|
Vinvesting.com is the leading social networking site for value investors where you can get the latest investment ideas, insights and interviews from great investors like Warren Buffett, Templeton etc. Over the last 70 years, value stocks clocked a 13.4% average annual return, vs. 10.2% for growth stocks, according to Ibbotson Associates. |
The Berkshire Hathaway Portfolio
Submitted by admin on Fri, 01/12/2007 - 14:23
Justin Fuller of Morningstar.com regularly reviews the stock holdings of Berkshire Hathaway (BRK.B), the investment conglomerate run by Warren Buffett, one of the all-time great investors. At Berkshire Hathaway's last annual meeting in May 2006, Buffett said that if he were starting his investment partnership over again, he would invest in securities around the world and focus on smaller companies. To illustrate this, he used the experience of his relatively recent investments in Korea, stating that since companies with strong balance sheets were trading at a meager 3 times earnings, he would have been almost 100% invested in Korea. What's more, he said he wouldn't expect all of his small investments to pay off, but would only need a few to pay off very big. While this commentary is very instructive for most of us, you won't necessarily see Berkshire making these types of small-company investments anymore.
The reason for this is that Berkshire is so big now--it has more than $40 billion in cash on its balance sheet--that it is difficult for the firm to invest in stocks with relatively small market capitalizations. In addition, given their small size, these investments would have a negligible impact on Berkshire's results. As such, Berkshire tends to make investments in larger companies, where it can deploy enough cash to move the needle on its own intrinsic value. And Buffett has a fairly conservative outlook on Berkshire's current stock investments, stating in last year's annual report that he believed the share prices of Berkshire's stock portfolio might only double in about 10 years' time.
Now you're probably thinking: Great, if Buffett himself thinks Berkshire's equity investments will only be slower growers, why should I be interested in them?
»
Post new comment