Berkshire Hathaway: A Note on the Inaugural Position

Every investor remembers their first position.

Not necessarily because it becomes their most profitable investment, nor because it ultimately generates the highest returns. Rather, the first position often represents something more important. It reflects the framework, philosophy, and principles that guide the decisions that follow.

When I established my family’s US equities subset portfolio on 1 March 2021, the very first stock I purchased was Berkshire Hathaway Class B.

The initial purchase was executed at USD 247.01 per share after approximately five years of disciplined observation during which no capital was deployed into US equities.

That decision was not accidental.

It was the result of years spent studying businesses, financial markets, investor psychology, economic history, and capital allocation. It was also the result of understanding a simple reality that many investors eventually discover: successful long-term investing is often less about finding extraordinary opportunities and more about avoiding catastrophic mistakes.

Looking back, I remain comfortable with that decision today.

Despite periods of underperformance relative to the broader market, Berkshire Hathaway remains one of the highest-conviction holdings in our family portfolio and is a position I currently have no intention of selling.

Why Berkshire Hathaway Became the First Purchase

When investors begin allocating capital internationally, many immediately search for the next fast-growing technology company, emerging industry leader, or disruptive innovator.

I took a different approach.

The primary objective was not to maximize short-term returns.

The primary objective was to establish a durable foundation.

At the time, I viewed Berkshire Hathaway as arguably one of the safest publicly traded vehicles available for long-term capital compounding.

This conclusion rested upon several observations.

First, Berkshire Hathaway possessed one of the strongest balance sheets in the world. The company consistently maintained enormous liquidity reserves while operating with a level of financial conservatism that has become increasingly rare in modern corporate America.

Second, Berkshire Hathaway owned a collection of high-quality operating businesses spanning multiple industries. Its subsidiaries included insurance operations, railroads, utilities, energy assets, manufacturing businesses, consumer products companies and service providers. The resulting earnings stream was diversified across sectors and economic environments.

Third, Berkshire Hathaway held a substantial portfolio of publicly traded equities that included ownership stakes in some of the highest-quality companies globally. These holdings provided exposure to businesses with strong competitive advantages, robust free cash flow generation and long operational histories.

Fourth, the company benefited from one of the greatest capital allocation cultures ever constructed. Much has been written about Warren Buffett and Charlie Munger as investors. Far less attention is often paid to the fact that their greatest achievement may have been building an organizational structure capable of deploying capital rationally over multiple decades. Capital allocation is an underrated corporate skill. Many executives are excellent operators but poor allocators of shareholder capital. Berkshire Hathaway’s leadership historically demonstrated excellence in both.

Finally, Berkshire Hathaway represented something psychologically valuable. It was a business I could realistically hold through recessions, market crashes, inflationary environments, geopolitical shocks and economic uncertainty without feeling compelled to constantly monitor quarterly developments.

An investment that allows its owner to sleep well at night possesses a form of value that cannot easily be captured within a spreadsheet.

The Five-Year Observation Period

One of the more unusual aspects of this investment decision was the amount of time spent observing before deploying capital.

For approximately five years, I watched markets without committing capital to US equities.

Many market participants would consider such patience excessive.

However, investing is not a game that rewards activity. It rewards sound judgment.

During those years, I spent considerable time studying the work of Warren Buffett, Charlie Munger, Benjamin Graham, Philip Fisher, and numerous other investors. I examined financial statements. I studied market history. I observed investor behaviour across different market environments.

Most importantly, I attempted to develop a process rather than merely collect investment ideas.

• Ideas come and go.
• A robust process endures.

By March 2021, I had reached a level of conviction that Berkshire Hathaway represented an appropriate starting point for the family portfolio. Not because it was guaranteed to outperform. No investment comes with such guarantees. Rather, it represented a favorable balance between risk and expected return.

What the Position Has Done Since

The investment journey has not been perfectly smooth.

Several additional Berkshire Hathaway purchases were made over time as capital became available and portfolio construction evolved.

At one point, the position generated an internal rate of return of approximately 11.17%. Today, that figure has declined to approximately 8.23%. The primary reason is straightforward. Over the last eighteen months, Berkshire Hathaway has materially underperformed the S&P 500.

Relative performance can be frustrating. Every investor experiences periods where sensible decisions appear inferior when compared against fashionable alternatives. This is particularly true during strong bull markets led by a narrow group of high-performing companies.

Many investors underestimate how psychologically difficult relative underperformance can be. Absolute returns may remain positive. Business fundamentals may remain intact. The original investment thesis may remain valid. Yet watching a benchmark advance more rapidly than one’s holdings can create pressure to abandon a strategy.

This pressure has caused countless investors to sell excellent businesses at precisely the wrong time. The temptation to chase recent winners has existed for as long as markets themselves. History suggests that doing so rarely produces superior long-term outcomes.

