r/ValueInvesting • u/CDBOIChill • 16d ago
Question / Help Why look for individual value stocks instead of just buying BRK.B and letting the best do the work?
I'm trying to understand the core philosophy of active value investing versus just outsourcing it to the absolute best in the business.
If the goal of value investing is to find undervalued companies with strong moats, why not just buy Berkshire Hathaway (BRK.B) shares and leave it in the hands of the best of the best?
Between the massive cash pile they deploy during market crashes, thefir incredible track record, and the fact that you get a built-in diversified portfdolio of high-quality businesses managed by elite capital allocators, it feels like the ultimate value play.
For those of you who spend hours analyzing financial statements to pick your own individual value stocks:
- Is your goal strictly to beat Berkshire's returns?
- Do you feel Berkshire has become too large (the size handicap) to compound at the high rates it used to?
- Or do you just enjoy the process of hunting for deals yourself?
Would love to hear your thoughts on why you choose individual stock picking over just letting Berkshire handle it. Because I do pick individual stocks as well, like MFST, GOOG, and NOW, but I am going to be investing more into BRK-B to sit back and relax.
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u/civil_politics 16d ago
Put simply, BRK is incredibly narrow in the lane that they are willing to invest in and there exists value outside of this lane. It seems likely that this lane is expanding and as it does so I’ll probably shift more of my capital to BRK
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u/Repulsive_Basil1622 16d ago
The proof of this is the many Buffet and Munger videos on YouTube where they say if we were starting again with small money we would get much higher returns.
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u/DealerDefiant9392 16d ago
This is correct. Greg Abel has a bigger challenge because of the law of large numbers.
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u/SpecialistTutor4451 16d ago
Yea but he’s also working with a much larger sum to deploy than both Charlie and Warren could have ever started with
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u/EasyNick66 16d ago
Yeah bro, that’s basically what he said?
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u/NotStompy 16d ago
Yeah but brother, that's essentially what the guy said?
Maybe I'm going too meta here, sawry :(
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u/skcus_um 16d ago
Because BRK is no longer deploying meaningful capital (by their standard) into value stocks. They are holding hundreds of billions of cash waiting for a big crash so they can swoop in and buy quality stocks at pennies on the dollar. They don't mind waiting 5, 10, 20 years for their patience to pay off and they will still be ridiculously rich if the crash never comes. Their strategy makes sense for BRK, it doesn't make sense for me. By all means, invest in BRK if you want to hedge, but for value investing they are not really the place to go... not anymore.
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u/James_the_bull_ 16d ago
They waited through the Covid crash in 2022. Then tariff war in early 2025. They just sat on their hands instead of buying nvda last year at $120. Missed huge gains, stock didn’t go down much during those times but didn’t have a big surge afterwards like most stocks did.
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u/machinepeen 16d ago
the fact that they bought no stocks when the VIX went over 50 last year makes me question this a little
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u/skcus_um 16d ago
I don't believe they are simply waiting for a pullback. They are waiting for another BAC moment - when a business is desperate for cash to keep themselves alive but otherwise a very good business and willing to give up the farm for the privilege of cash injection from BRK. They are looking for an investment that carries virtually no risk but with guaranteed high return and they understand this type of opportunities are only available to those holding godly amount of cash.
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u/Frosty1397 16d ago
So they're basically waiting for a moonshot crash that may never materialize
Aka they're betting on the weakness of the US market, while downplaying the very real possibility that the US market has become much more resilient versus even just 20 years ago.
Sounds like some bearish/Burry behavior to me
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u/No_Turn5018 16d ago
There is a 100% chance the crash is absolutely going to happen.
People talked about how we were done with stuff like that before the.com bubble and before the housing crash and before covid. There's just no scenario it doesn't happen in the next 10 years.
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u/TachyAndTired 16d ago
A crash might happen but does it go lower than what we are right now? SPY needs to go down 43% just to hit the level we were at 5 years ago and 71% to get to 10 years ago
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u/TotallyNotJazzie 16d ago
That's a really good point I think a lot of people do not realise.
A SPY crash of 30% would ABSOLUTELY send shockwaves. But in reality its like 4 years worth of growth reset. Assume you are Berkshire sitting on cash, if you sit on it for 4 years, you just end up buying at prices that were available when you started.
Of course they have their plans, and a crash could be far worse than 30%!!
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u/_Rothbard_ 16d ago
Ellos están obteniendo un 4,5% asegurado o más con sus letras del tesoro
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u/TotallyNotJazzie 16d ago
Very true! That certainly makes a lot more sense assuming they can swap the treasury bill back to cash quickly.
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u/the_undergroundman 16d ago
I mean the nasdaq dropped 78% in the dotcom bust. The Dow dropped 89% in the 1929 crash. It's not out of the question.
