marazul

From a quantitative valuation using book value or other multiples you miss the following: -Tax efficiencies from allocating exces cash flows of certain businesses into other productive assets with no leakage -Buffett special deals (sellers that will only sell to BRK, network of contacts or distressed companies that need the credibility) -Deferred tax liability that will probably never be realized -Float historically has EARNED not COST Berkshire money, so it is a good growing liability to have. -As time goes on and Berkshire becomes more of a conglomerate of operating companies the difference between IV and BV should expand. -You have the best capital allocator in the world running the show for free, no fees.

The 10% decline in the stock portfolio would impact BV by ~5%. In addition, DTL would shrink and that would make the impact less than 5%. Also, earnings from operating businesses and dividends from securities would add to BV. So BRK BV is less exposed to market fluctuations than a couple of years ago, and less than people think imo.

would love to see this buyback and how aggresive WEB gets.

Read it a while ago, but I think The Frackers should be a book that people would like reading given the current O&G situation. It gives an idea of the way the domestic O&G business started, who are the characters, etc...

From my experience: You usually cover a specific industry (e.g. packaging). Once you become the analyst for that industry you are supposed to follow all of the names in the portfolio under that industry. It doesn't matter if you pitched them initially or not. You usually send an update every time something significant happens and every quarter. Also, there is some regulatory?paperwork that you sometimes need to take care of. Then there is the analysis of new investment ideas. You do the research for days and then bring it to committee. here you get to present the idea to the big guys. They get to decie if they like it or not. If the idea gets approved, it goes into the portfolio and you are supposed to cover it. And that is basically the cycle. that is my experience, I guess things change depending of where you work at.

I think Smartest Guys in the Room was an interesting read that touched on Mckinsey/consultants/Skilling. Besides the fact that some of these guys are cocky, etc... I realized they are good in the theory, the big picture, analyzing a business etc.. but puting those things to work and into action is difficult. Many of these guys don´t realize the difficulty of execution and the repercusions some of these "beneficial" actions can have. For example, Pearson thought probably the most rational thing to increase shareholder value was to increase prices of meds until the customer couldn´t take it anymore, reduce taxes and push the boundaries. But guess what? That draws attention and might end up destroying value. Skilling also had these big ideas of how he could make so much money trading or using complex structures, they sounded good in paper but the reality was different.

The company has experienced operational issued. Taking into account the amount of debt, their is a real possibility of this being a 0. I guess the situation has changed since he made the initial investment.

I think the most important factors that make BRK woth more than book are: 1) Operating businesses bought at attractive prices years ago (like See´s, Geico, Iscar, BNSF) are worth much more than carrying value because GAAP won´t let you revalue goodwill upward. 2) Deferred tax liabilities of more than $60 billion (or ~25% of book value) will most likely never be paid back and continue to increase over time. 3) Float liability of $80 billion has no cost and should not be considered a liability as it will lilely continue to increase. 4) the ability to move cash flows from "cash cows" to businesses that can invest capital at reasonable returns in a tax-advantaged way has great value. Few people discuss this, but overtime saving ~30% of cash flow in taxes and reinvesting the full amount adds a lot of speed to the compounding effect. Other businesses would pay a dividend with the excess cash and investors would lose 1/3 of the cash flow. Berkshire is a very efficient machine, run by the greatest capital allocator of all time.

I think BRK at the moment is one of the best risk-reward situations in the market. You have BRK trading at less than 5% above buyback territory. At the same time, the person that knows the company best (WEB) thinks it is incredibly cheap at this valuation. On the other hand, you have a market that is trading at a fair to slightly rich valuation. For the next 5 years, I think this is a solid way to beat the index. I wouldn´t be surprised if BV grows at ~8% for the next 5 years, while IV grows at a slightly higher rate. In addition to that, BRK should trade near 1.5x book not ~1.25x (using expected 3Q15 BV). If I am correct, BV grows at 8% for the next 5 years and BRK rerates to 1.5x BV then investors should earn 12% compounded in this period. Not bad for a safe investment with little downside risk IMO.