yesterday just a hair above that level -- 1.14 times book value. "In my estimation the value is doing pretty well, and the price always catches up with it over time," said Markel chief investment officer Tom Gayner on Saturday. Value investor Whitney Tilson gave a presentation last week arguing that Berkshire shares are now 33% below intrinsic value. Buffett's own response this weekend to a question about a common valuation technique called the "two-column" method suggests that his estimation of Berkshire's intrinsic value is around $107 per class-B share, according to Motley Fool Inside Value advisor Joe Magyer. That's 30% above current prices.

So what's the market thinking? Buffett may have also explained that one this weekend: "The market is a psychotic drunk, and sometimes Mr. Market does very strange things."

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel owns shares of Berkshire and Bank of America preferred. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Markel, Bank of America, and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Markel, Goldman Sachs, and Berkshire Hathaway. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (43) | Recommend This Article (69)

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  • Report this Comment On May 08, 2012, at 1:58 PM, kyleleeh wrote:

    I think the thing that is lost on most people who say that Buffet has lost his touch, is that Buffet and Munger are not great investors because they consistantly picked the very best performing stocks in the index, it's because they consistantly avoided the worst ones.

    Buffet's rule number one and two are "don't lose the money" but rather then take that message to heart most people just say he's lost his touch because he missed out on Apple and Google.

  • Report this Comment On May 08, 2012, at 2:29 PM, TMFDiogenes wrote:

    Excellent point, kyleleeh.

  • Report this Comment On May 08, 2012, at 5:22 PM, WikiCPA wrote:

    Forget Buffet...I wanna hear from Tom Gaynor of Markel Capital. %100 return on capital in the past decade! HOW?

    http://www.insidermonkey.com/blog/tag/tom-gayner-markel-gayn...

  • Report this Comment On May 08, 2012, at 5:25 PM, alan0101 wrote:

    Part of the problem is that a substantial amount of the buzz and the Hedge fund money has moved away from boring pick and shovel work like value investing and is chasing momentum,looking for those quarterly spikes. Time will prove them wrong, but as with the writer, I have been long Brk since 2006 and the only money I make is through covered calls. Retired folks must be whittling down their capital, all these years.

  • Report this Comment On May 08, 2012, at 6:16 PM, DoctorLewis4 wrote:

    Every time the market writes off Mr. Buffett the stock goes on a great run.

  • Report this Comment On May 08, 2012, at 7:02 PM, verdure wrote:

    I owned some Berkshire because they bought my Burlington Northern stock. I miss the railroad stock because it paid me dividends. Owning shares that will never pay anything makes me question their actual worth. Its like having a share of a piggy bank in Warren's office that will never get opened. Just my point-of-view.

  • Report this Comment On May 08, 2012, at 8:26 PM, optimist911 wrote:

    Past performance is no guarantee of future results! Often repeated, seldom taken to heart. There will always be someone on the far right of the bell curve, but that place need not be reserved for those with ability.

  • Report this Comment On May 08, 2012, at 10:50 PM, derekrv wrote:

    Weren't the pundits saying the same thing about Buffett & Berkshire Hathaway at the height of the tech / Internet bubble ?

  • Report this Comment On May 09, 2012, at 7:08 PM, TMFMorgan wrote:

    <<his returns reverted to mean (or worse), reflecting his true skill set as an investor.>>

    As noted in the article, his returns measured by the increase in BRK's book value still ranks him as one of the best investors in the world.

  • Report this Comment On May 09, 2012, at 7:11 PM, daveandrae wrote:

    Let's see....

    On 12-27-2004, class A shares of Berkshire Hathaway stock closed at a market price of 88,300. Thus, anyone that bought or didn't sell in 2005 has realized an annualized rate of return that is much, much closer to 4.7% as of May 9th, 2012.

    Of course, investors that added to their positions during the BIG SALE of 2008-09 did even better than 4.8% over the last seven years.

    It should be noted that the s&p 500 closed at a market price of 1220 on 12-27-2004. Thus, more than 90% of ones total return over the last seven years was due from the simple decision to hold equities over debt, or real estate.

