ValueMaven

The stability of the operating income is remarkable. I'm having a hard time however figuring out what normalized operating income are for BRK is however. While I understand the writedown of PCP - I wouldnt totally write off this investment just yet...1) other aerospace part suppliers are up over 75% - 100% from the March bottom; and are generally lower quality then PCP - although have less oil & gas exposure, and 2) Initially everyone thought GenRe was a terrible acquisition in 00-01', only to have the co' in a few years really turnaround and help fuel BRK's growth in flow. I am also of the view that at some point in the not to distance future - I believe Berk will start a small divy...not while Warren is around - but likely under Abel. Kudos to everyone who was flagging this in the low $170s and $180s as being extremely cheap...will be an interesting 12-18months

This reminded me of previous comments about principles guiding goodwill impairment. It involved GenRe and the adjustments that had been made before (adjustments made without a requirement) to more conservative discounting of workers comp reserves. Combining what both said, i guess the goodwill impairment means facing reality with a dose of a margin of safety. The way it's always been. The comment about decreasing transparency with modern (and more detailed) disclosure (1960s vs 2000s) is food for thought. AWESOME FIND!! Thank you

the more I look over the Q - to me the story is: 1) How strong the operating biz's are and 2) the aggressive nature of the buyback post AGM... looks like its going to be close to $9-$10B including July....

In terms of valuation – I view BRK right now as a 65-68 cent dollar, with limited downside due to cash. I’ve valued the biz all sorts of ways: DCF, SOTP, float as a negative carry, % of stock portfolio income etc etc. For me the purest and simplest way know; knowing full well, that it is better to be roughly right, then precisely wrong: •BRK Market Cap ($500B) – stock portfolio ($230B) – BNSF ($110B) – Cash ($145b) = $480B. This tells me you are getting ALL Insurance – which generates 45% of pre-tax income, Utilities – which is extremely stable, and the whole MSR group of businesses at call it $20B. Does that make sense from a valuation perspective? NO. Which is why we’ve seen nice buybacks over the past few months. •The real question is what the IV of the BIZ is

What do you have current B.V. pegged at given the current Q? Also - it looks like BNSF was better slightly better then expected IMHO

yes - but my point was that if he really views it as Berk's 3rd largest biz - he is unlikely to sell anytime soon

https://www.wsj.com/articles/private-equity-firms-discuss-bid-for-kansas-city-southern-11596223106?st=anc0qqplbu68up3&reflink=article_copyURL_share Private-Equity Firms Discuss Bid for Kansas City Southern Blackstone’s infrastructure arm and Global Infrastructure Partners explore potential deal Would love to see the multiple they put on this much lower quality rail and how that translates to BNSF ....

RationalWalk posted this on twitter - interesting way to look at it Every $BRKA share has an indirect position of ~153 $AAPL Every $BRKB share has an indirect position of ~0.102 $AAPL It's easy to calculate your indirect ownership interest in Apple. Buffett owns ~248,741 BRKA, so he indirectly owns a bit over 38 million AAPL worth ~$16 bn

Berkshire purchase of Apple (~253M shares @ $130) less than 3 years ago. In terms of sheer P&L, this is the greatest trade ever.

How does todays move in Apple change how you view Berkshires current valuation? This is easily one of Buffett's biggest homerun's of all time. If I think how Apple ($100B) position balances out the Rails, Uts, and Insurance businesses; it is extremely complementary. Few investors understand the consumer as well as WEB - and this highlights it. 5G roll-out, A.I., new product cycle and the whole Apple ecosystem.

WOW!! Congrats mate. There does come a point when you should always leave a stub position on -- just to see how far something goes!

Decent outperformance this week for our favorite (and extremely cheap) company! Up +1.7% vs. -1.7% for the S&P 500...it's one week - but I wonder if the market - or maybe Berkshire - is starting to notice cheap this thing is. There might be some gaming ahead of what his likely the August results which will show Berkshire bought back $5B in equity. Thoughts?

I thought Berkshire cant own more then 10% of a bank - without Berkshire being classified as a bank holding company from the FED. News out this morning that Berkshire boosted its stake in BofA to over 11%. Thoughts??

