Is it now a good time to buy Buffett?

As a living investing legend, Buffett is miraculous and impactful. I heard a lot of people lost money this week following the tragedy of the Ukraine jet crash in Iran simply because there was a surge of buying airline stocks just prior to the accident as there was rumor circulating around that Buffett was buying airline stocks. Then no news came out to confirm that but the plane crash knocked down airline stocks as a whole. While such kind of brainless FOMO should be punished for their blind gambling, it is indeed a reflection of how powerful Buffett is. I must say I missed a great opportunity to make some serious money by simply allowing Buffett to manage my money. As you know, in our generation, we knew nothing about investment during our early adulthood when we grew up in China. While I started to "invest" (blindly) in mid 1990s, I hadn't heard Buffett at all back then when I was in Europe. Then in late 90s when we moved to Canada, that was the first time I heard Buffett by accident. I recalled I saw a free investment newsletter one day that had one article written by a financial planner. He was basically telling a story that a friend of his from Hong Kong bought an expensive Omega watch worth about $50K. And he said he would never buy such luxury stuff (which I agree wholeheartedly) but rather to buy a share of Buffett's stock (BRK). That was the first time I heard about Buffett and I was shocked how expensive the stock was, around $50K! Naturally I did not buy BRK as I thought this guy was crazy to suggest to buy such an expensive stock!! Stupid me of course!!!😠 Now BRK is trading $340K per share, nearly 7 times the price back then or roughly 35% annual increase in the past 20 years or so by simply buying and holding it!!!! I wish I had the wisdom back then but I didn't unfortunately. Back then I was similarly like most others to do FOMO....and lost a lot of money during the dot.com era.😢

The interesting question now is whether it is still a good time to buy Buffett?! I have a mixed feeling about this. On one hand, you probably will hardly lose much money by just buying and holding BRK (A or B shares). Valuation wise, BRK is nowhere near the expensiveness of the general stocks, or S&P as a whole. There is a good sign that value stocks which include BRK are in generally entering into a good era after lagging behind growth stocks for years. This is especially true if the decade long bull market comes to the end (it will for sure) and if we are entering into a general bear market (and it will also for sure😖). It will be much better to hold value stocks during a bear market in general, especially in a prolonged bear. Having said that, I'm not sure I will put my money into BRK any time soon for a couple of reasons:

·         Buffett's most glory time has probably passed. If you are not aware of, BRK has underperformed the market consistently in the past 15 years straight. In other words, if you simply buy S&P for the past 15 years, you would have made a lot more than holding BRK. I don't think this will change in the future. One of the major reasons that Buffett cannot beat S&P anymore is that he has changed his investing style. Somehow he has deviated from his long term success of investing in capital efficient companies (higher return with less capital) but has become more into those capital inefficient companies. Actually Buffett has talked about this back in 2007 in his annual letter.....sometimes businesses look good in terms of revenue growth, but require large capital investments all along the way to enable this growth. He lost a lot of money in such cases like in COP, airline stocks, IBM, and more recently and still ongoing struggling with Kraft. Interestingly, at last year's annual meeting, Buffett was kind of stumbled by a question from an 8 year old girl 🙋questioning him exactly about this (see here).😸

·         The world has changed fast and rigorously. The technical innovations on a daily basis have not only fundamentally changed our life style, they have also created a lot of very innovative companies that are largely capital efficient. But Buffett cannot adapted effectively anymore and he has notoriously been shy from high tech companies. Apparently it is difficult for him to catch up and stay with the technical advances probably due to his very advanced age now. I cannot see any meaningful changes from Buffett moving forward, even though he knows very well his limitations.

·         As we all know, BRK has never paid dividends to shareholders. This was great in the past when Buffett could beat the market by a large margin and grow the stock value as reflected by the share price. Effectively, the shareholders were just letting Buffett manage their money instead of receiving the profit (via dividends) and managing by themselves. But now with BRK badly lagging behind the market, lack of dividends is becoming a big no pass for investors in my opinion. I'd rather put my money in quality dividend stocks and let them compound over time.  In this sense, just buying S&P with dividend reinvestment will be much better than holding BRK without dividend at all.

·         Lastly, not a curse but a reality check every investor has to face: Buffett is nearly 90 years now. Even though I wish Buffett can live healthily forever, the human nature will show its power sooner or later. Right now BRK is basically Buffett and people continue to have full faith in Buffett. What will happen if god forbidden Buffett leaves the world some day, especially suddenly? This is not if but just when! I think there will be a huge shock for investors and BRK will suffer a great deal when this happens. To me this is just like a time bomb without a specific timeline but for sure it can explode any time.

In a nutshell, I will stay away from BRK right now, unless there is a huge correction that we can buy BRK much cheaper than the current level. There are simply too many low risk opportunities out there for investors that there is no sense to tie up your capital for a lagging behind stock, even though it is not a bad one at all. It is just not an efficient wealth grower anymore as it used to be. Sorry Buffett, although I'm still your unfaded admirer for your wisdom!!😘