Investing Blog

Buffett’s long term approach to buy and hold securities didn’t exactly stun Wall Street with its 4Q results, the numbers looked terrible. Under mark to market laws, Buffet has to report derivatives holdings at present market value – pretty rough considering the stock market is off by 50%. Most of Berkshire’s loss generating positions are in fact on the derivatives market.

What stunned me about Buffett’s comments on the loss was his interpretation of the value of Berkshire’s stock. His methodology is all about the “book value” or true value of the assets owned by the corporation. The goal for him, is to find companies that trade below – or slightly above – their present book value.

But when he said that Berkshire-A shares were worth $70,530 at book value I got a sense that there are better investments out there. Betting on Buffett is something I’m never willing to do with my capital, the stock has performed near average over a decade long period. Buffett gets knocked for his approach but it isn’t the approach to the market that’s killing Buffett, its the market itself.

Quite frankly Buffett benefited nearly exclusively with the tailwinds behind his back. In the last 40 years the United States has seen such an incredible growth in the value of securities, and assets as a whole, that Buffett was able to score big. When the market is hot, Buffett is hotter, not because of strategy but because he buys strong companies.

There is really no benefit to buying Buffett.

That might seem extreme but I’ll tell you why. Buffett’s own evaluation of his company, that owns parcels or wholes of many other companies, is under what it trades on the open market. Most of his positions are in the stock market, which you can buy, and listed in the company’s reports, which you can read.

Catch my drift?

If you were to walk into a brokerage house to buy an index mutual fund or even the Dow ETF would you pay a 10% premium for the opinion of the broker? I wouldn’t and it doesn’t even matter if its Buffett. Recreating Buffett’s portfolio shouldn’t be difficult.

Investing