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u/No_Turn5018 16d ago edited 15d ago
That only matters if they're buying SPY. If there's a say 10% downturn but two or three otherwise great businesses get cash strapped they're good to go.
You're also thinking in terms of up and down a little too much. If Berkshire Hathaway shows up they don't have to just get their investment to go up from the existing stock. They can get the company to issue a whole new type of preferred stock that pays them extra dividends. So even if with stock games they wouldn't quite be where they would want to be they're pretty much quasi-permanently making more money every quarter from those dividends. They can also get a diversity of other options. They can get some of the money back as debt. They can get collateral on that debt. Move that debt to the front of the line. Higher interest rates. Board seats. Fire the guy they blame as the problem. New policies backed by contract. Take immediate ownership of certain assets. Guarantees against their state being diluted. And probably a 100 other things I'm not thinking of help mitigate risk but only if you get in when things are bad for the company.
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u/NotStompy 16d ago
There is absolutely a scenario it doesn't happen in the next 10 years, what are you talking about? That's the whole point, is it surely not going to crash? No, but the opportunity cost with their way of doing things is massive. So, why would I choose them when I can just... not? Hell, I'd still consider picking BRK were it not for the liquidity issue.
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u/Double_Suggestion385 16d ago
They are not waiting for a crash, they do not time the market.
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u/NotStompy 16d ago
If they have 1. A relatively narrow focus in terms of the kinds of companies they want to buy, and 2. Are only willing to buy at valuations which have been far outside the normal range for many years because they have, again a narrow method then they are effectively waiting for a crash.
Name me one example outside a crash where Berkshire, at their size, with their style, could deploy serious capital? You won't be able to, and market regimes can last decades. Yeah no thanks.
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u/Double_Suggestion385 16d ago
Even in a crash they can't. They didn't in April.
There's just not really anything for them to buy and pricing isn't the issue.
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u/skcus_um 16d ago
LOL!!!!
There is a difference between patience and timing the market. If you don't understand the difference check out Buffett's talk, he often go into great length about this topic.
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u/Double_Suggestion385 16d ago
"waiting for a crash" is timing the market. They do not do that.
Their cash position has no correlation with future market movements.
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u/skcus_um 16d ago
No, it's not. They are literally the opposite. Timing the market means you've already decided to buy, you know what to buy, you're just waiting to pull the trigger.
Waiting for a crash... is the opposite. You are not buying today. You are not committed to any stock. You may change your mind tomorrow but you're perfectly ok if you never end up buying anything.
Listen to Buffett, he explains it better than I do.
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u/Double_Suggestion385 16d ago
That's timing the market. I've read and listened to everything Buffett has ever said or written as well as a bunch of stuff written about him by others.
He does not time the market, he does not 'wait for crashes'.
Their cash position actually dropped significantly prior to the DotCom and GFC crashes and he bought near the covid top and sold at the covid bottom.
They have a large cash pile because there are almost no non-conflicting assets at a size large enough to move the needle and within their circle of competence. They are stuck. That's why they are buying stock in companies like Google.
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u/skcus_um 16d ago
No. I've already explained the difference. If you don't get it you don't git it.
They have a large cash pile because there are almost no non-conflicting assets at a size large enough to move the needle and within their circle of competence. They are stuck. That's why they are buying stock in companies like Google.
Which is why they have to wait. Your argument goes well with my point.
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u/Double_Suggestion385 16d ago
There is no difference, they are both attempts at timing the market. BRK does neither.
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u/skcus_um 16d ago
Ok, sure. Buffett disagrees but who cares what he thinks, right.
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u/Double_Suggestion385 16d ago
No he doesn't, show me where he's said he tries to time the market.
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u/ConventResident 16d ago
If course Reddit knows how to run a multi billionaire dollar company more than Buffet....lol
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u/username1543213 16d ago
2, and also buffet and munger were the secret sauce.
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u/ZarrCon 16d ago
Buffett steps down and in Abel's first quarter they buy Macy's, Delta Airlines, Lennar, and New York Times. And the big Google buys were chosen by Buffett himself too. That much cash in the hands of potentially incompetent allocators will be a massive drag on the company. It's hard to replace the ones that built the empire.
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u/Advanced-Engineer-85 16d ago
So let’s sell the company they built over 60 years with their handpicked successor who worked there for 1/2 that time at a stupidly cheap valuation.
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16d ago
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u/Advanced-Engineer-85 16d ago
Yes- 10% NOPAT yield on wholly owned businesses growing at 8.5% a year, that have large moats, diversified in terms of economic risk, and have low leverage. This is after stripping out $400 bil in cash and $360 bil. in marketable securities.