    Most people don't realize this. Over the LONG RUN, "stock selection" and "market timing", the two variables most people put their overwhelming amount of energy into, account for less than 10% of ones total return, tops!

    All of this, and more only reinforces my firm belief that there is absolutely, positively, NO correlation whatsoever between "investment performance" and Investor Return.

  • Report this Comment On May 09, 2012, at 7:56 PM, ValueSnark wrote:

    The problem with Berkshire as an investment is that it's selling at a conglomerate discount, which is not unlike what happened to valuations in the fabled conglomerate era of the 1960s. Buffett's successor(s) will add value by spinning off and selling some of Berkshire's holdings (detritus?).

    When a company becomes a cult, which Berkshire did long ago, it's a sell.

  • Report this Comment On May 09, 2012, at 8:34 PM, CoreAndExplore wrote:

    @daveandrae Random walkers such as yourself have a legitimate argument... to a point. While in general I do agree that the market is more or less efficient over time, there is no question (at least to me) that there are certain periods when future earnings and cash flows are being discounted far to high, and other times far too low, thus resulting in "oversold" and "overbought" situations; the same holds true for individual stocks at various times.

    Active stock picking is a losing proposition for the majority of investors/traders, oddly enough, due to the costs of trading, turnover, taxes, and investor sentiment. However, the "majority" does not imply that nobody can successfully enhance returns through equity selection. It can and does happen, especially for the long-term, contrarian (where prudent), disciplined students of value and behavioral finance.

    As Lynch and Buffett have proven, you can be either a "growth" or a "value" investor and make a killing, but you have to be highly discriminatory to the point of being fanatical when screening for investments. Both of those two require(d) huge margins of safety for their stocks, either through earnings growth (Lynch), price to book value (Buffett), liquidity, or what have you, and both were always keen to find situations where a competitive advantage could easily be maintained and leveraged to ramp up future profits. Also, most investors don't have the time, technical expertise, or interest, but conducting due diligence for truly successful equity investment usually entails some form of "scuttlebutt," i.e. talking to industry/company executives, employees, suppliers, and customers to get a good sense for things like corporate culture, client satisfaction, business relationships and other intangibles that really make or break a business in the long run.

  • Report this Comment On May 09, 2012, at 9:52 PM, skypilot2005 wrote:

    I feel part of the reason the stock has underperformed is because many investors question Mr. Munger and Mr. Buffet’s understanding of macroeconomic conditions over the past few years. I do.

    The editorial below is an example of this.

    http://www.nysun.com/editorials/the-munger-games/87811/

    The Munger Games

    Editorial of The New York Sun |

    May 6, 2012

    An excerpt:

    "One would think that a man as wealthy, as smart, and as old as Charles Munger would have known better than to suggest that people who buy gold are uncivilized. “Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939,” Mr. Munger told Rebecca Quick of CNBC, “but I think civilized people don’t buy gold, they invest in productive businesses.”

    The fact is that people who bought gold a decade ago were far better positioned than those who put their money in Mr. Munger’s company, Berkshire Hathaway. For the value of a share of Berkshire Hathaway has collapsed over the past decade to barely more than 74 ounces of gold from the 238 ounces it was worth a decade ago."

    To make that big of a “miss” and not acknowledge it hurts Mr. Munger’s credibility. I. M. O. It has obviously hurt the performance of their stock, as well. For many, perception is reality.

    I don’t question their ability to value companies. I read everything published that they write. But I do question their interpretation of macroeconomic data and its context in history.

    Reading Mr. Munger’s comments regarding gold, I wonder if he has learned anything, recently. His disparaging remarks of an entire asset class without data to support his opinion don’t make any sense. It only highlights his “miss”.

    That being said, I have great respect for both men.

    Sky

    I sold my Berkshire shares many years ago.

  • Report this Comment On May 09, 2012, at 10:05 PM, skypilot2005 wrote:

    On May 09, 2012, at 9:59 PM, trader2012 wrote:

    Morgan,

    "When was the last time you (or Buffet) were able to spend "book value" at the grocery store?"

    :)

    Morgan,

    Please include the name and address of the store in your reply.

