Written on April 28, 2020: Despite factoring in “key man”, Energy & Airline exposure risks and little to no future growth, BRK is trading at a substantial discount. Much of the value lies in optionality - in its massive cash balance, which we expect to be deployed prudently, especially in a bad recession.
Competitive Advantage - The Castle:
- Core Competency? Long-term investments in Private & Public companies across the world.
- Products: Better or Cheaper? Better. Business structure and investment style superior.
- Growth Prospects? >$100 billion ready to deploy. And warmed up to Tech investments.
Durability of Competitive Advantage - The Moat:
- Competition/Threats? “Key Man Risk”. Airlines and Energy exposure.
- Moat? Brand value of Buffett/Munger. Company structure. Pile of cash balance.
Management Quality - The Generals:
- Strategy & Action? Superior. Investment style lends itself well to bear markets.
- Risk Management? Business risk minimal. But investment risk in Energy/Airline exposure.
- Valuation? ******Redacted.