Munger has commented on a similar way of approaching the question a number of times. I noted one time he mentioned this maybe a week ago when I was watching an annual meeting on the cnbc archive. I think I tweeted about what year it was. I will see if I can find it. He also has said before (essentially), "It used to be like shooting fish in a barrel, you could buy Berkshire below the book price of the marketable securities and get the insurance and the other wholly owned subs for free." Yes - would be interested in seeing this ... Thx

Chris Bloomstrain from the Manual of Ideas on 3/26 'Berkshire is a big position for us, and I think they’re in pretty good shape. That’s the proper way to think about it. When I think about Berkshire — I said it at the year end — they had about $42 billion in economic earnings. That includes $3 billion for the optionality of the cash, and everybody can make their own decision about that, so $40 billion. It won’t be $40 billion this year, but discounting 2021 and beyond, I think $40 billion is right. When the stock traded at a market cap of less than $400 billion, I don’t recall a time that Berkshire has traded at 10x what I would call normalized earnings. It’s got a fortress balance sheet, and it’s got a lot of businesses inside it that are about as well protected against the downturn as you can have. It made no sense to me that the stock traded at 160.'

This is a great topic actually. Personally I've allocated to BAM vs. BX - as BAM is cheaper IMHO, and better hands-on operators. Way better credit (oaktree), infrastructure and renewable businesses vs BX. Yes, they are over-allocated to retail and office....that is a sore spot for sure. BAM insider ownership = $10B, while BX is sub-$1B. In fact: Jon Gray (co-president) only owns $75M w/of stock.

My hesitation is that it values cash and equities at 27 times peak-cycle cash/equity earnings of approx $14 billion. A 3.7% peak-cycle earnings yield. how does that value cash and equities at 27x p/e? I dont follow ... fine - apply a 50% discount and its still cheap. I'm just saying this is one of several interesting ways to value BRK

The Rational Walk on twitter posted this and I totally agree with this approach...its neat way to value BRK: 3/31/20: Cash & Investments = $349.5B + $33B gain in Q2 = $382B vs. Market Cap of $427B Implied Value of $45B for non-insurance wholly owned subs (BNSF, GEICO, Clayton, PCP, Utility etc etc) .... man this thing is CHEAP He also pegs P/BV at 1.08x Thoughts? It's an interesting way to triangulate valuation

Can we take this back to the specific topic thread of VALUATION I have Fair Value pegged at $260 - $280 currently. Would love to know what others think around valuation. It seems like the Street is giving little credit for the Operating Income at the parent company more broadly.

thank you for starting this topic - this is the cheapest BRK has been in a VERY LONG TIME. Trading below 1.2x BV. Operating Biz will likely earn $23-$24B this year as well... also think about Apple... Berk is up $50B+ in Apple -- it is now basically 21% of Berk. A simple way to value Berk = Operating Income + Investments + Cash ... throw a below market multiple on the N.I, and you can see how cheap it is here. You can do things like SOTP etc - but that is a bit more complex and in the weeds IMHO What is the catalyst to drive value higher??

Question: roughly how cheap was FFH trading when Prem bought? price to tangible BV? price to normalized earnings?

Good for Prem ... the more I thought about this - the more I liked it!!!! I really wish WEB did something similar w/Berkshire. IMHO Berkshire is cheaper then FFH

Announcement just hit - Prem has acquired about $150m worth of Fairfax shares in the open market!! Way to step up!! He is now calling Fairfax ridiculously cheap.

Bought more just below $180. Seems like 99/00 to me when Berk became extremely cheap. Interesting confluence of many events: rails all-time highs, GEICO booming, APPL all-time highs, insurance pricing improving, stability of uts....yet sitting on a ton of cash, banks underperforming, equity portfolio is mixed. Frankly, I have FV pegged at $240 - $260 currently. By my estimation BRK is trading below ~1.2x BV, more like 1.15x currently. Apply a reasonable multiple to the earnings (below market), add back investment-per share and I think you get a fair target for where it should be trading. In terms of next acquisitions - I dunno - Oaktree would have been extremely interesting to buy - but not typical BRK; something countercyclical? WEB mentioning how $130B in cash is not high for worst-day outcomes was a really bad comment IMHO....Dont break it up - but start a small divy policy...esp given how stable the operating biz's have shown to be. Others - thoughts??

Bought a decent chunk below $168 this morning !! Trading below 1.1BV by my estimates right now ... cheers!