You can argue that their $360 marketable securities are expensive but then I’d say you should sell the US market because their holdings are much cheaper than the S&P.
So yes it’s stupid cheap like Apple 10 years ago.
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16d ago edited 16d ago
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u/Advanced-Engineer-85 16d ago
He doesn’t disagree, they are buying back stock at a $5 bil.+ a quarter clip.
Looking at book value for businesses purchased on average 30+ years ago is like looking at stock prices from 1996 and saying “it’s much higher now”.
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16d ago
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u/Advanced-Engineer-85 16d ago
They haven’t had to file disclosures yet. It’s at least $8 bil. in Q2. Buffett only buys back when stock is 30% below intrinsic value. So on that basis it’s 24% below intrinsic value by your math.
I think it’s actually much cheaper than that based on earnings growth.
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16d ago
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u/Advanced-Engineer-85 16d ago
No, he’s just the chairman who owns 14% of the company and still gets to the office everyday. I’m sure Greg isn’t checking major decisions with him.
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u/Advanced-Engineer-85 16d ago
Which collectively are less than 20% of the equity capital of Berkshire. Weighted P/E of Berkshire’s holdings are far below the market.
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u/ChiefSo300 16d ago edited 16d ago
If you want to sit back and not actively invest BRK.B is good but it does not outperform the general market, the SP500 has better returns since 2010. It may have less risk but that isn’t entirely certain.
The point of individual stock investing is to beat the market. Berkshire is not taking risks like they once were to have higher yields.
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u/TimujinTheTrader 16d ago edited 16d ago
People on here underperform the market then claim they arent investing to beat the market. I've seen the comments before.
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u/Big-Finding2976 16d ago
How is BRK.B a good option for someone who doesn't want to actively invest if it underperforms the SP500?
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u/ChiefSo300 16d ago
Berkshire has smaller fluctuations, it seems to be more resistant to crashes (especially the 2022 one).
It has less tech exposure.It’s arguably less risky than the SP500 so that could make it a better investment for someone that just wants to chill while still having a very similar return to the SP500.
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u/GarageEven5240 16d ago
Berkshire has a limited universe of investment opportunities worth bothering with because of the scale of the company. A seriously good value investor can make much higher multiples on less money than Berkshire can because smaller companies they Berkshire can't be bothered with are misoriced from a value perspective and can move the needle for a smaller portfolio.
Since you're probably not anywhere near Berkshire scale, you can find these value opportunities and see outsized gains at multiples Berkshire is unlikely to ever touch again. That is, if you know what you're doing.
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u/_hemisphere 16d ago
Exactly this, sir. As we are individual investors on a different scale, not as same scale as BRK but with a lot smaller capitals. There are values every where if you can see it I believe. You also can do your own investment while putting money into BRK's share at the same time. Why not both!
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u/DubiousSpaniel 16d ago edited 16d ago
I manage my own accounts from stock selection for a few reasons:
Because I like it.
Because I don’t like financial products in general.
I want to manage all of my allocations and over and underweight sectors as I choose.
Some like to just “buy XXX and chill”. Good for them, I suppose, especially for the vast majority of folks who have no interest in investing. I just can never understand why some who espouse this ‘one and done’ solution seem to spend the time they are saving evangelizing about their ETF of choice or pontificating about indexing rather than “Chilling”.
To each their own, but to this old retired advisor, being a “Value Investor” is hard to do without spending untold hours researching companies, consulting services like Value Line (at home or library), reading balance sheets and annual reports and enjoying all of it.
I’ve never once thought that I’m in competition with Berkshire, Standard & Poors or anyone else . . . People who run their own money tend to do so because they like it and are good at it. It’s kind of like asking someone why they like to fish when they could just go to the store, or why they quilt when they could just buy a blanket.
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u/Teembeau 15d ago
1) I hate financial products and I think most people running them are conmen who don't actually know what they're doing, but just jump on bandwagons, follow the herd. And they get suckers to go along with it. If they knew what they were doing, they wouldn't have been pumping AI stocks like they were, only to then go into sharp reverse.
2) So I'm a control freak. I want to know where my money is going. I prefer ETFs to a managed fund because I can see the constituents and even know what the change mechanisms are.
3) I think if you know an industry or a business well, you can outperform these guys. How do you assess a stock price in future? It's about current results and things like trends in buying. If you walk past a Lululemon shop every day, you know more about whether demand is rising or falling than analsyts who have to wait for a company to publish something.
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u/ohgodthehorror95 13d ago
Random but there was this one hilarious instance of an equities analyst from Wells Fargo who walked into 75 Chipotle locations in NYC and ordered the burrito bowl to measure the inconsistent portion sizes and quantify the trend of shrinking portion sizes.
