by winston » Wed May 04, 2016 7:32 am
What's Wrong with Berkshire Hathaway
By Charles Sizemore
You see, Warren Buffett is in the twilight of his career. His masterpiece – Berkshire Hathaway – doesn’t quite generate the returns it used to anymore. And while there might be a couple reasons for that, the single biggest one is that it’s gotten too big and too unfocused. There’s a hodgepodge of everything and it’s not doing investors any good.
Buffett generated the returns that made him famous in the 1950s to 1970s by concentrating and making just a handful of very large, very successful bets at any given time. That’s because successful investing needs focus.
But given the size of Berkshire Hathaway today, Buffett is effectively locked out of his own game.
He’s said a few times in recent years that, were he running a small $100 million hedge fund, he’d deliver 50% annual returns like clockwork. Running a $360 billion conglomerate makes that impossible.
At that size, you’re essentially limited to mega-cap stocks. If you were to take a meaningful position in a smaller company, you’d end up owning the whole thing outright.
So my advice to you today is this: if you’re wanting a good party, then mix it up. A Catholic/Jewish/Hindu wedding in South America is a blast.
But if you’re wanting decent portfolio returns, stay narrow and focus. Don’t follow the Berkshire Hathaway model. Instead, pick a strategy or a small handful of strategies that you feel comfortable mastering, and stick with them.
Source: Boom & Bust
It's all about "how much you made when you were right" & "how little you lost when you were wrong"