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Berkshire Hathaway – Adding More Shares to the FFJ Portfolio

 

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Berkshire Hathaway Class B shares (BRK.b) are currently held in the Core Accounts portion of the FFJ Portfolio. I will be transferring additional BRK.b shares to the Side Accounts portion of the FFJ Portfolio and will be acquiring further shares as I view them as being reasonably valued.

I anticipate heightened volatility in the equity markets over the foreseeable future and highly recommend investors restrict their investments to highly profitable companies which have competitive advantages and which generate strong Free Cash Flow. Berkshire Hathaway is the epitome of such a company.

 

Berkshire Hathaway (NYSE: BRK.a and NYSE: BRK.b) holds its Annual General Meeting in Omaha, Nebraska at the beginning of May. In recent conversations with fellow BRK shareholders we contemplated on attending this year’s AGM at the beginning of May in Omaha, Nebraska.

As much as I would really like to attend this event while Buffett and Munger are still with us (they are getting on in years), common sense has prevailed and I have decided to pass for the following reasons:

  • I would waste two entire days commuting;
  • I can watch the key portions of the event from the comfort of my home and at my leisure (videos of the 2018 BRK AGM can be found here);
  • I could acquire ~15 – 20 Class B BRK shares for what it would cost me to attend the AGM;
  • I am already scheduled to go on a ski trip in late February/early March to Whistler/Blackcomb and am planning a longer trip later this year.

Those who have followed this blog for some time will know I follow the teachings of Buffett and Munger as I am of the opinion these gentlemen are the best long-term equity investors! Previous recent BRK articles can be found here and here.

As evidence of the extent to which I follow the teachings of Buffett and Munger I draw to your attention that within disclosed and undisclosed accounts we hold shares in 10 of the companies held in BRK’s portfolio of publicly listed entities (as per BRK’s most recent Form 13F-HR found on the SEC website); I just recently added  Apple Inc. (NASDAQ: AAPL) to the Side Accounts of the FFJ Portfolio and wrote about this purchase here.

Their investment philosophy is sound and they freely share their knowledge, which if followed, allows average investors to achieve investment results that can/may provide lifestyle options that may not be attainable by simply doing the typical 9 – 5 grind five days/week.

I recommend readers unfamiliar with Buffett and Munger read these letters to gain a good understanding of why these gentlemen are so successful. Those familiar with Buffet and Munger will not be surprised to learn that Buffett’s letter is 15 pages and Munger’s letter is 5 pages.

At our (my/my wife) stage of life I am not prepared to invest in companies in which the level of risk would cause us to lose sleep. I, therefore, purposely avoid high dividend yielding equities. Over the years I have found that investors generally have a less than pleasant experience when an investment is made in a high dividend yielding equity. Don’t believe me? Delve into the numbers of some high dividend yielding equities and you will likely find some of these dividends are unsustainable.

I wrote about such a company when I wrote this Owens & Minor article (NYSE: OMI). This company has been the equivalent of a ‘dog with fleas’ for years but, surprisingly, a great many investors have piled into this stock in the last few years because of its attractive dividend yield (even after the dividend cut in the Fall of 2018 its current dividend yield is 4.85%).

Although I pay particularly close attention to:

  • the dividend income which can be generated from our investments;
  • the projected growth of this income;
  • the level of risk;

this does not mean I will completely exclude low dividend yielding companies as potential investments. In fact, some large holdings in disclosed and undisclosed accounts have a sub 1.0% dividend yield. We also have a holding which distributes no dividends….BRK. Although we generate no income from these shares to service our expenses during retirement, we made a conscious decision to invest in this company for the sake of our beneficiary (we hope our departure from this planet will be well into the future).

The BRK conglomerate certainly does not operate in a vacuum and several companies within the group may generate less than stellar results until such time as the US/China trade tensions are resolved. I, however, have a great deal of confidence that BRK as a whole has the wherewithal to withstand just about any adverse economic condition it could possibly encounter.

So.....now that BRK shares are fairly valued and equities, in general, are likely to continue to experience heightened volatility over the foreseeable future, I have decided to entrust additional money to Buffett and Munger (and their team) because I have the utmost confidence in their investment abilities.

The Core Accounts of the FFJ Portfolio currently hold 200 Class B BRK shares (for the very reasons discussed in the Buffett and Munger letters). There are also 165 Class B BRK shares currently held in an inactive investment account which I will transfer to the Side Accounts of the FFJ Portfolio. I also plan to acquire additional Class B shares for the Side Accounts within the next 72 hours.

I wish you much success on your journey to financial freedom.

Thanks for reading!

Note: I sincerely appreciate the time you took to read this article. Please send any feedback, corrections, or questions to charles@financialfreedomisajourney.com

Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.

Disclosure: I am long BRK and AAPL.

I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.

By |January 6th, 2019|General Investing|Comments Off on Berkshire Hathaway – Adding More Shares to the FFJ Portfolio

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