A Second Berkshire Hathaway ...?

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date A Second Berkshire Hathaway ...? dapperdobbs 03-20-2008  Re: A Second Berkshire Hathaway ...? joetaxpayer 03-20-2008  Re: A Second Berkshire Hathaway ...? BreadWithSpam 03-20-2008  Re: A Second Berkshire Hathaway ...? dapperdobbs 03-21-2008
Posted by dapperdobbs on March 20, 2008, 4:28 pm The article below suggests some stocks Buffett might select, if he were starting over. The impressive statistics behind Berkshire - $1,000 invested in 1965 would be worth $7,000,000 today - would seem to suggest that even doing half as well would be worth some investigation - even hours of work. The article, "What would a young Buffett do now?" by Harry Domash http://articles.moneycentral.msn.com/Investing/SimpleStrategies/WhatWouldAYoungBuffettDoNow.aspx offers 14 stocks to look at. In the opinions of subscribers to this erudite forum, are these "Buffett stocks?" Do these companies offer superior returns over the next 40 - or the next 100 - years? -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by joetaxpayer on March 20, 2008, 4:46 pm dapperdobbs wrote: > The article below suggests some stocks Buffett might select, if he > were starting over. The impressive statistics behind Berkshire - > $1,000 invested in 1965 would be worth $7,000,000 today - would seem > to suggest that even doing half as well would be worth some > investigation - even hours of work. > > The article, "What would a young Buffett do now?" by Harry Domash > > http://articles.moneycentral.msn.com/Investing/SimpleStrategies/WhatWouldAYoungBuffettDoNow.aspx > > offers 14 stocks to look at. In the opinions of subscribers to this > erudite forum, are these "Buffett stocks?" Do these companies offer > superior returns over the next 40 - or the next 100 - years? There's something a bit sacrilegious about such titled articles. It's one thing to interview a just-retired Peter Lynch (for example) but a completely different story to suggest that one can mimic another investor's style and somehow match his performance. If anyone could do this, there'd be many (100s??) of such investors. There are not. The title is meant to attract attention, and it seems it succeeded. Why not go back to his teacher and read Graham's "Security Analysis"? Joe www.blog.joetaxpayer.com -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by on March 20, 2008, 5:45 pm > The article below suggests some stocks Buffett might select, if he > were starting over. The impressive statistics behind Berkshire - > $1,000 invested in 1965 would be worth $7,000,000 today - would seem Those numbers aren't quite right. According to the 2007 BRK shareholder letter, the compounded gain from '65 to '07 was 21.1%, not the 23+% you suggest. Either way, it's astounding, but the end result is vastly different over the course of 43 years (period inclusive): At 21.1%, $1,000 grows to $3,760,000 At 22.9%, $1,000 grows to $7,091,000 At 19.2%, $1,000 grows to $1,904,000 The shocking thing is that to do twice as well - over 43 years - as Berkshire did, all you had to add was 1.8% to your annual returns. To do half as well, you still had to manage 19.2%/yr average - only 1.9% worse, but still an astounding feat. If you actually did half as well as Berkshire - 10.6% - over 43 years, you end up with only $76,115 from your initial $1000. The article may have pointed out to some good ideas for stock screens - there are many out there, and lots of places have "buffett-like" screens already set up so you can just click on them. But the numbers he's starting with to entice you to play with his screen are just insane. It's like telling folks they can hit like Barry Bonds if they take a couple of lessons. [footnote - in the Berky letter, Buffet quotes cumulative overall returns of 400,863% for BRK and 6,840% for the S&P500 (incl. divs) over that period - not quite the same cumulative total I note above, but he's almost certainly done some rounding in the posted numbers - with long-term compounding, as you see above, very very small differences along the way, can make gigantic differences in the end] <http://www.berkshirehathaway.com/letters/2007ltr.pdf> This isn't meant to discourage folks. But they should be aware of how mind-blowingly far out of the norm Buffett's results were. -- Plain Bread alone for e-mail, thanks. The rest gets trashed. No HTML in E-Mail! -- http://www.expita.com/nomime.html Are you posting responses that are easy for others to follow? http://www.greenend.org.uk/rjk/2000/06/14/quoting -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by dapperdobbs on March 21, 2008, 1:40 pm Very nice comments on "Berky." It is mind-blowing. Your accurate perception of the amazing difference of fractions of a percent, over time, is true. Another amazing thing is the production and growth of the companies. They were there. Buffett recognized them. Your post inspires new insight into how carefully Buffett must analyze dynamics, markets and products, quality and competition - it's true, he doesn't buy the stock, he buys the company - and its future. He's a super nice guy to post all those letters, too. Express Scripts earnings have grown 34% since 1997, revenues from 1,230m to 17,660m. I remember National Medical Enterprises went from 1 to 100 over a 16 year time frame. No dividends, in either case. Not the only companies to do so well, either. I just thought maybe I could help someone analyze a company and perhaps eventually make some money and enjoy life a bit more. A little positive outlook, you know? Encouragement to look at and analyze individual companies, for fun. I've never used screens. The first seven companies in the article aren't extraordinarily compelling, but TRMD is a Danish shipping company with a story to tell - it's been around since 1889. Today it's mostly oil tankers, owns 56, and I believe 44 leased. They probably ship sweet light crude out of Norway (I think the world's top producer of that premium grade). Next time you use an e-fax, it's probably JCOM. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.