> When pressed on the issue, [Warren Buffet] has told shareholders that a lower price would bring unsophisticated short-term investors into the stock.
With respect to Buffet who has talent and is not a total fraud he gets a large fraction of his outsized returned in trades not available to you and me. Off market placements for example. Do you think your returns would have improved if you could buy Goldman Sachs at a 20% discount to market? Yeah me too.
Marketing and promotion is one way he gets those offers you and I don't. (No not the only way, he has billions to invest too, but his name helps). Having the highest share price for a single unit of stock is something else to talk about and color a story if you're reporting it. He's very good at this promotion. His annual letter was a previous generation's version of Elon Musk's tweeting, hiring onion writers, flame throwers and so on that gets Elon so talked about.
It's a skill, a talent. Finding the opportunities and exploiting them in a way that doesn't significantly blow back at you. Buffet executes it brilliantly. Something to consider in your own business. Is there something else you can exploit like that which would make for a paragraph in the story of your company?
You can go to the meeting with BRK.B. Buffett prefers long-term holders, and the feeling was a higher share price makes things a little less liquid. With fractional share ownership it's kind of a wash now.
Even BRK.B would be 50x more its current price but it had to be split when they bought Burlington Northern with stock to accomodate BNSF shareholders.
The major difference is voting power. Economic interest is pro rata, but voting is much different (not that it matters in the current environment). That, and BRK issues direct tender offers to BRK.A holders.
Voting power is in my understanding the real reason. Dollar for dollar a shares have seven times the voting power of a b share. Following his death, the foundations he has bequeathed his wealth to need to sell his shares over the course of ten years. Ordinarily this would result in institutional investors having a majority of the voting power. To avoid this the a shares will be converted to b shares in order to reduce the voting power. A shares are by and large held by investors who have been with Berkshire for decades. Hopefully they will continue the long term focus of Berkshire. Once their progeny start inheriting the shares I think all bets are off. I worry activist investors will convince institutional investors to break Berkshire apart.
Many of the individual businesses within Berkshire are able to act with a long term horizon that I think is uncommon within the stock market as a whole. Profits and float are able to be reinvested within Berkshire in a much more tax efficient way than separate companies.
One example is BNSF. Most railroads are on warpath to increase operating margin as much as possible. Cutting routes, laying off staff, and neglecting customer satisfaction are the norm. Imagine being laid off after your company has had its most profitable year ever. These actions are being dictated by institutional investors. BNSF is the only major railroad not taking on precision railroading. It's possible that this will be a failure on BNSF's part, but Berkshire is willing to take the bet and act differently from everyone else on the idea that this will be better long term. Institutional investors are not interested in that.
I think you get tickets with BRK.B too. A friend of mine sells the tickets he gets on ebay and says that's a bigger dividend than the stock will ever pay :)
Pricing for auto insurance is all fully public information, that states' approve. There is no "discretion". You can look it up yourself. Search for "SERFF" and your state.
Also, auto insurance has the lowest profit margins of any type of insurance.
Unfortunately, in some states, even after reading and cross-referencing dozens of obtuse rules and tables from a given company's rules and rates filing, you may eventually find that the final premium relies on the output of some manner of GLM/tree model that you'll never have access to.
True, you might need to review those rate/rule filings across several states to tease out the more obscure aspects...or any large actuarial firm can do it for you.
All of those things are for sure taken into account, but the key input for pricing is:
- type / year / color of car (gives price and your attitude)
- how many km driven / year (no risk if it stays always on your drive!)
- where is it parked
A small anecdote: I did a project for an insurer once. When we discussed the extreme detail the actuarials wanted for each policy, the client remarked half jokingly that the color + engine size was almost enough for the actuarial model.
(Disclosure: I work for a car insurance company. I am not an actuary and have no special insights into how premiums are calculated.)
Gender famously matters too - a 18/M is (statistically) likely to be a worse driver than a 18/F. Rates reflect this. Having once been a 18/M, I have no trouble believing this.
That said, it's very difficult to compare across states. Car insurance is regulated at the state level, so inevitably different states (or territories, or DC, etc.) have made different choices over time. You can do a dollars-to-dollars comparison between any two states but there's a good chance the elements of the policies and liability rules aren't the same.
I suspect there's also some adjustment to premiums done for how much it costs to repair things where you live. Medical care, building repair, and car repair are all things that likely come up a lot on claims. If you're some place where these are twice national averages, you might have higher premiums than you would in a place where these cost half the national average. In addition to the chance of a loss varying by location.
You should probably include your full credit history as well, since in most US states (i.e. where legally allowed) that has a very large impact on your premium.
You would need coverage amounts and driving histories. Even then, it’s impossible to do comparisons without having all the data for losses in various locations and personal history of claims.
Car insurance is extremely regulated and transparent. If you think you’re getting ripped off, go to a different website and shop around.
