Berkshire: Pinch Hit Weschler

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We have argued for years that the biggest mistake being made by Berkshire Hathaway was not giving shareholders access to the thoughts and investment discipline of their two talented stock pickers, Ted Weschler and Todd Combs. After all, Buffett calls the shareholders “partners” and has not allowed his partners to understand anything about the strategies and results of upwards of $30 billion of shareholder capital.

Thanks to Allan Sloan from The Washington Post, we have learned more about Ted Weschler from the footnotes at ProPublica and Sloan’s phone call to Mr. Weschler than we have ever learned from the Berkshire annual reports or the Berkshire Hathaway annual meetings. Where has any of this been in the Berkshire Hathaway footnotes? Weschler has made himself a centi-millionaire just from his personal investments in his Roth IRA. These funds came from converting his traditional IRA and paying a whopping $26 million in taxes to have future gains grow tax free. Here is how Sloan explained these circumstances:

Warren Buffett's deputy explained how he snowballed his retirement account from $70,000 into $264 million, how he shrugs off losses, and how people can save a fortune

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Warren Buffett's deputy grew his retirement fund from $70,000 to $264 million in under 30 years. He detailed how he did it, shared the way he shrugged off investment losses, and offered tips on saving for retirement in a recent Washington Post interview.

Ted Weschler, who helps Buffett manage Berkshire Hathaway's investment portfolio, discussed his approach with Allan Sloan for the writer's latest column. ProPublica first disclosed the size of Weschler's nest egg in June, citing federal tax returns it obtained.

Would You Have Found Berkshire Hathaway in 1975?

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Probably not, from the performance charts, writes Rekenthaler in this article from the archives.

My July 25, 2018, column suggested that time travelers purchase $1,000 worth of Berkshire Hathaway (BRK.A) stock in 1975. That position would be worth $7.5 million today. Which got me thinking: How did BRK’s equity appear at that time?

Warren Buffett gained control of BRK in May 1965. The chart below depicts the value of a $10,000 investment in BRK over the next five calendar years, from 1966 through 1970. For comparison’s sake, I included the S&P 500 and the price change of a barrel of crude oil. (The latter two investments are theoretical: There were no index funds, and oil barrels came with storage costs.) All figures are adjusted for inflation.

Why Buffett Bought Japanese Stocks

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Warren Buffett recently announced he had invested ~$5bn in five Japanese trade companies, a value investment in a country that trades at a steep discount to the United States. The companies Buffett purchased trade at a 35% discount to the broader Japanese TOPIX index and a whopping 79% discount to the S&P 500 on a price-to-book basis.

Why is Buffett investing in Japan today? We bet it has something to do with the massive valuation disconnect shown above: Japan is one of the few value investments available in today’s global developed markets. Large caps in the United States have gotten dramatically more expensive compared to Japan in the last 10 years.

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” Warren Buffett

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A critical pearl of wisdom from Warren Buffett teaches us that with any potential stock investment we may make, as soon as our buy order is filled we will have a choice: to remain a co-owner of that company for the long haul, or to react to the inevitable short-term ups and downs that the stock market is famous for (sometimes sharp ups and downs).