    Sky

  • Report this Comment On May 09, 2012, at 11:37 PM, CoreAndExplore wrote:

    Trashing Buffett and Munger's investing abilities due to the fact that Berkshire's share price has performed poorly relative to gold in recent years, is like me trashing your posting abilities due to the fact that your parents rarely use the internet - one has absolutely nothing to do with the other, though one can feasibly twist the discussion far enough to reach those conclusions (although I'm at a loss as to how exactly).

    This all misses the point that gold is not an "investment" in and of itself, not in the true sense of the word, although it is useful tool for speculation, hedging, diversification, and as a currency. But when you're talking about true investments, you need to see some sort of cash-flow or at least the potential for it. Obviously there is none with a non-productive metallic object. This is not to say that somebody won't be willing to pay you more for your gold than what you paid, much more in fact. However, this does not an investment make; it's more the definition of the "greater fool theory" (not my term by the way, just relaying the information as it is).

    Gold bugs are understandably irritated by Munger's rather insensitive and condescending comments regarding their favored asset class and the philosophy they abide by. Still, generalizing and outright lying about Buffett's investment performance while throwing Berkshire under the bus along with Munger, all in the effort to defend their investment credo, does not help make a convincing case for gold investors being particularly "civilized."

  • Report this Comment On May 10, 2012, at 4:45 AM, dividendgrowth wrote:

    daveandrae,

    That's what index fund pushers want you to believe.

    For amateur investors, index returns are perfectly acceptable.

    For professionals, not beating indexes is a testament of failure.

  • Report this Comment On May 10, 2012, at 6:40 AM, daveandrae wrote:

    to dividendgrowth-

    In 2011, the total return for the s&p 500 was around 1.94% before income tax.

    More than 78% of "professional investors" still managed to underperform this return ( by a very, large margin) and charged their clients a fee to do it!

    Nuff said there.

    to coreandexplore-

    I agree with you, to a point.

    There will be many, many, times during your investment career when the market goes far wrong. I've lived through, and averaged down during 2000-2002 and the 2008-2009 bear markets.

    Thus, I can tell you from personal experience two things.

    A. It takes a tremendous amount of faith, patience, discipline and most especially COURAGE to buy when everyone around you is either selling, has sold out, or is telling you to get out of the market.

    B. From a ratio perspective, fear is to logic as 19 is to 1. Meaning, in spite of the obvious fact that a falling market price must also mean, a rising dividend yield, most people still sell harder and harder as prices go lower and lower.

  • Report this Comment On May 10, 2012, at 7:14 AM, skypilot2005 wrote:

    On May 09, 2012, at 11:37 PM, CoreAndExplore wrote:

    "Gold bugs are understandably irritated by Munger's rather insensitive and condescending comments regarding their favored asset class and the philosophy they abide by. Still, generalizing and outright lying about Buffett's investment performance"

    Now. That’s a very compelling, fact based defense of investing in Berkshire.

    Come on.

    Asset Allocation 101:

    “Asset allocation involves dividing an investment portfolio among different asset categories.”

    My allocation is based on Macroeconomic conditions, ongoing.

    Sky

  • Report this Comment On May 10, 2012, at 7:23 AM, skypilot2005 wrote:

    BTW,

    My current allocation:

    +80% stocks.

    Sky

  • Report this Comment On May 10, 2012, at 8:19 AM, pondee619 wrote:

    "A long, long time ago, "Buffetology" morphed into a religion" as follows:

    http://www.fool.com/search/solr.aspx?q=%22a+Buffett+stock%3F...

    Perhaps now is the time for the article: "Is Berkshire Hathaway a Buffett stock?"

  • Report this Comment On May 10, 2012, at 8:40 AM, JimmyZangwow wrote:

    Everyone, even prophets, grow comfortable with success. And why not? Success is rewarded.

    It's up to the individual investor to keep scanning the financial environment for superior opportunities. Just throwing money at an "oracle" is really no different than what people did with Madoff. "Here's my money, turn each dollar into $10,000."

    C'mon!