That is only relevant if the person buys coverage for the car. Legally, you only have to buy liability insurance, so you can compensate any other parties you injure or damage.
If you borrow money for the car, the lender might require coverage for the car itself. I pay for $500k bodily injury and $100k property damage liability only coverage for $40 per month per vehicle for 10k miles per year.
I had Geico on the east coast at a similar price ($50), but they were more expensive on the west coast so I switched to Amica.
With less than 1 you're not a shareholder, only your broker is. All you have is a contract with your broker about how they split a part of the profits of their share in Berkshire Hathaway.
Not really. A small shareholding is still a shareholding. You can still go. If you read the meeting instructions they ask for a statement showing you have a holding in street name. I've been a couple of times flying from London to Omaha. It was kind of fun.
Also you are technically and legally a shareholder even if your broker holds the shares on your behalf as is usually the case these days, and attending any shareholders meeting is a legal right whatever the size of the shareholding.
Although just now they are online due to covid but I'm sure the physical meetings will return.
If you do hold 0.001 shares with a broker and you want to go you should request with them to be sent the annual report, also a legal right, and that'll have the invite card. Or if not you can phone Berkshire and ask for one.
A small shareholding counts, but that still means owning at least 1 share. Anything less means you don't own the share. Fractional shares are a different construction (compared to the normal case where the broker holds your real non-fractional shares for you) between you and some brokers that offer it, which result in you not really owning the share and thus not going to the shareholder meeting.
Joke's on those that think having 0.9 share at Robinhood is the same as owning a real share. Try voting or going to a shareholder meeting with your fractional share and see how it goes...
"a lower price would bring unsophisticated short-term investors into the stock"
Haven't "sophisticated" investors been conned, suckered, and fleeced as long as stocks existed and even before?
From participation in the South Sea Bubble (the original "bubble") to the Tulip Craze to Bernie Madoff to Enron to cryptocurrencies and beyond.
Not to mention that deep pockets don't necessarily equal sophistication (even when they spend enormous sums to hire professionals to manage their money), and the fatter your pockets the juicier a mark you're going to make for people whose lives are dedicated to funneling money from your pocket to theirs.
I think it's just a matter of terminology/framing -- large sophisticated, moneyed market participants is a "financial crisis" and smaller players getting conned/suckered/fleeced is "enabling gambling". On one hand I don't care for the moralizing and condescension but on the other hand, Berkshire has more business/market knowledge in their trashcans than I have in my head.
That said, Berkshire has always been on the side of the little guy in a sense, even if they're a bit condescending about it -- Warren Buffett has been very vocal about investing in index funds (even putting a tiny bit of his money where his mouth is and challenging fund managers to beat it) this whole time and it's been a good strategy over a very long time frame.
Now, one of the things that no one tells you about the stock market is that a LOT of players make money by front-running and middle-manning the whales (index funds, pension funds, etc), so you'd maybe think it was a trap to just make the whales bigger, but in general the strategy of just investing in broad index funds has been good regardless for individual investors.
Another thing that's been made pretty clear in the previous year is that governments will bail out businesses first in crises. One of the really crazy things that Warren mentioned was just how wide "spreads" (difference between pristine debt aka bonds and debt from struggling companies aka junk bonds) got in march of 2020 -- near/surpassing 2008. He joked that Berkshire couldn't even have floated debt in that market, which is why the Fed doing what it did was necessary. The usual arguments of businesses as "job creators" is maybe valid in some sense, but capitalism without repercussions/negative feedback is what we seem to be trying to drive hard to. Companies that are not prudent with their cash and record profits for the last 10 years of extremely loose fiscal policy should be punished. We expect individuals to save for a rainy day, why don't we expect companies to do so?
I remember it was a discussion topic during my graduate degree in finance. According to theory, the story about unsophisticated investors is stupid since you could basically start an ETF with only BRK stuff in it and sell it at a lower price.
You can skip ETF management fees and just look up their latest SEC filing. Here is a pie I made in M1 (which you can invest with the click of a button if you have an account) which is similar to their public holdings but with tech stocks (Apple and SNOW) removed: https://m1.finance/6rAREGn34Ai2
Fund shareholders typically don’t show up to the shareholder meetings of the fund’s underlying holdings and don’t vote because the fund itself is the shareholder, rather than the fund’s shareholders. (If that makes sense...) So it did in a way keep the unsophisticated investors from exercising too much control but it did bring fund managers into the mix. Which is arguably worse. Hence BRK.B.
there's BRK.B for that. BRK.A is what, a vanity stock?
I've long had the idea that the reason to buy any BRK.A is because ownership of a single share allows you to go to the shareholders meeting in Omaha.
https://www.investopedia.com/ask/answers/021615/what-differe... doesn't mention the shareholders meeting, so maybe that's outdated or apocryphal.