Berkshire Hathaway
Tax Loss Strategy

Related Links
Discussion Boards

By UMassHoops
July 1, 2008

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

Would love feedback on a tax loss strategy I've been employing over the past 6 months and whether anyone sees any obvious flaws to the approach that I am missing.

Start with the disclaimer, I consider myself simply an average investor probably best suited for WEB's recommendation of low cost index funds. Despite that I have taken advantage of having a guru (WEB) who's purchases I can track publically via 13F filings and make informed decisions that I hope will beat the market despite my decided "averageness" in ability to individually assess stocks. This strategy has worked extremely well for me over the past 6 years.

My buy strategy is simple, I buy what WEB has bought recently (last 2 quarters) at the same or lower price that he pays. This has worked great over the years for stocks like USG, PTR, but not so well recently with WFC, BAC, UNH.

On to my tax loss strategy. For funds that I have invested recently in my taxable account I am showing significant losses. For stocks I bought like UNH that have significant losses I am selling now, taking the tax loss and rebuying another stock from the WEB portfolio such as WFC. My only consideration with the rebuy is that it is another stock that WEB has also bought recently (indicating he still sees value) and is also down significantly from his recent purchase prices.

I am not happy that I am harvesting losses since they are losses after all, but I figure I will save 15%-33% (short/long term tax rates) on gains that are offset against them in the future, while remaining invested in what (at least to WEB) are undervalued stocks that I can realize long term gains on.

At some point the market will turn and head higher and hopefully all my new positions will be in the green and eventually fall into the hold forever category. I don't trade much and won't retire for 15-20 years.

For a true value investor this whole approach is obviously crazy because I don't understand the companies I am buying well enough in the first place, so stick with index funds. I get that point of view.

On the other hand I believe that even with his size disadvantage WEB is a way better investor than the market in general and as long as he keeps giving me free advice I will keep taking it.

Anyone else employing a similar tax loss strategy?

Your unhappy to take losses but sticking with it investor.