  • Report this Comment On May 10, 2012, at 8:54 AM, JimmyZangwow wrote:

    I'm not offended by comments about gold. It is purely a "when it hits the fan" investment. It's not a bet against stocks, but against what lax enforcement of financial-sector ethics and unsound government practices do to fiat currency. Read "What Government Has Done to Our Money".

    No crystal ball here, but I don't think it's far-fetched to think that a U.S. dollar will someday again represent 1/20 of an ounce of gold bullion. Inflationary spirals have never achieved escape velocity - they always come back to earth. I could be wrong. Maybe we will follow the Zimbabwean economic model and be printing googleplex bills.

  • Report this Comment On May 10, 2012, at 9:06 AM, mikecart1 wrote:

    You don't need a research paper to tell what is going wrong with this stock and Warren Buffet. Never really understood all the hype. He was big in the 60's, 70's, and 80's when businesses were growing still and he was buying out growth companies. Now he is old and clueless. There is too much competition now that use computers and all to calculate things he used to have the advantage over. It is like the guy that creates anything and is the first person in a market, industry, or idea. He/she has the most pressure to keep that performance or momentum or otherwise someone will soon pass.

    It takes a lot more work to create and grow something vs. taking someone else's creation and growing from that.

    :D

  • Report this Comment On May 10, 2012, at 10:35 AM, CoreAndExplore wrote:

    The following article doesn't really support my earlier arguments for Buffett and Berkshire or anything, but it's worth a read:

    http://hedgefund.blogspot.com/2010/11/portfolio-manager.html

  • Report this Comment On May 10, 2012, at 10:44 AM, sikiliza wrote:

    My top investor of all time is Peter Lynch. He came in, did his thing then quietly retired. He is still regarded as an investing genius. That said, it was a job to him while for Buffett, this is his life's work. He can't just up and walk away.

    We all have highs and lows and if you read Buffett: The Making of an American Capitalist, you will realize that this is not the first time that Buffett's performance came into question. During the heady days of the Nifty Fifty, everyone around him was going insane, but he held steady and even liquidated his partnership stating that he could no longer find bargains.

    I would say that the fat lady hasn't sang yet and we will all wake up one day and find that the rocket ship is once again orbiting the atmosphere i.e. BRK's performance is back through the roof.

  • Report this Comment On May 10, 2012, at 11:11 AM, JGBFool wrote:

    "Is Berkshire Hathaway a Buffett stock?"

    It clearly is.

    http://www.berkshirehathaway.com/news/sep2611.pdf

  • Report this Comment On May 10, 2012, at 3:57 PM, kyleleeh wrote:

    @skycaptain2005

    As I stated above Buffet and Munger's long term performance is not so much a product of their ability to pick the best performing assets but rather their ability to avoid the worst performing ones. I don't remember Buffets saying anything negative about precious metals in the 90s when they were dirt cheap, it's only when the price skyrocketed that he said they aren't a good investment. When has Buffet ever been known to chase after something that has skyrocketed in price? For that matter when has Buffet or Munger ever deviated from a small category of investment assets they have stuck with for decades? How many of these wall street analysts touting gold and bashing Buffet said Internet stock was the way to go in 1999? and then said owning a home was the best investment you could ever make in 2005? I can tell you who never said any of those things...Buffet and Munger, and that's why the cash pile at Berkshire keeps growing, and markets can only ignore a pile of cash for so long.

    Buffet's rule number one is "don't loose the money" rule number two is "never forget rule number one". My interpretation of that based on Buffet's own investing is that knowing what investments to say "no" to is more important then knowing what investments to "yes" to.

  • Report this Comment On May 10, 2012, at 7:40 PM, hbofbyu wrote:

    "Why abandon a belief merely because it ceases to be true. Cling to it long enough, and not a doubt it will turn true again..."

  • Report this Comment On May 10, 2012, at 8:32 PM, Balabu wrote:

    In my view the market values the price of Berkshire correctly for the following reason:

    1. As some commenters pointed out although it is legally a corporation but in practice it is essentially a closed end Mutual fund with no termination date and its unit holders have no say how it is run. The big discount from its book value and NAV is justified for reasons that I state below.

