TIP625: BERKSHIRE HATHAWAY

W/ CHRIS BLOOMSTRAN

20 April 2024

Stig has invited legend investor Chris Bloomstran from Semper Augustus to teach us how to value Berkshire Hathaway on today’s show. Semper Augustus has an outstanding track record with a compounded annual growth rate of 11.5% on equities since his fund’s inception on 2/28/1999, compared to 7.6% for the S&P500.

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IN THIS EPISODE, YOU’LL LEARN:

  • The impact of holding cash on your portfolio returns.
  • How to understand the five different components that make up stock market returns.
  • How to estimate the expected return of being invested in the S&P500.
  • What the intrinsic value of Berkshire Hathaway is.
  • How Berkshire Hathaway has allocated capital since 2018.

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:03] Stig Brodersen: Every year I look forward to reading two annual letters. One from Mr. Buffett, and the other from Chris Bloomstran. Chris and his company Semper Augustus have an outstanding track record. Since the fund’s exception in 1999, Chris’ CAGR on equalities has been 11.5% compared to 7.6% for the S&P 500. In other words, a dollar would have turned into almost $15 with Chris compared to only $8 for the S&P 500. I can’t think of anyone other than Warren Buffett who understands Berkshire Hathaway’s valuation better than Chris and after this episode, I’m sure you will agree with me.

[00:00:36] Stig Brodersen: Before we discuss Berkshire Hathaway in detail, Chris outlines his expectations for the S&P 500 returns and the five factors you need to include in your estimations. This is an episode you don’t want to miss out on. Let’s do it.

[00:00:54] Intro: Celebrating 10 years and more than 150 million downloads, you are listening to The Investor’s Podcast Network. Since 2014, we studied the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Stig Brodersen.

[00:01:22] Stig Brodersen: Welcome to The Investor’s Podcast. I’m your host, Stig Brodersen, and I’m here with Chris Bloomstran. How are you today, Chris?

[00:01:30] Chris Bloomstran: Stig, I’m great. It’s always good to be with you and look forward to this for, we’ve done this for a couple of years now, so looking forward to it again.

[00:01:37] Stig Brodersen: You had an amazing track record and perhaps I should take one step back before we get to that and really just acknowledge that you survived for 25 years.

[00:01:46] Stig Brodersen: And I don’t think we can take that for granted and to some, it might seem silly to mention, you know, a lot of people might’ve been 24, 25 years in a job, but it’s in asset management, this is so different. Whenever you see the industry from the inside, you hear everyone talking about being anti-fragile, but then that’s really not how a lot of funds are set up.

[00:02:06] Stig Brodersen: So I guess my first question to you here, Chris, would be as a two-part question, what has been the impact of holding cash been on your portfolio returns, but also which impact, if any, has holding cash had on the longevity of the fund?

[00:02:22] Chris Bloomstran: Interesting. We have a lot of clients that have to have varying levels of cash reserves and some fixed income reserves.

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