Tag Archives: NYSE:BRK.B

Buy Berkshire Hathaway: Follow The Oracle Of Omaha

Since 2018, Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) stock has been in consolidation mode, which should pique the interest of long-term investors.

Long-term market-beating performance

Warren Buffett has been a great long-term investor and has generated excellent total returns over many years. From 1965 to 2018, BRK’s book value per share (“BVPS”) compounded at 18.7% per year, while the stock compounded at 20.5% per year, which more than doubled the S&P 500 total returns of 9.7% per year.

The Berkshire Advantage

The Top-Notch Insurance Operations

Berkshire’s well-run underlying insurance business generates float as a source of low-cost capital. In The Outsiders written by William N. Thorndike, Jr. that discusses “eight unconventional CEOs and their radically rational blueprint for success”, the author explained that

Over time, Buffett evolved an idiosyncratic strategy for his insurance operations that emphasized profitable underwriting and float generation over growth in premium revenue. This approach, wildly different from most other insurance companies, relied on a willingness to avoid underwriting insurance when pricing was low, even if short-term profitability might suffer, and, conversely, a propensity to write extraordinarily large amounts of business when prices were attractive. (Page 179)

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Is this a Market Top? What Will You Do?

You might have noticed the general market represented by the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is trading in a sideways channel between roughly $185 and $209.

SPY technical chart May 2016

In fact, Financial Visualization’s daily chart marks a double top, which technically means it’s going down from here. There’s a strong support at $180, but if it falls through that, there will be more downside.

SPY finviz chart May 2016

OK, so all of this is like reading tea leaves. How does the market look fundamentally?

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