Understanding Berkshire’s Periods of Underperformance

One of the most interesting aspects of Berkshire Hathaway’s history is that periods of extended underperformance are not unusual. In fact, they have occurred multiple times over the company’s modern history.

This observation deserves attention because many investors incorrectly assume that exceptional businesses should consistently outperform market indices.

Reality is more complicated.

Even the highest-quality businesses experience cycles. Investor preferences change. Market narratives evolve. Valuation multiples expand and contract. Different economic environments reward different characteristics.

Berkshire Hathaway’s structure naturally leads to periods where it may lag speculative growth-driven markets. The company owns mature businesses. It maintains substantial liquidity. It prioritizes capital preservation. It rarely pursues fashionable trends simply because they are popular.

These characteristics can appear unattractive during speculative periods. However, they often become advantages when market conditions deteriorate.

Historically, several of Berkshire’s strongest periods have followed stretches where investors questioned whether the company had lost its edge.

The underlying explanation is not mysterious. When expectations become excessively low while business fundamentals remain healthy, future returns often improve. Markets eventually reconnect with economic reality.

This does not guarantee future outperformance. No investor should assume history will repeat precisely. However, understanding historical patterns provides useful context when evaluating temporary periods of relative weakness.

Why I Do Not Intend to Ever Sell Berkshire Hathaway

Investors frequently discuss when to buy. Far fewer spend sufficient time thinking about when not to sell.

For me, Berkshire Hathaway occupies a category that I describe as a perpetual compounder. This does not mean the company is perfect. No company is. It does mean that selling requires a stronger justification than merely experiencing temporary underperformance.

Several factors support this conclusion.

1. The Business Continues to Evolve

Many people still view Berkshire Hathaway as simply Warren Buffett’s investment portfolio. That characterization has been incomplete for decades. Berkshire is a collection of operating businesses generating substantial earnings independent of the publicly traded equity portfolio. The company continues to evolve as subsidiaries grow, acquire assets and generate cash flow. The economic engine is significantly broader than many casual observers appreciate.

2. Berkshire Remains a Capital Allocation Machine

The defining feature of Berkshire Hathaway has never been stock picking alone. It has been intelligent capital allocation. That capability extends beyond any individual investment. As long as management continues deploying capital rationally, shareholders benefit from an embedded compounding mechanism that operates continuously. This is a rare characteristic.

3. Tax Efficiency Matters

Long-term investors often underestimate the impact of taxes. Selling a successful investment introduces friction. Capital gains taxes reduce the amount of capital available for future compounding. One of the advantages of holding Berkshire Hathaway indefinitely is the ability to defer those costs while allowing capital to continue compounding internally. Over multiple decades, this effect can become meaningful.

4. Simplicity Has Value

As my investment experience has increased, my appreciation for simplicity has grown rather than diminished. Many investors begin their journeys believing complexity creates superior results. The evidence frequently suggests otherwise. Some of the most successful long-term investors concentrate on understanding a relatively small number of high-quality businesses exceptionally well. Berkshire Hathaway fits naturally within that philosophy. It provides exposure to numerous businesses, industries and capital allocation opportunities through a single security.

5. Alignment With My Investment Philosophy

Perhaps the most important reason is philosophical. My investment framework increasingly emphasizes quality, durability, resilience and long-term compounding. Berkshire Hathaway embodies those characteristics. Its culture encourages rationality. Its leadership historically emphasized patience. Its structure rewards long-term thinking. Its capital allocation philosophy prioritizes economic reality over short-term appearances. Those attributes align closely with how I believe capital should be managed.

A Final Reflection

The first stock purchased for our family’s US equities subset portfolio was not selected because it promised the highest potential returns.

It was selected because it represented the type of asset I wanted to own when uncertainty inevitably arrived.

Five years of observation preceded that decision. Several years of ownership have followed. The investment has experienced periods of strong performance and periods of relative disappointment. Such outcomes are normal. Markets are cyclical. Investor sentiment fluctuates. Relative performance leadership changes over time.

What has not changed is my assessment of the underlying business.

Berkshire Hathaway remains one of the most remarkable corporate structures ever created. It combines business ownership, capital allocation, financial strength, and managerial discipline in a manner that remains exceptionally difficult to replicate.

Whether Berkshire outperforms the S&P 500 over the next year is unknowable. Whether it outperforms over the next five years is also uncertain. No investor possesses reliable foresight regarding such outcomes.

What I do know is that the reasons for purchasing Berkshire Hathaway in March 2021 remain largely intact today. The balance sheet remains strong. The collection of businesses remains high quality. The capital allocation framework remains rational. The culture remains grounded in long-term value creation.

For those reasons, Berkshire Hathaway was the first international stock I purchased for my family.

And unless something fundamentally changes in the economics of the business, it is a position I currently expect to own indefinitely.