Key insights
- The article compares Berkshire Hathaway's returns to the S&P 500, noting underperformance in recent years. The author questions Berkshire's large cash position and speculates on potential reasons, including succession planning and market caution. The author expresses uncertainty about Berkshire's future performance and hopes the next CEO will be successful. This signals a potential shift in investor sentiment towards Berkshire, with possible implications for its stock price relative to the broader market.
Following are the returns for Berkshire vs S&P 500 (dividends reinvested) for the time periods listed;
1 year : -10.4% Vs +14.2% (S&P by +24.6%)
5 years : +11.7% Vs +13.5% (S&P by +1.8%)
10 years : +11.8% Vs +12.9% (S&P by +1.1%)
25 years : +9.8% Vs +8.2% (Brk.B by +1.6%)
30 years : +10.6% Vs +10.1% (Brk.B by +0.5%)
Warren has said in the past that he has asked his close ones to invest in S&P 500 after he is gone. Seems like great advice knowing Berkshire’s good days are in the past. I am long term holder with no intention of selling what I have but also no intention of investing more at this point.
The idea of holding nearly half of its market cap in cash baffles me. Maybe preparing for Abel to buyback his stake from charities after he is gone.
He has a clause in his charity that he wants it fully gone in 10 years after his death or execution of will.
However, every one of my assumptions with Berkshire has always been wrong. So, I don’t really know why they are collecting cash. Maybe because of his age he has seen so many ups and downs that he is clinching his pearls.
Hoping Abel turns out to be like Tim Cook has been after Steve Jobs.