đ Why Buffett Struggles To Beat The S&P; Berkshire's Secret Weapon; Apple's (AAPL) Wearables Business
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The Daily Compound #002
The Truth about Buffettâs Track Record
Twitterâs most popular speculators and Bitcoin pump-and-dumpers would like you to believe Buffett is a has-been. They point to Berkshireâs growth vs. the S&P 500 in the last ~ten year stretch. This is misleading for many reasons, most notably because of the constraint that Berkshireâs size has on future growth.
đ Remember This: It is practically impossible to keep compounding like they used to, considering Berkshireâs size. Buffett has been telling us this since the 1980s.
đŹ âWe cannot compound money at 23 percent from a $12 billion base. We donât know how to do that, and it would be a mistake for anybody to think that we could come close to that... âWarren Buffet (via Berkshire Hathaway shareholder meeting, 1995)
Berkshire Hathawayâs Secret Weapon
The insurance businesses Berkshire Hathaway owns, like GEICO, provide free money that Buffett and Munger use to buy stocks. Itâs the coolest thing about Berkshire, in my opinion.
đ Remember This: Berkshire has $138 billion in free cash thanks to the float produced by their Insurance businesses. The Apple purchase? That was float money.
đŹ âWell, our insurance business gives us a float. That's other people's money which we're temporarily holding but which gets regenerated all the time. So it's a practical manner. It has a very, very long life, and it's probably a little more likely to grow than shrinkâŠAnd that's somewhat like having a bank that just consists of one guy, and people come in and deposit $124 billion and promise not to withdraw it foreverâŠWe have managed to earn money on money that is given to us for nothing and have the side earnings from underwriting and then have these large earnings from investing. And it's an integral part of Berkshire.â âWarren Buffet
Appleâs (AAPL) Wearables
I am working on something about the lollapalooza effect as it relates to Apple. The Wearables businessâwhich includes Apple Watch and AirPodsâis now the size of a Fortune 120 company.
đ Did You Know: 75% of customers that purchased the Apple Watch were new to the product.
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