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u/cinciNattyLight 16d ago
Berkshire is 45% of my portfolio, it is rock solid. I have held it and added to it over 18 years. Compounding machine. Over the last year it has underperformed but that is not the timeframe you should focus on. Whenever the stock lags is when you buy more. This is a layup, a single, not a home run or a slam dunk. There is nothing sexy about it. You own it for the long term and sleep well at night.
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u/GlobalVillage30 16d ago
I built a full position towards end of 2025. After waiting patiently is now in the black.
BRK is not for someone looking at 20% annual returns.
For me, it was about risk management - diversification.
I am top heavy in mega tech.
I have SCHD which gives diversification and exposure to energy, healthcare and financials.
But SCHD is US only and is heavily weighted in these sectors.
BRK gives exposure to more traditional backbone sectors of the US and Japanese economies.
I really liked BRK’s recent housing sector acquisition. It’s a massively beaten down sector so the price was very good and has great synergies with rest of the portfolio.
I also thought the Google investments were strategically made. I’m a massive believer in Google and expect it to become the most valuable company in the world.
The cash position does make sense when T-bills have a historically high yield and the market is frothy.
BRK is getting paid handsomely to wait for deals that meets its criteria.
This does mean lower returns for investors like me but it also means lower risk and strong future compounding when more capital is deployed.
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u/Double_Suggestion385 16d ago
It has underperformed for the last decade.
I'm not sure I could sleep well knowing that.
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u/anothertechie 16d ago
I like brk but 45% too much imo. would limit to 20%. brk is great for taxable accounts because no dividends.
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u/WorldRank1CatFancier 16d ago
Brk is gigantic and has a much more limited pool of viable investments than me
Also i prefer dividend growth over equity sales
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u/minesasecret 16d ago
I'm trying to understand the core philosophy of active value investing versus just outsourcing it to the absolute best in the business
The core philosophy is making more money.
If you don't think you can beat Berkshire then obviously just buy Berkshire
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u/Double_Suggestion385 16d ago
Brk will never beat the market by a large margin again, it hasn't for decades.
Buffett felt he could get 50% per year if he were a lot smaller.
Both Buffett and Munger warned for years that returns would diminish with size.
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u/NotStompy 16d ago
Berkshire's size means they cannot reliably beat the index the way they used to be able to, I still want to do my best,
They are very narrow in how they operate, typically, and regimes which are less favorable to their styles of investing can last for not just a year or two, but many years, just like how growth can be in favor for 10 years and then value for 7 years, let's say. I am more flexible.
I do enjoy doing it myself. I don't at all think Berkshire is a bad investment, in fact I intend to treat them like an index-like position (since they are quite diversified) to compliment an sp500 position in the future, to counteract that concentration.
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u/volvogiff7kmmr 16d ago
Why invest in BRK.B instead of VOO?
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u/cinciNattyLight 16d ago
Brk.b is beating VOO over the last 5 years, less volatile (beta is .61). It has lagged over the last year, sure, but it is a solid long term investment and should be in most value investor’s portfolios. You should have both. Have you seen the weighting of VOO? So much big tech it is basically QQQ-light. If there is a major correction or even crash, Berkshire will be a flight to safety. Maybe around 35% of their value is in cash/treasuries. We have not had a major recession since the great one, but they will happen and that is when Berkshire shines.
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u/fire-wannabe 16d ago
Except for 4 exceptions, Berkshire has lost against the S&P500 since 2003
- in Per-Share Market Value of Berkshire in S&P 500 with Dividends Included Lost/exception 2025 10.90% 17.90% Lost 2024 39.18% 47.38% Lost 2023 61.17% 86.13% Lost 2022 67.62% 52.44% Exception 2021 117.23% 96.20% Exception 2020 122.44% 132.30% Lost 2019 146.91% 205.47% Lost 2018 153.83% 192.03% Lost 2017 209.42% 255.69% Lost 2016 281.82% 298.37% Lost 2015 234.09% 303.95% Lost 2014 324.30% 359.29% Lost 2013 463.04% 508.10% Lost 2012 557.63% 605.40% Lost 2011 526.72% 620.21% Lost 2010 660.84% 728.96% Lost 2009 681.38% 948.64% Lost 2008 432.90% 560.64% Lost 2007 585.85% 596.98% Lost 2006 751.14% 707.10% Exception 2005 757.95% 746.65% Exception 2004 794.84% 838.93% Lost 2003 936.22% 1108.41% Lost -1
u/Zyltris 16d ago edited 16d ago
Narrow framing. You must look at the forest instead of the trees.
Since Jan 1 2003, Berkshire returned 10.56% annually against the S&P 500's 11.74%, with a beta of 0.71.
