TIP717: Berkshire Hathaway 2025 w/ Chris Bloomstran
Apr 27, 2025
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Chris Bloomstran, a legendary investor from Semper Augustus, shares his expertise on valuing Berkshire Hathaway. He discusses the importance of trust in investing, echoing Warren Buffett's principles. Bloomstran challenges listeners to consider owning 10-year treasuries over the S&P 500 in the coming decade. The conversation dives deep into Berkshire's culture and business model, revealing its intrinsic value and potential for future returns. He also touches on the impact of inflation on capital expenditures and the significance of Buffett’s legacy in value investing.
Warren Buffett emphasizes the crucial role of trust in investor relations, highlighting its importance beyond mere financial returns.
Current market valuations suggest a cautious approach to equities, with a preference for 10-year Treasuries over the S&P 500 amid potential profit margin compression.
Berkshire Hathaway's investment philosophy prioritizes strong fundamentals and lessons from past market cycles, emphasizing adherence to value-oriented principles.
Deep dives
The Importance of Trust in Investing
Trust is a fundamental element in the relationship between investors and those managing their money, as discussed in the context of investing principles. The podcast highlights how Warren Buffett values trust in his interactions with shareholders and emphasizes the emotional connections he maintains with them throughout his career. Buffett's approach shows that managing money isn't solely about financial gain, but also about being a responsible steward of capital for families who often have their entire fortunes invested in Berkshire Hathaway. The legacy of trust built over decades leads to significant charitable contributions from long-term shareholders, showcasing the broader impact of having a trusted investment relationship.
Investment Strategies in Current Market Conditions
Current market valuations and the effectiveness of traditional investment strategies are analyzed, particularly in relation to the S&P 500. The consensus presented suggests that many investors may face challenges achieving the historical returns they expect due to high valuations and the potential for profit margin compression. There is a comparison between investing in the S&P 500 versus 10-year Treasury bonds, with a strong leaning towards Treasuries under current economic conditions. This cautious stance highlights the importance of understanding valuation and risk before committing capital in an environment that may not yield favorable outcomes for equities.
Berkshire Hathaway’s Unique Investment Approach
Berkshire Hathaway's distinctive position in the investing landscape is discussed, particularly in terms of its historical performance and investment strategy. The conversation touches on how Buffett and Munger have historically chosen not to follow tech trends, instead focusing on companies with strong fundamentals. A critical analysis of Berkshire's recent valuation and the stock's current trading levels suggests it may be fully valued, causing some hesitation in new investments. However, the podcast suggests that the firm's reputation for integrity, coupled with its consistent track record, continues to attract new and seasoned investors alike.
Lessons from Past Market Cycles
Insights from previous market cycles, particularly the tech bubble of the late '90s, are highlighted as crucial learning points for investors today. The podcast discusses how Buffett's foresight in recognizing overvaluation and his reluctance to engage in tech investments during that era serve as a testament to his value-oriented philosophy. The negative consequences of speculative investing in high-margin environments illustrate the importance of sticking to sound investment principles. Listeners are encouraged to reflect on historical patterns to help inform their current investment decisions and avoid market pitfalls.
The Legacy of Value Investing
The enduring legacy of Warren Buffett and Charlie Munger in the field of value investing is emphasized, particularly in the context of their teaching roles. The podcast notes that their principles and philosophies will continue to influence generations of investors well beyond their lifetimes. Educational initiatives and curricula incorporating Buffett's methodologies indicate a growing interest in value investing as a disciplined practice. This ongoing commitment to teaching and sharing knowledge reflects a broader desire to maintain the integrity and effectiveness of value investing in an ever-evolving financial landscape.
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 11.4% on equities since its fund's inception on 2/28/1999, compared to 8.2% for the S&P 500.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
01:45 - The importance of being trusted for Warren Buffett and Chris Bloomstran
18:20 - Why you may want to own a 10-year treasury over the S&P 500 over the next decade
20:28 - How to estimate whether you’re in a secular peak
27:43 - How active Berkshire should be on the boards of portfolio companies
36:03 - How to take a deep dive into Berkshire Hathaway’s culture and business model
43:53 - What the intrinsic value of Berkshire Hathaway is, and what type of return you can get moving forward
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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