    2. This BRK does not pay any dividend so the Shareholders holders cannot realize any income from holding it.

    3. The lofty share price of BRK is such that majority of the market participants cannot afford to buy shares in it and if they own it and need funds for whatever reason the amount they realize might be much more than they need.

    4. Since BRK did not pay capital gain tax, if for any reason it is liquidated there will be a big tax liability for the shareholders.

    5. Because of the share structure BRK cannot be a candidate for a hostile takeover.

    6. Last and not least is Buffet with prostate cancer or not his days are numbered and there is no guarantee that his successor will be as astute and successful

  • Report this Comment On May 10, 2012, at 9:43 PM, skypilot2005 wrote:

    On May 10, 2012, at 8:54 AM, JimmyZangwow wrote:

    It's not a bet against stocks, but against what lax enforcement of financial-sector ethics and unsound government practices do to fiat currency. “

    Exactly! An asset allocation strategy based on current macroeconomic conditions.

    Sky

    BTW: I don’t own physical Gold. You can “own” Gold and other precious metals many different ways without taking physical possession.

    Fellow Fools: I encourage you to read as much as you can about our current macroeconomic situation. Opinions on both sides. If you aren’t familiar with the subject, start by buying a used introductory text. It is not an exact science but, the knowledge I gained from my college classes many years ago has been very valuable to me.

    Fool on

    Sky

  • Report this Comment On May 10, 2012, at 10:17 PM, skypilot2005 wrote:
  • Report this Comment On May 10, 2012, at 11:47 PM, kyleleeh wrote:

    <<It's not a bet against stocks, but against what lax enforcement of financial-sector ethics and unsound government practices do to fiat currency. “

    Exactly! An asset allocation strategy based on current macroeconomic conditions.>>

    That would be true of gold if anything you mentioned was current news, but it's not. It's not sound asset allocation based on current macroeconomics, It's using today's money to chase after yesterdays headlines.

    It's been almost 4 years since Lehman collapsed...Financial sector ethics is not current news. The Government has been running a deficit for over a decade...it's old news. The crisis in Europe has been going on since 2009, again, old news. Everyone worried about these things has already bought gold, and is now waiting for the right time to unload it on some poor fool.

    All these things you mentioned are why gold costs $1600 now instead of the $300 or so it was in the 90s but to think that it still has that much upside and that the market has not already priced these things in years after the fact is just naive. Buffet and Munger were around during the last precious metal bubble in the late 70s early 80s, IMO that's a big reason why they are against it now even though buffet was a buyer of silver back in the late 90s. They didn't get rich chasing bubbles and hoping to get out at the top, they did it by knowing how to avoid bubbles in the first place even if people tell them they don't know what they are talking about at the time.

  • Report this Comment On May 11, 2012, at 9:32 AM, TMFMorgan wrote:

    ^ well put!

  • Report this Comment On May 12, 2012, at 11:18 AM, skypilot2005 wrote:

    On May 10, 2012, at 11:47 PM, kyleleeh wrote

    “All these things you mentioned are why gold costs $1600 now instead of the $300 or so it was in the 90s but to think that it still has that much upside and that the market has not already priced these things in years after the fact is just naïve”

    Morgan, let me take this opportunity to remind you what Asset Allocation is:

    “Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investors risk tolerance, goals and investment time frame.”

    How can you reply “well put” in the context of Asset Allocation? I don’t own physical gold.

    Sky

  • Report this Comment On May 12, 2012, at 11:35 AM, skypilot2005 wrote:

    On May 10, 2012, at 11:47 PM, kyleleeh wrote:

    “All these things you mentioned are why gold costs $1600 now instead of the $300 or so it was in the 90s but to think that it still has that much upside and that the market has not already priced these things in years after the fact is just naïve”

    To think our current level of national debt and the cost of servicing that debt should not be considered in a person’s Asset Allocation decisions is naïve, in my opinion. But, I respect your opinion.

    I repeat, I don’t own physical gold. I own companies with exposure to the price of precious metals. IMO, they will handily outperform Berkshire over the next 10 years.

    Good luck over the next 10 years with Mr. Buffet and Munger.

