I think this report is rather remarkable.
How many companies this size have been able to grow earnings this fast ( and they seem to be accelerating)?
I've jotted down quarterly operating earnings for 13 years now. I include insurance underwriting gains/losses, and exclude investment gains/losses. You can't get this from the annual letter, because Warren excludes underwriting results. Here they are, annually, starting in 2000:
$1.8B
$1.5B
$3.9B
$5.4B
$5.1B
$4.98B
$9.3B
$9.6B
$9.6B
$7.7B
$11.1B
$10.8B
$12.6B
$15B? (2013)
A lumpy but terrific 17.6% CAGR - through 2012 - in a fairly miserable 13 years for the U.S. economy.
( One thing I like about tracking these numbers every quarter is the perspective it gives you. For instance, BRK 'only' grew operating earnings by 5% Y/Y. But Q2 in 2012 was huge-it was 32%, 21%, and 100% above the three previous Q2's).
So here we are, halfway through 2013, and BRK has posted $3.8 B and now $3.9B...if mother nature copperates, we will probably crack $15B for the first time. The Heinz $$ starts flowing now, too ( $700MM / yr, I think).
Every three years or so, BRK seems to 'vault up' another few billion. Looks like the new level is around $15B. That will be a floor in a few years, if 50 years of history mean anything.
If you take the undistributed earnings from the equities, that runs around $4.1B this year.* Add it all up and you're around $19B in look-through earnings ( I don't know why Buffett dropped that metric).
So how much is BRK worth?
Well, I would say this beautiful contraption, given its management, safety and track record of growth, is surely worth 15 X earnings.
So if you believe in the look-through model, that's $285B, pretty much exactly where we are.
Fairly valued, but 2 years ago if you'd have told me BRK would be at $177,000 I'd have said it would be overpriced. I don't believe that. If I had to choose between buying and selling, I'd be a buyer. I think they can still grow earnings at 12% for some time now, and maintain that multiple.
I'd be happy to make 12% going forward with the bulwark of my portfolio ( at this stage of my life).
P.S I notice interest income is up for the first time in many quarters. Because of dividends...good to see.
*After subtracting a 10.5% tax (I'm told by smarter people than me) BRK would pay if they were distributed to BRK.