BRK free cash flow

[Libs]

I've noticed cash flow from operations has gone up a lot.

 

What about figuring out free cash flow? Does any one use this as a valuation tool? And am I calculating / thinking about this correctly?

 

Here goes.

 

(Cash flow statement on P. 51:)

 

http://www.berkshirehathaway.com/2014ar/2014ar.pdf

 

 

Cash flow from operations = $32 B in '14. ( Was $20.9 B just 2 years ago)

 

Purchases of property, plant and Equipment = $15 B last year. Depreciation & amortization was $7.3 B. Let's say that Cap Ex was $8 B, and $7B was for growth.

 

( Shouldn't we factor in, positively, that $$ spent on Burlington are guaranteed a reasonable return by the regulators? How should I think about that in relation to this calculation?)

 

Thus, free cash flow was something around 32-15+7 = $24 billion. (right?)

 

Furthermore, this doesn't account for undistributed earnings from the equities. It may sound odd to add that to FCF, but then again Buffett used a look-through earnings calc in the past.

 

This would push the number to 27-28 B.

 

Market cap is $342 bilion or  ~12.4X "free cash flow."

 

Help :P

 

[beerbaron]

Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups.

 

BeerBaron

[Libs]

Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups.

 

BeerBaron

 

That's a good point, thank you. I should have thought of that first.

[Guest longinvestor]

No matter whether it is $15B or $25 B annually, the accumulation of cash on hand is likely to be "huge" 10 to 20 years hence. (Buffett on CNBC).

[orthopa]

Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups.

 

BeerBaron

 

At the risk of sounding ignorant why is this exactly? Thanks

[beerbaron]

Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups.

 

BeerBaron

 

At the risk of sounding ignorant why is this exactly? Thanks

 

Take Fairfax cash flow statement, in 2014 they reported Net Earnings of 1.66 Billions but if you look at their cash flow statement you see that their Operating Cash Flow statement is -70 Millions. If you look at the constituents of the cash flow you can see 1.74 Billions from investment gains substracted from their Cash Flow. That is because those investments are earnings but since they have not sold them yet it's not a cash in flow. It's also the same when they make an investment, it takes out their cash flow but really has not much to do with their operation.

 

So why are these investments appear in the cash flow part and not the investment part... because investments are part of insurance companies operations.

 

BeerBaron

 

 

[orthopa]

Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups.

 

BeerBaron

 

At the risk of sounding ignorant why is this exactly? Thanks

 

Take Fairfax cash flow statement, in 2014 they reported Net Earnings of 1.66 Billions but if you look at their cash flow statement you see that their Operating Cash Flow statement is -70 Millions. If you look at the constituents of the cash flow you can see 1.74 Billions from investment gains substracted from their Cash Flow. That is because those investments are earnings but since they have not sold them yet it's not a cash in flow. It's also the same when they make an investment, it takes out their cash flow but really has not much to do with their operation.

 

So why are these investments appear in the cash flow part and not the investment part... because investments are part of insurance companies operations.

 

BeerBaron

 

Great explaination, thanks.