Warren Buffett Speaks, & I’m Listening

Warren Buffet, the 2nd richest man on the planet, released his annual letter to shareholders over the weekend. He apologized for the fact that this was the second year in a row that his company, Berkshire Hathaway (BRKA), has lagged the S&P 500 Index. He has openly said in the past that it will be very hard for a company of Berkshire’s size to beat the S&P 500 by very much, especially of you buy a low-cost index fund like Vanguard’s VFINX. Of course, he is a very humble man. Over the past 40 years, Berkshire has grown its book value per share at an annualized rate of 21.9%. That’s more than twice the S&P 500′s 10.4% annualized return in that time.

His other comments include the fact that he is predicting further weakening of the dollar due to the U.S.’s huge trade and budget deficits, and he is currently sitting on $44 Billion dollars of cash since he can’t find suitable companies to invest in. I wonder if he keeps some of that at Capital One 360? I’m thinking no.

I’ve often dreamed about owning a Class A share of Berkshire Hathaway, but at $90,000 a pop, it’ll be a while. Still want part of the action? There’s the Class B shares (BRKB), which are approximately worth $3,000, or 1/30th the price of an A share. The catch? First, you lose some voting rights. Second, you are not eligible to help choose where their charitable contributions go. Of course, if you can’t afford an A share chances are your vote won’t matter anyways. Finally, while each Class A share is convertible at any time into 30 shares of Class B, the opposite isn’t true. And sometimes you can get a Class B share at a discount to 1/30th of a Class A share, so there are some opportunities. Definitely something I’m monitoring. I’m not really sure about how to hedge against currency risk, though. More information about Berkshire available here.

Comments

  1. Check with your broker on something more. When I investigated this with Schwab, it required buying BRKB in lots of 10, so the entry price is now up to about $30,000.

  2. You can bet against the dollar by buying foreign currencies or gold. Everbank offers foreign currency deposit accounts and CDs. Most US banks don’t offer foreign currency accounts, unfortunately. You can put money in gold by buying coins, bouillon, shares in gold mining companies, opening an e-gold account or similar, or buy shares in GLD, an ETF which tracks the price of gold.

  3. Anonymous says:

    I think that Berkshire got rid of the directed charitable contributions last year because people were boycotting some of Berkshire’s businesses based on the fact that they didn’t like some of the charities people were donating to.

  4. Anonymous says:

    I think that Berkshire got rid of the directed charitable contributions last year because people were boycotting some of Berkshire’s businesses based on the fact that they didn’t like some of the charities people were donating to.

    Owning even a single Baby Berk is nice if only to get the annual report every year (I know you can get his letter online, but reading paper is nice). Mind you, I also bought it at the height of the internet bubble when everyone thought Buffet was a dinosaur and the stock was in the $1400s.

  5. Anonymous says:

    If you own a single (or more) class A or B share, in 45 of 50 states you are entitled to an additional 8% or so discount on auto insurance from GEICO. Obivously, if Geico offers a better rate than the one your getting now, my theory behind this is that over a 5 to 10 year period of time your savings on car insurance could “theoretically” pay for your Berkshire stock. A small edge but and edge nonetheless in the savings and investing grind.

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