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Friday, January 13, 2006

Growth vs Value

Today I happened to get into a debate with someone from the value persuasion. After reading about some of his beliefs on value investing I felt compelled to opine on some of the spurious relationships he mentioned such as buying low p/e or below book value stocks will outperform the market.

His response was:

"In the short run the market is a voting machine (Google is sexy)

In the long run the market is a weighing machine (which has more weight? Berkshire or Google?)"

And then offered to make a value vs growth bet.

Well it just so happened that today the stars are aligned, because Google and Berkshire both closed with a market cap around $138 billion. So to answer his question, as of today they are equal weight.

For the sake of knowledge what better way to entertain the bet then to track the performance of Google (growth) vs Berkshire (value).

As of 01/13/2006:

Google closed at $466.25
BRK.A closed at $89,600.00

I will be tracking the performance of these two side by side, and will make updates as we observe new developments in both.

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