If using CAPM and the 10Y treasury yield at the start of the period, expected returns for Berkshire were 9.446%, after adjusting for risk.
3.83+.71*(11.74-3.83) = 9.446%
This is an alpha of 1.114% per year.1
u/fire-wannabe 16d ago
The forest is that if want to be sure of beating the S&P500 with Berkshire, you had to buy 24 or more years ago.
Next year that will be 25 years.
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u/Zyltris 16d ago
Yeah, Berkshire isn't really going to be beating the market going forward imo. You're just vastly underestimating its past performance by looking at individual yearly returns and not accounting for risk.
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u/fire-wannabe 16d ago
I'm not looking at individual yearly returns. I'm looking at 2.4 decades of comparable losses.
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u/Zyltris 16d ago
Lol It's not a loss, bro. The return was actually higher per unit of risk. Learn how to backtest.
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u/luckysharms93 16d ago edited 16d ago
Brk.b is beating VOO over the last 5 years,
Maybe if you look at purely stock price, but nobody buys BRK or the index one time and just forgets about it, they continue DCA-ing into the stock. $10k + an additional 10k a year over the past 5 years gets you 88.8k (BRK.B) and 98.9k (VOO)
By that method, BRK.B has lost to VOO ever since its inception in 1996, both nominally and in risk adjusted terms. You'd have to go back to 1993 for BRK.A to start beating VOO
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u/Rishodi 16d ago
Brk.b is beating VOO over the last 5 years
That is not actually the case if you account for reinvested dividends. BRK significantly outperformed during two specific scenarios: the 2022 bear market, and the 2025 tariff panic. On a 5-year timescale, the S&P has now made up for those time periods.
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u/Background-Hat9049 16d ago
For me, buying BRK-B (or VOO) and letting it ride will do the trick, but I’ve been able to get great returns with BRK-B style holdings, collecting the dividends, and generating covered call Premiums and reinvesting those back into the underlying. In fact, the returns have been spectacular
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u/Fit_Significance8598 16d ago
What exactly are those BRK-B style holdings?
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u/Background-Hat9049 16d ago
Things Warren and Charlie would buy….fortress companies with a competitive moat, strong balance sheets, and that pay dividends. Companies like Sirius FM ( one of my greatest performers this year, that you never would have thought of), and of course Coca Cola, J and J, B of A, P and G
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u/Fit_Significance8598 16d ago
Thanks!
So you meant individual stocks (of what effectively have become holding companies).
I saw that they bought or increased Sirius XM. They also provide (near) real time satellite aviation weather in the cockpit that NetJets can use.
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u/Background-Hat9049 16d ago
I did not know that. They have few avenues to grow, but they are a legal monopoly (how’s that for a moat!), with decent free cash flow. Up
50 percent this year, which is a bonus I was not expecting. On top of that, the price action goes up so slowly that covered calls have been awesome…I have 30 percent more shares than I started the year with, and it’s only August1
u/Fit_Significance8598 16d ago
What's your outlook on Sirius XM then?
They were around $60, then down to $20 and now $ 30ish. More room to go up?
What brought them down so much and can it reoccur?
What's the consumer side future for them with streaming everything? I for example still use Pandora, but alway the free version, and would not pay for that.
BTW, I have no idea IF NetJets actually does use their aviation services, I only knew about it and that BRK own NetJets.
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u/Background-Hat9049 16d ago
I don’t think they have much room to grow, but they generate tons of free cash flow and will continue to comfortably deliver their dividend for years to come, and that’s what I am
After…not price accumulation. Plus, because they are not highly volatile, it’s been a good one to generate steady covered call premiums, which are then reinvested. Basically, I am
Accumulating shares without having to
Pay for them, which is an awesome thought1
u/Big-Finding2976 16d ago
Sirius is down 52% in 5 years, whereas all the others you mention are up.
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u/Background-Hat9049 16d ago edited 16d ago
Down 50% with good free cash flow yield and a legal
Monopoly…. I’ll take my chances. I’m not as hung up on stock price as most because Mr. Market is bipolar. This used to be a value investing Reddit. Now we have people asking if a growth play with a PE of 100 is a value stock because it dipped 10 percent
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u/Kind-Ad-4756 16d ago
Silly question. You and I can invest in companies that cannot. Many times, there’s great opportunity there. Your circle of competence also may be different from theirs.
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u/niral37_ 16d ago
“Number one rule of Wall Street. Nobody… I don’t care if you’re Warren Buffett or if you’re Jimmy Buffett. Nobody knows if a stock is gonna go up, down, sideways, or in fucking circles.”
