I've never been a big fan of Warren Buffett. The 86 years old fucker seems to have lived an empty life, always focussing on money and on nothing else (family, history, culture, etc). Surely a good guy, but not as stimulating and fascinating as Steve Jobs.
And I've always found that Berkshire Hathaway was a boring investment. How could an investor put money in that boring stock? The company is so huge that it's performance is more and more similar to the market.
Well, that's what I thought.
The chart below shows the performance of BRK VS the market over the last 5 years. The difference is even bigger if we look at a 10 years chart. As you can see, BRK beats the market easily.
With Berkshire, you'll get a shitload of great businesses: you have 100% of GEICO, 100% of Duracell, 100% of Precision Castparts, 99% of Fruit of the Loom, 27% of Kraft, 16% of American Expres, 10% of Wells Fargo, 9% of Coke, 8% of IBM and many, many, many more.
How much money gets Berkshire via dividends each year? Well, they got 400 000 000 shares of Coke which distributes 1,40$ each year. So, with only Coca-Cola, Berkshire gets 560 000 000$ each year. With Wells Fargo, Berkshire gets about 730 000 000$ each year... So, I don't know exactly how much money BRK gets with it's dividends, but it's at least 5 billion dollars each year. Probably much more.
The PE of the market is now over 19, which is expensive on an historical basis. There's still many stocks selling at 10-12 times earnings, but overall, it's an expensive market. Berkshire is selling at 14 times earnings and at 1,4 times book value. Warren Buffet once said that at around 1,2 times book value or below, it was a good idea to buy Berkshire (there would be buybacks). At 2 times book value, it would not be such a good idea. So, we're closer from the "good idea" than from the "not so good idea".
I've came to realize that many big investors have a big part of their portfolio on Berkshire for a good reason: that stock is safe. And that stock beats the market. And that stock is a core holding that regulates and balances your portfolio. It won't make your portfolio a super performer, but it will raise your performance to a minimum level. With BRK, you're almost sure to beat the market in the long run. So, if 50% of your porfolio is made of BRK, 50% of your portfolio beats or achieve about the same performance as the market. You just have to chose a few great performers for the other 50% of your portfolio..
Given the state of the market, the abudant liquidities of BRK and the fair price of the stock VS the high price of the market, I think it would be a good idea for anybody to invest a large part of their portfolio in BRK.
That's what I say. That's not what I do. But I'll probably move in that direction, sooner or later.
Finally, here's some BRK metrics according to Reuters:
Annual EPS growth last 5 years: 13%