The underlying earnings capacity of Berkshire Hathaway far surpasses the contribution of one individual, even if his name is Warren Buffett. Inside that umbrella company are no less than 5 Fortune 500 companies that had they been on their own would be in the S&P 500. The company is diversified- beyond its stock holdings, it owns a Class A railroad company, 2 major insurance companies, a very large holding in a major oil company, the largest real estate brokerage firm, a carpet manufacturer, a paint company, the largest manufacturer of bricks in the south, Precision Castparts, etc. You get the annual report - go read it.This is the question I always come back to...Can BRK be treated more as an Index than an individual stock if the cost is 36%? But then there is the caveat of Warren Buffett...if WB was 50 years old I wouldn't have a problem.In general, I agree that putting so much in one stock is excessively risky. 'But in this case, it is worth noting that Berkshire itself is highly diversified.
Let me put some number to the issue. Since 2010, the standard deviation of Berkshire stock return is 16.3 percent, compared with 14.3 for the SP500. (For comparison, Apple is 27 percent.) So the risk of holding Berkshire is only somewhat greater than holding a diversified portfolio. I am not sure that huge tax hit is justified to get the small risk reduction.
Ask yourself after WB moves on, what happens at the businesses - no more railroad, stop pumping oil, don’t sell bricks, no more need for insurance? Of course not, business will continue on and likely make higher profit into the future. This might be one of the times where you just stand there and do nothing!
Statistics: Posted by Grt2bOutdoors — Tue Aug 13, 2024 6:56 pm — Replies 13 — Views 603