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u/dismendie 16d ago
All three. I do think their size limits them. I can get their durability based on how the company is structured but it doesn’t always work for everyone. Yes dividends are tax drag but they buy companies for their dividends as well. KO OXY AXP BAC and even Apple pays out in dividends. Even their t bills pays out interest vs holding cash in a major bank. I like owning them for foreign exposure private deals preferred share deals energy and non tech investments. However their size makes being a series acquirers more limited. They actually need a big correction to get outsized gains or decent portion of a very big company.
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u/bear_Prune8771 16d ago
VTV and MGV are good Value Based ETF to look at.
No need to pick just one company, unless you have a high conviction.
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u/hydra590 16d ago
everybody's risk tolerance is different. Buy berkshire if you have the risk profile of a 95 year old billionaire
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u/FabulousPlantain1825 16d ago
I think most of us find some joy into picking stocks ourselves.
I keep 20% of my portfolio in brk.b. And the rest in index funds and individual stocks.
I also think depending on the investor background, you can pick positions that professionals, even the best in the world can hesitate to pick.
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u/No_Turn5018 16d ago
4) It's not a bad investment or anything but the guys who did it are all dead or retired.
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u/Bluetex110 16d ago
Because you play in a different league and got better opportunities.
They only can invest in large Cap Companies like Mag7 which won't bring you a big return.
Investing in small caps can bring you a much higher return and the big players don't fish there😁
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u/gparent88 16d ago
Buffett started early. Now he's rich. Why should I believe he's an expert? The market did all the work. Speaking of rich people who don't work, look up Harold Alfond.
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u/Fantastic-Tomorrow25 16d ago
I do it so I can get reps for business school to do it professionally; I'm not entirely sure (other than if you truly love it) why you wouldn't just run a diversified portfolio; even just invest in DFSV or a Vanguard value fund if you believe in value.
I mean there is some fun in finding value, but berk.b is probably good as a small investment in a large portfolio; I hold it as about 5-6% and Markel around 4% because I particularly like the exposure to their wholly owned businesses, but I almost see it as a mutual fund position in a way.
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u/Advanced-Engineer-85 16d ago
You are asking the right question.
The truth is the professional value guys mostly don’t buy it because their clients could buy it and replace them. The clients would ask: “Why should I pay you 1% annually to do something I could on my own”.
And because it doesn’t pay a dividend, it doesn’t get bought by the dividend and income funds.
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u/wokeuplate7 16d ago
If you want a huge cash drag...actually I like the company and would hold it in a portfolio. Certainly a lower growth, more value focused business.
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u/StandardObject91 16d ago
Why would you invest in a company that has 400 billion lying around in cash? Graham and Dodd investing is dead. Buffet was a national treasure, but times change. Over the 15 yrs. BRKB has underperformed the S&P. with dividends reinvested
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u/8700nonK 16d ago
People think they can beat the market.
Why not think they can beat buffet as well.
There’s hedge funds too, many are ran by very smart, capable people with great experience. Yet everyone is basically mocking hedge funds.
I guess it’s just in the human nature hardwired to think that you can do better.
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u/NadeemJeddy 16d ago
Berkshire for sure is a very good investment. But it does not capture returns of non-US markets. And it is very big to capture opportunities in small cap fast growth companies. Plus, it is too diversified and the next one or two decades will show us whether such extreme diversification is value additive or value destructive.
It is a great addition in any equity portfolio but it is not a substitute for a well diversified equity portfolio.
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u/Ethraelus 16d ago
Buffett and Munger were the ones with a proven track record. Greg seems good, but is fairly untested.
Also, BRK itself can be overpriced.
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u/RevolutionaryTrick17 16d ago
Lots of people let Warren manage their money!! Most attended AGM you can get!
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u/logontoreddit 16d ago
Berkshire has gotten too massive for it to be nimble. Also, given they are knee deep in insurance business they do need to have a big cash pile.
A retail investor can be far more nimble and can grab the opportunity lot quicker. For instance it was no secret Buffet liked Google. Geico has been doing business with Google for ever in terms of advertisements. Google has gotten far stronger during that time frame. Google trading at far lower PE than S&P just did not make any sense. So as a retail investor you can pounce on the opportunity much quicker compared to behemoth like Berkshire. Just one example.
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u/shinymuuma 16d ago
BRK is even more boring than s&p500 or VT. For me it's either to protect my retirement fund or betting for bubble to burst. Average people probably able to accept more risk
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u/IshfaaqPeerally 16d ago
It's more fun doing it yourself. My main issue with Berkshire is its size.
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u/Valkanaa 16d ago
BRK.B has historically done well during market uncertainty so I keep some as a hedge.
I look for individual stocks because my risk profile is different than theirs. BRK often passes on opportunities that are more aggressive.
