Bill Smead Explains Selling All Berkshire Hathaway Shares

Reasons for Selling Berkshire Hathaway

• 🎯 Smead Capital Management sold its final Berkshire Hathaway shares in the previous quarter due to a combination of factors.
• 💡 One reason was the premium associated with Warren Buffett's deep involvement in the company's major investments.
• 📈 Another key factor is Berkshire's status as a large-cap stock, making it vulnerable to market shifts.

Market Momentum and Large-Cap Risk

• ⚠️ The cyclically adjusted PE ratio of the S&P 500 has broken records, historically leading to negative returns over the following three and five-year periods.
• 📉 This suggests that the current momentum in the S&P 500 could reverse, leading to momentum in the wrong direction.
• 📉 When the S&P 500 experiences selling pressure, the largest cap companies are sold the most, and Berkshire Hathaway is frequently among the top 10.
• 🌍 This selling pressure is not necessarily due to the companies' performance but their inclusion in indices that attract significant global investment.

Future Outlook for Berkshire Hathaway

• 👏 Bill Smead expressed immense admiration and gratitude for Warren Buffett and Charlie Munger's contributions.
• 🏢 He believes Berkshire Hathaway will remain a wonderful conglomerate and an excellent company.
• 💰 However, the premium associated with Buffett's and Munger's stock-picking abilities will diminish, changing the valuation of the company as a conglomerate versus a closed-end fund managed by legendary investors.