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JohnCLeven (39.76)

The Beginning of a Long Journey [originally written 6/6/12]



December 06, 2012 – Comments (2) | RELATED TICKERS: BRK-B , BRK-A

[Originally written June 6th, 2012]

Today was a great day.

I just made my first ever real life investment.

At 12:53pm, I purchased shares of Berkshire Hathaway, Inc (BRK.B) at $79.83 per share.

I am 23 years old, and I began studying value investing about a year and a half ago. Since then I’ve become pretty much obsessed with it. I’ve spent about 1-3 hours a day reading any value investing material that I can get my hands on including: All of Buffett’s shareholder letters and most of the books written about him, Seth Klarman’s Margin of Safety, some Peter Lynch, Charlie Munger’s writings, zillions of articles on motleyfool, Morningstar, and seekingalpha, oldschoolvalue, and about 100 different companies annual reports, etc. Needless to say, this investing thing has quickly transformed from a casual hobby to an insatiable passion.

Buying Berkshire today was like killing two birds with one stone.

The 1st bird: Buying a wonderful company at a wonderful price.

I’m buying into a diversified perpetual cash compounding engine at a price/book value of 1.097, below the threshold that Berkshire buys back shares.  Buffett uses Berkshires historical book value growth to measure the company’s intrinsic value growth. Despite growing book value at about 19.8% compounded annually over Berkshire's history, it has only grown at a rate of about 10% annually over the past decade. I'm conservatively estimating that it will grow at 7% annually over the next 5-10 years. If the companies price to book value stays as low as it has been(which it may not), and it grows that book value at 7-10% annually over the past 5 yrs, then, logically, the share price should grow at least at a rate of 7% annually over the next 5 years. If that p/bv valuation increases as well over time, the returns will be much greater. Furthermore, the price of Berkshire has dropped over 20% since late 2007 while the book value (Buffett's proxy for intrinsic value) has increased by 30%. THAT’S MARKET INEFFICIENCY FOLKS!

The 2nd bird: Partnering up with one of my best teachers.

By becoming a Berkshire shareholder, I get to put my money where my mouth is and actually get into the market by partnering up with one of my greatest teachers.  It is a symbolic gesture, of course, but also meaningful one. Through his letters and interviews, Warren has taught me many timeless lessons that will help me on the road to financial independence for the rest of my life. Now, we are partners, and that’s pretty damn cool. I can’t think of a better way to start a lifetime of investing. Moving forward:  I look forward to adding to my core position in Berkshire, as well as acquiring other great wide-moat businesses for the next 50 years., and blogging about it on this site and perhaps others.


Disclosure: I am long BRK-B. (I’ve always wanted to say that)

-          John 


2 Comments – Post Your Own

#1) On December 06, 2012 at 3:19 PM, constructive (99.97) wrote:

Congrats, welcome to the club.

Have you bought your Berkshire baseball cap yet?

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#2) On December 06, 2012 at 3:40 PM, JohnCLeven (39.76) wrote:

Haha, i've not. I'm not much of a hat guy, but maybe i'll put it on my christmas list anyway. Thanks!

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