Berkshire Hathaway

 I currently have a major investment in Berkshire Hathaway. I think it'll be tough for Berkshire to grow at much more than 8-10%/yr going forward, which may be in line with the market index. 

I do love the culture at Berkshire exemplified and prefer holding BRK over SPX at current prices. Management views shareholders as partners, sells stock when shares are overpriced, buys back shares when they are underpriced. Management compensation is more than fair and management is very price sensitive when it comes to acquisitions. I could go on, but in essence, Buffett and Munger were in the top 1% of managers and I think have established enough of a culture that future managers will adopt.

In terms of valuation, I think BRK can earn a 9% ROE and should trade at 1.4-1.6x book (though BV will be less valuable as BRK buys back shares). With BV ~$420B, and a MC of $500B, that it's worth closer to ~$630B and trading 15-25% cheap. BRK has grown BV by 6.9x over the last 20 yrs, which is a smidge over 10% (with a cash drag!) It's also hard very hard for me to believe that in 10 yrs BRK will  be worth less than its current $500B MC. In 2019, my estimate of normalized net income was $38B with $80-90B of excess capital. If it didn't reinvest any its cash in growth capex, it could likely pile up $500B in cash and securities in 10 yrs time.  

The downside to BRK is obviously that it does not have a large runway ahead of it and returns for the next 20 yrs should be lower than that of the last 20 yrs. There's also been the complaint that Buffett has been overly conservative with the balance sheet over this past 10 yr bull run. I actually like that he's ridiculously conservative given how levered most Fortune 500 companies are. 

In terms of the market, I think we can maybe get to $160-190 EPS in SPX by 2022. So at 3500 we're trading 20x 2022E. If I discount that back 2 yrs, we can call that close to 23.5x. Now SP does have a higher ROE, closer to 14% so it deserves a much higher multiple than BRK. But it's also much more leveraged.