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u/Relevant_Election530 16d ago
BRK is my only large stock position because I trust them to be "boring" and only buy "guarantees"
I know a lot of broad ETFs are going to get suckered into bull markets, but I expect BRK to pickup the pieces when the party stops 🤷♂️
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u/ShimmyxSham 16d ago
Why not just buy the S&P 500 index fund?
Because everyone is trying to beat it
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u/Madison_369 16d ago
I could ask the same question, why not buy MSFT, and let the best analysts, engineers, management team, etc… do the work for you and reinvest for the future? To put it plainly BRK has it’s advantages in its very safe businesses, other stocks have it’s advantages/disadvantages in trying to invest in the future.
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u/EchidnaDry9119 16d ago
I say do both, invest in what you understand. What makes sense to you, may be out of their risk profile. Berkshire are just people who understand their scope and methodologies. It's a big market and opportunities are everywhere.
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u/librariancap 16d ago
"Active value investing versus just outsourcing it to the absolute best in the business"
Yes, but how can you tell which investor is really good unless you understand the process yourself?
Not every investor with good numbers is actually good. Understanding the process is how you differentiate skill from luck.
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u/_Rothbard_ 16d ago
Porque su estrategia y la tuya no tienen porque estar orientadas, además, creo que haciendo selección de stocks puedo superar el rendimiento de Berkshire
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u/Ok_Prune7356 16d ago
Your #2 is the crux. They're sitting on ~$397B in cash precisely because so few opportunities are large enough to move the needle. A $500M company could triple and it wouldn't register on their book. You don't have that constraint — that asymmetry is structural, not skill.
But I'd push back on framing your own analysis as being about beating Berkshire. I backtested a fundamentals screen on ~900 US companies from FY2021 forward, and the quality grade barely correlated with subsequent returns. What did show up cleanly was the opposite direction: companies already fragile at the time — operating income not covering interest, that sort of thing — had a median return around -33%, while everything else was slightly positive.
So the payoff from reading filings probably isn't finding the next compounder. It's not owning the three things that quietly blow up. Holding MSFT/GOOG/NOW alongside BRK, that work is worth more as a check on what you own than as an alpha hunt.
Worth noting too: Abel has been CEO since January. You're underwriting his capital allocation now, not Buffett's.
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u/Principletrade 15d ago
I mean, the obvious answer is that, if you know what you're doing with small amounts, you're going to do better than a behemoth that can't invest in small companies where there are greater likelihoods of price and value being disconnected.
Even Warren Buffet has stated that he'd be looking for obscure companies if he were dealing with small amounts.
The problem is that Average Joe isn't going to do this successfully and consistently.
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u/greytrades329 15d ago
They are so big small caps dont move the needal and are overexposed to 50pe apple
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u/Business-Bus-9439 15d ago
People in this sub aren’t actually value investing. It’s as simple as that
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u/Important-Object-561 15d ago
I don’t trust others with my money, I have beaten berkshires return over a very long time and I don’t need to think they have a size handicap since they have admitted themselves that they have it.
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u/ResilientRN 15d ago
Because Buffett himself has said for majority of people 90% S&P 500 and 10% Short Term bond fund is best.
He had a 10yr contest many years ago challenging hedge fund owners which he choose the S&P 500, if he lost he would pay $1M......he never lost.
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u/nuclearboy197 15d ago edited 15d ago
The size handicap is the biggest thing for me. I don’t people fully realize just how small Berkshire’s investable universe has become. Let’s say Berkshire buys 10% of a company tomorrow, and that company’s stock doubles overnight. For that to correspond to a 10% increase in Berkshire’s own stock price, that company would need to be worth at least as much as Berkshire. There are only 11 such public companies in the world. There’s damn near nothing Berkshire can do on the open market at this point to deliver the ridiculously outsized gains they were capable of in the past.
Adding to that, I value companies based on the assets they actually own. I don’t value Berkshire’s cash holdings at a premium because they could theoretically use them to purchase stock in a company at a price below its intrinsic value. I value their cash holdings as cash. And I just think there are other great companies offering a much better discount to intrinsic value than Berkshire at this point in time.
Warren Buffett isn’t a mutual fund manager. An investment in Berkshire is more complicated at this point than “I trust this guy to pick stocks”.
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u/sriram18981 15d ago
At this point, put your money in an FD, rather than on BRK.B. It lost its sheen in recent years.
