Thread by @ChrisBloomstran

Jim, I have a ton of respect for your work but this is a bad take. $BRKA traded as high as 3x book in the late 90's, rewarded for compounding book at 25% a year for three decades. Trades for 125% of BV today, so a 60% decline, yet BVPS compounded way faster than the S&P...1/

https://twitter.com/biancoresearch/status/1361129152871600136

When the stock was expensive Buffett used it as currency to buy companies. In 2020? Repurchased shares meaningfully @ 105% of BV. Growth in BVPS killed the S&P 500 by more than 3%/yr from the late 90’s, between 10-14% versus 7-10% for the index depending on the beginning year. 2/

The stock portfolio also wins. 21% in 2020 vs 18.4%. 39.8% in 2019 vs 24.8%. Even from 1998 when the portfolio was overvalued, $KO at close to 50x, the portfolio still wins 7.6% to 7.2%. I bought $BRKA in 2000 at 105% of BV. BRK’s BVPS grew 9.7% from there vs 7.2% for the S&P. 3/

My gain is > 9.7% given the increase in price/book from 105% to 125%. End point sensitivity matters...Berkshire earns an unleveraged ~10% return on equity. The stock price should match the ROE over time. Using your chart the stock spent most of the last 25 years OUTPERFORMING. 4/

You pick the recent point on the chart to make your point. Looks to me like those moments below the index are classically a great time to invest. The shares rose 2.4% last year, but BVPS and intrinsic value per share grew by ~11%. Capital allocation in 2020 was outstanding. 5/

What’s your expected future return for the S&P? I’d wager if Berkshire compounds unleveraged equity @ 10% then it beats the index by a wide margin, again. You have 2 years where the stock trails the index by a bunch: 11% in 2019 vs 31.5% for the index. 2.4% last year vs 18.4%. 6/

The astute investor might infer that if underlying value is growing at ~10% then perhaps a bargain is to be had. I’d suggest you run your chart using the annual change in BVPS vs the index. The results will be eye opening for you. Mr. Buffett can’t control the stock price. 7/

What Mr. Buffett can control is what he does with the shares and capital, and his skills as a capital allocator drive intrinsic value and book value per share. I’m looking at a reverse CAGR from my yearend letter which shows the 1-year return, 2-year return and so on....8/

The lowest compound annual series for change in book value per share is the 22-year return from the end of 1998, at 9.7% per year. The S&P from that point? 7.2%. Even Berkshire’s shares, again from their most expensive point ever, returned 7.5%, beating the index. 9/

I'm also confused by your comment about Buffett investing in Japan for 20 years, "killing him for that long." Outside the 2020 buys of the 5 trading houses for ~$6.5 billion (less than 1% of total assets), I don't see a record of any Japanese investments, killing him or not. 10/

I'm always bewildered why so many intelligent people love to pile on Mr. Buffett. Clean accounting, judicious use of debt & net cash, exemplary governance. I'll take the unleveraged 10% return on equity at a discount and not get excited when the stock "lags" for a time. 11/11 END