SlowAppreciation

So I get around $290k/share for BRKA and $192/share for BRKB, which means BRK is still trading at ~13% discount to IV. I just apply a 10x multiple on the operating businesses, though each group probably deserves a slightly different multiple. Operating Earnings Underwriting: $2.1b BHE: $2.7b BNSF: $5.7b MSR: $8.4b Financial Product: $2b Total Operating Earnings: $21b @10x multiple = $210b Cash & Investments Cash: $86.3b Investments: $120.4b Fixed Income: $23.8b Preferred/Warrants/KHC: $32.6b Total Investments: $263.3b $210b + $263b = $473b current Mkt cap = $420b Discount to IV = 13%

As for whether or not to reduce OCF for acquisition costs, you shouldn't because those costs are already taken out in calculation of net income. Maybe I'm misunderstanding this part. Do you mean once the acquirer consolidates the acquiree's operating business? Because as far as I know, there's no hit to income for the cost of the acquisition (save for some restricting charges or the like). It's mostly the balance sheet which is affected, and then costs are capitalized in future periods. What do you mean by acquisition related costs? If you mean hiring an investment banker, doing due diligence, and costs integrating an acquired company, it does hit net income via SG&A. Right but if the company is acquired for say $100m, it's not like net income is reduced by $100m the next year. It's only the operating pieces and any one-off acquisition-related charges (like restructuring, lawyer fees, etc) that hit net income. The acq costs from the Investing section of the CF statement don't reduce Net Income by the same amount.

As for whether or not to reduce OCF for acquisition costs, you shouldn't because those costs are already taken out in calculation of net income. Maybe I'm misunderstanding this part. Do you mean once the acquirer consolidates the acquiree's operating business? Because as far as I know, there's no hit to income for the cost of the acquisition (save for some restricting charges or the like). It's mostly the balance sheet which is affected, and then costs are capitalized in future periods.

No sorry, I knew that's not what you were implying! What I meant by it was that since I generally don't use multiples, I guess I would probably try factoring in any future acquisitions into a model if I were to do a DCF (though I don't rely on them too much).

I'm not one to take shortcuts...

Wondering if most here reduce operating cash flow by any acquisition-related costs when calculating free cash flow. For serial acquirers, I think it's apt, but am on the fence when a company maybe makes a few occasional acquisitions. Curious as to hear other's thoughts on this.