I’m going to attempt something a little odd today, Fools. Even though Berkshire Hathaway Inc. (NYSE:BRK.B) stock makes up 3.7% of my real-life holdings, I’m going to be giving you three reasons to consider selling the stock today.
Why am I doing this?
Recently, Nobel Prize winner Daniel Kahneman visited Fool headquarters in Virginia. While visiting, he talked about how a number of different biases can lead us to believe we can predict the future with relative certainty. In reality, he argued, we are just deluding ourselves.
It got me to thinking about how I don’t write enough about the risks of owning the stocks I own. So, though I don’t plan on selling my Berkshire Hathaway Inc. (NYSE:BRK.B) stock anytime soon, I think it’s healthy for me to practice and model this behavior.
1. Buffett and Munger aren’t getting any younger
Source: ChinaFotoPress/Getty Images.
Berkshire Hathaway Inc. (NYSE:BRK.B)’s amazing appreciation over the last half-century has been accomplished through the shrewd decision-making of CEO and Chairman Warren Buffett, and later, Vice Chairman Charles Munger. Buffett is 82 years old, and Munger is 89.
Judging by their performance and generally upbeat mood at this year’s stockholder meeting, neither man is showing signs of slowing down. But that doesn’t mean the sad day when they leave the company won’t soon come.
The company’s 2013 annual report states that: “Berkshire Hathaway Inc. (NYSE:BRK.B)’s Board of Directors has identified three current Berkshire subsidiary managers who, in their judgment, are capable of succeeding Mr. Buffett.” One contender that is generally considered the front runner is insurance guru Ajit Jain. Buffett, in fact, has so much faith in Jain that he once quipped: “If Charlie, I and Ajit are ever in a sinking boat — and you can only save one of us — swim to Ajit.”
While its comforting to know Warren has that level of confidence, investors should remember that Buffett and Munger have been the primary drivers of Berkshire’s success over the decades.
2. It’s too complicated
I like to keep my investing simple. Normally, I refuse to invest in a company if I can’t explain to a kindergartener how it makes money. For Berkshire Hathaway Inc. (NYSE:BRK.B), I’ve broken that rule, and I’m not sure that’s such a great thing.
For starters, the insurance underwriting industry can be extremely complex. It is here that Ajit has excelled, but the fact that it takes such a brilliant mind to adequately handicap risk shows that very few people can actually wrap their heads around the business.
Furthermore, this list of Berkshire subsidiaries — taken from the company’s website — demonstrates the dizzying reach of the company — from railroads like Burlington Northern Santa Fe, to See’s Candy, and just about everything in between.
Source: Berkshire Hathaway.
Because of this, for many people, an investment in Berkshire Hathaway Inc. (NYSE:BRK.B) is more about investing alongside Buffett than it is investing in the underlying businesses (which brings us right back to my first point).