    Sky

  • Report this Comment On May 12, 2012, at 1:26 PM, kyleleeh wrote:

    Owning a mining company that produces cash flow is very different from investing in gold...I'll give you that. I've never heard Buffet or Munger speak out against owning mining stocks, just owning physical metals at current prices.

    Buying an asset that has already gone through a meteoric rise in price due to macroeconomic factors that everyone has known about for years and is in the news everyday, on the assumption that these same macroeconomic factors have not been priced in yet and will cause someone to pay a much higher price for it in the future, is not sound asset allocation...it's chasing a bubble.

  • Report this Comment On May 12, 2012, at 2:42 PM, skypilot2005 wrote:

    On May 12, 2012, at 1:26 PM, kyleleeh wrote:

    "Owning a mining company that produces cash flow is very different from investing in gold...I'll give you that. I've never heard Buffet or Munger speak out against owning mining stocks, just owning physical metals at current prices."

    I am happy you understand.

    I invite you to invest alongside many of us in “Streamers” like Silver Wheaton and Sandstorm.

    I feel Nolan Watson, CEO of Sandstorm, will prove to be one of the greatest creators of stockholder’s wealth within the next 10 years. I am confident he will easily beat Berkshires’ returns.

    I also feel this may be a great time to initiate a position in all three stocks. Note: There are two Sandstorms: Gold and Metals. Also, note they do not have the same costs as Miners.

    I wish only the best for Berkshire shareholders. I just have my sights set on higher returns.

    Fool on,

    Sky

    I own all three companies and I am still accumulating.

  • Report this Comment On May 13, 2012, at 7:35 PM, ReddTiger wrote:

    I can think of 2 reasons why BRK-A is not rising as fast as other stocks. One is the price of 1 share. How many investors can purchase a single share? The other is BRK-A does not pay dividends. You could purchase a portfolio of the stocks that Berkshire holds and get a decent dividend.

  • Report this Comment On May 15, 2012, at 7:47 PM, veritasvincit wrote:

    How many fools here have read the BH owners' manual?

    It's funny how many 'investors' want their 'investments' to hold their value and steadily increase OR to have low volatility (a term often confused with risk). As Buffett has said, investors should welcome volatility! Provides good entry points!

    I think some folks will drive across town to save 5 cents on a gallon of gas, or head to the mall for a "25% off" sale, but freak out when a stock or a fund drops by the same percentage.

    If you want dividend income, then invest in dividend stocks, and have fun paying taxes on them. Dividend policies should be based on sound reasoning: The investors in the company have entrusted us to increase the value of their holdings. Is it best to re-invest our earnings in the company? Should we pay down some debt? Should we buy back shares? Should we hold cash in anticipation of an opportunity or economic downturn? If the answer is no to these, then a dividend should be paid. Otherwise, it's just like the car rebate craze of the '80s and '90s! "Get a car and get a check!" Which really means, "We'll lend you money at a high interest rate to make you feel better about buying a car!"

  • Report this Comment On May 20, 2012, at 1:18 AM, julcion wrote:

    Can someone explain why the "A" shares are so

    expensive?

  • Report this Comment On May 21, 2012, at 4:33 PM, joaquingrech wrote:

    @morgan "Buffett's own response this weekend to a question about a common valuation technique called the "two-column" method " <-- anywhere to see that response? Got curious.

    @julcion expensive? They are very cheap. I guess you mean why the price is big. It's just a matter of division, divide $1 million by 10 shares or by 1000 shares. The value of the company would be the same, not expensive ($1mm). Just the amount per share is bigger or smaller depending on the # of shares you divide by.

  • Report this Comment On May 22, 2012, at 6:05 AM, thidmark wrote:

    Quote me a top money manager or CEO who claims Buffett was "lucky" or has "lost his touch" and I'll consider the possibility. Otherwise, I can't take seriously the musings of an anonymous moron.

  • Report this Comment On May 23, 2012, at 8:30 PM, gsturgis wrote:

    Pumped egos are deadly, unwonted praise corrupts and offering advise in subjects beyond one's areas of expertise demonstrates one's lack of perspective to the real world! Warren and Charlie venturing into who should pay what taxes and how to invest in gold are perfect examples of above! pathman

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