AJDelphi
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Posts posted by AJDelphi
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He has said that Berkshire will repurchase shares at no more than 120% of Book Value. He also believes, and has said many times, that it is dumb to repurchase shares unless you think they are SIGNIFICANTLY undervalued.....so being that we are close I would argue, and I'd bet that Buffett would agree, that Berkshire is not expensive right now.
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Not notes but I wrote a blog post about the Berkshire weekend
The Berkshire Meeting: My Favorite Weekend of the Year
http://delphivalueinvestments.blogspot.com/2015/05/the-berkshire-meeting-my-favorite.html
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One other comment, I also calculated Berkshires Owner Earnings + Look-through earnings for 2004 and 2009
2004
OE of about $8.5 Billion or $5,522 Per A Share
2009
OE of about $14.3 Billion or $9,224 Per A Share
2015
OE of about $29.8 Billion or $18,135 Per A Share
So for me the question is how long does it take them to double earnings again? Probably a little longer than in the past but I suspect not by much.
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I valued BRK recently and this is how I look at it.
In 2015 Berkshire produced Cash from Operations of $32.010 Billion. They spent $15.185 Billion in Capital Expenditures but many of these were growth capex. I come up with a rough estimate, but with the various businesses it would be hard to get a precise figure, of about $8.9 Billion of Maintenance Capex for Owner Earnings of $23.1 Billion.
But this number does not include Berkshire's look-through earnings which are very significant. Of Berkshire's equity securities only the dividends show up on the consolidated financial statements. So, I went through and calculated my estimate of OE for ALL of Berkshires securities, Berkshires ownership of the company, and then what their earnings would be if they were sent to Berkshire.
I came up with $6.6 Billion of look-through Owner Earnings, again a rough figure with lots of assumptions but I'm comfortable with it.
So in 2015 I believe Berkshire had around $29.795 Billion in OE. And around $37 Billion of excess cash (Buffett has said he won't got below $20 Billion).
If you think about what Berkshire's Earnings will look like say 5 or 10 years from now, and the current stock price I think it looks interesting. In a world where not much is interesting at the moment.
I do something very similar. I start with net income and add back looks through earnings (minus dividends that already show up in Net Income) plus intangible asset amortization minus investment capital gains/losses. Using this I get $23.3B in earnings.
Either way, I think we get to the same conclusion of "the current stock price I think it looks interesting. In a world where not much is interesting at the moment." With the lower of the two numbers (23.3B), Berkshire is trading at 14 P/E ratio. I much favor graham's side by side comparison of two options to trying to put a precise number on intrinsic value. Berkshire next to the S&P500 at 20x, KO at 25x or PG at 22x all seem like no brainers to me (Berkshire compared to other stable growth with strong balance sheets and diversified businesses). The side by side comparison would include more than a P/E ratio, but I think we all get the point that in terms of large caps with very predictable futures, I have yet to see anything with similarly relatively attractive valuations.
Oh yea I do subtract the dividends also. Forgot to mention that
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I valued BRK recently and this is how I look at it.
In 2015 Berkshire produced Cash from Operations of $32.010 Billion. They spent $15.185 Billion in Capital Expenditures but many of these were growth capex. I come up with a rough estimate, but with the various businesses it would be hard to get a precise figure, of about $8.9 Billion of Maintenance Capex for Owner Earnings of $23.1 Billion.
But this number does not include Berkshire's look-through earnings which are very significant. Of Berkshire's equity securities only the dividends show up on the consolidated financial statements. So, I went through and calculated my estimate of OE for ALL of Berkshires securities, Berkshires ownership of the company, and then what their earnings would be if they were sent to Berkshire.
I came up with $6.6 Billion of look-through Owner Earnings, again a rough figure with lots of assumptions but I'm comfortable with it.
So in 2015 I believe Berkshire had around $29.795 Billion in OE. And around $37 Billion of excess cash (Buffett has said he won't got below $20 Billion).
If you think about what Berkshire's Earnings will look like say 5 or 10 years from now, and the current stock price I think it looks interesting. In a world where not much is interesting at the moment.
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So does anybody want to start taking bets for what month the DJCO Annual meeting will be in 2015?
Had a great time at it last year and will be going again in 2015 if it doesn't conflict with anything major in my schedule.
http://www.sec.gov/Archives/edgar/data/783412/000143774914022115/djco20141215_nt10k.htm
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I will be attending the meeting as well and would like to join everyone for lunch afterwards!
berkshire - cheap?
in Berkshire Hathaway
Posted
I totally agree on your comment about making it easier for the next guy. Buffett has barely used repurchases with Berkshire and if the next guy does it at cheap prices you could still get good per share returns after Buffett is gone. The benchmark just makes it easier for the next person to see what cheap is.