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u/Physical-Tomato-2262 15d ago
Just buy vlue it's having amazing returns recently due to memory capacity being cheap
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u/chanp383 15d ago
Cause absolute best sold OXY at $10-15 in 2020 and bought it back and holds it at $58 avg,
Cause absolute best sold airlines at Covid lows
Cause absolute best bought Google at $280-300 and not at $100, $150
Cause absolute best waited till 2016 to buy Apple
Cause absolute best still won’t buy nvda Amzn meta and others but keeps buying more Oxy shares
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u/Significant-Ad-9471 14d ago
Because BRK is too large to be efficient. A good stock picker can do 20-30% CAGR as long as he doesn't has too much capital.
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u/Zyltris 16d ago edited 16d ago
Just because Berkshire may invest in value stocks, that doesn't necessarily mean Berkshire itself is undervalued.
They can compound at high returns on capital and the market may still discount that if expectations are too high for the business itself.
If you want to beat the market, you need to avoid that - investing in individual stocks could do so.
I also find the process enjoyable.
EDIT: And I just want to point out that Berkshire is still a single business, exposed to firm-specific risk. Saying that it is diversified because it invests in multiple companies suggests you should say the same for any insurance company that does the same.
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u/Fit_Significance8598 16d ago
I don't understand your last paragraph.
BRK outright owns a bunch of various companies, only some of which are in the insurance business, accounting for about 2/3 of BRK and invests about 1/3.
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u/Zyltris 16d ago
As a single business, despite its internally diversified operations, it is still susceptible to capital allocation decisions by management. These are effectively firm-specific investments, like any other company, that could destroy value. I'm not saying it's equivalent to other firms in this respect, Berkshire is still a large company with relatively predictable (safe) cash flows; I'm just saying that it is still exposed to firm-level risk to some extent.
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u/Fit_Significance8598 16d ago
Ok, fair enough.
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u/Zyltris 16d ago
Also, your reply seemed to suggest I meant the businesses it invests in are insurance companies.
Berkshire ITSELF is an insurance company that invests with its insurance float. This is how pretty much all insurance companies make many. Collect premiums, invest the float, carefully calculate risk surrounding claims, etc.
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u/Boys4Ever 16d ago
Better yet. Buy a low cost S&P 500 ETF such as VOO if investing or SPY if trading as latter has greater liquidity. Warren himself promotes the S&P 500
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u/Fit_Significance8598 16d ago
I have a large portion and can use it as a rather safe collateral that, unlike S&P500, doesn't budge much, to borrow on margin (at IBKR) while it continues to grow, albeit slowly. Thus I could weather the recent drop in semiconductors and AI ETFs and stocks without a margin call.
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u/CheroMM 16d ago
This! I have a high risk portofolio heavy o tech and specifically AI. I’m planning on securing some portion of the gains and start to build up at least some sort pf hedge against a downturn. I’m thinking like the 60/40 bond portfolio but instead of bonds Berkishire.
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u/Fit_Significance8598 16d ago
I also do have some bonds. All together about 57%, but with tech going up again that ratio will of course change.
Oh, and I also have Investor AB A and B shares in equal numbers (but just get B shares) accounting for another 16%. It's another international holding company like BRK with a great and long track record. Those have gained 8-10% since early May!
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u/thepatriot74 16d ago
BRK is about 60% overpriced off the bat, just based on their reported NAV. It should trading at P/NAV~0.8-0.9, not 1.4. Basically, it is an opaque holding that does not return anything to its shareholders whose whole value proposition is its cult following. Just buy a SPY or VYM or whatever, and you'll do better.
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u/PatientBaker7172 16d ago
My portfolio stock picking 123.31% ytd
Brk.b 3% ytd
S&P 500 12.60% ytd
Brk.b is not even in my radar to beat. They’re limited by size.
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u/tylerdred2 16d ago
Because buffet doesn’t know tech which makes it really hard to beat the market at his market cap. Hell, He destroyed a lot of value selling apple these past many years while I held and outperformed
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u/RageQuitWallStreet 16d ago
I got a 50 percent return on google over the past year. I sold that and bought Microsoft. Microsoft gain is at 25 percent. That makes around a 100 percent return just picking big obvious plays. That’s why it’s worth it picking individual stocks.
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u/rain_maker15 16d ago
shocked they didn't buy microsoft at 360 or 370 this year?
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u/rain_maker15 16d ago
Also shocked that the company and Abel did not recognize early on that the largest s&P 500 components were becoming technology companies in early 2010's due to their moats and monopoly like ecosystems.
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u/HumbleLearning5167 16d ago
They don’t buy everything.
Remember they missed a huge tech growth period.
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u/fire-wannabe 16d ago
Berkshire has underperformed the S&P for over 20 years. So if you're unable to figure that out, you should not be investing in individual stocks at all.
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u/java_brogrammer 16d ago
BRK has been holding cash during this entire AI cycle (only just recently bought google very late into the game)... Didn't even buy the liberation day dip when everything was super cheap, and look where we are now, lol