Disconfirming information on Berkshire Hathaway Value

[LongHaul]

What do you think are the biggest items of disconfirming information on the value of Berkshire Hathaway? 

How can someone be wrong investing in Berkshire?

 

 

 

[valuefinder0525]

Losses in public markets portfolio (AXP, IBM)

Weakness in rail

Weakness in P&C, reinsurance

Weakness in aerospace (PCP)

Concern over Buffett's health

[LC]

How well the private businesses function post-Warren.

[Jurgis]

Losses in public markets portfolio (AXP, IBM)

 

Possible Buffett support for ineffective managements in AXP and IBM (and others?).

 

I am not saying that AXP and IBM managements are ineffective. But there is likelihood that they are. And it seems that Buffett supports them and therefore stops them being replaced by better ones.

 

OTOH, Buffett might be right and then his support for AXP and IBM managements is very valuable. Pick your choice.

[jay21]

My biggest issue with BRK is his insistence on growing capitalization when he should think about shrinking it and his conservative balance sheet. A debt fueled buyback would have been pretty great in 2011.

[cogitator99]

But probably something he never seriously considered, jay. ;)

[handycap5]

my impression of the wholly-owned businesses (with several notable exceptions) is that they are generally average businesses run by above average managers, sometimes founders. over time, the founders or above average managers have to be replaced, and these replacements will tend to be average in my opinion.

 

at the meeting several years ago, i was amazed how old the "scrolling heads" were on the "thank you" video.

 

most owners i know of BRK have it as a "put away" stock - this ongoing change is glacial and hard to quantify, but would be among the factors i would consider.

[Jurgis]

my impression of the wholly-owned businesses (with several notable exceptions) is that they are generally average businesses run by above average managers, sometimes founders. over time, the founders or above average managers have to be replaced, and these replacements will tend to be average in my opinion.

 

This.

[LongHaul]

It will be interesting when Berkshire gets to ~1.2x book if he buys it back aggressively as he says.  I think it would be the most rational to buy back Berkshire at say .8x Intrinsic Value rather than do a deal for 1x Intrinsic Value.

 

I would also add that misallocation of capital is a risk.  IBM I think was a big mistake.  PCP may also turn out to be one.

[valuefinder0525]

It will be interesting when Berkshire gets to ~1.2x book if he buys it back aggressively as he says.

 

It always seems that when BRK is getting close to the 1.2x book the stock portfolio (IBM, AXP, etc.) declines as well. So you never hit the 1.2x book mark for Buffett to start repurchasing.

[Mephistopheles]

Is the 1.2x buyback threshold based on last reported book value or based on real time/ most accurate measure of it? The latter obviously makes more sense but I don't know what they are legally obliged to do.

 

Thanks

[thepupil]

they are not legally obliged to do anything.

 

 

[Guest longinvestor]

Is the 1.2x buyback threshold based on last reported book value or based on real time/ most accurate measure of it? The latter obviously makes more sense but I don't know what they are legally obliged to do.

 

Thanks

I'd guess that last reported is what they'd use to not have any informational advantage, legal or not. Buffett has put it out there that the selling shareholders should make an informed decision.

[Guest longinvestor]

Is the 1.2x buyback threshold based on last reported book value or based on real time/ most accurate measure of it? The latter obviously makes more sense but I don't know what they are legally obliged to do.

 

Thanks

I'd guess that last reported is what they'd use to not have any informational advantage, legal or not. Buffett has put it out there that the selling shareholders should make an informed decision.

When (if) shares are bought back in the market, B shares likelier. Trades 5x more in $ amount than A. The uninformed (idiots) are likely in that pond.

[Mephistopheles]

they are not legally obliged to do anything.

 

 

 

So they've made it clear that they'll buy back at 1.2 or below. Now let's say they decide to repurchase at 1.5 last reported. You're saying that this doesn't risk any fiduciary violations? This is different than other companies who don't lay out a set metric for repurchases, whereas Buffett has made it very clear the price he's willing to pay.

 

But I guess you're right that they can do whatever they want. Like when they changed the threshold from 1.1 to 1.2 while simultaneously buying out that estate for 1.2.

 

Btw, I personally don't think it's wrong for them to do whatever they want - I think the best thing to do for shareholders is what creates the most value over time, and if that means unannounced change in threshold, so be it. I don't even think Buffett should have specified 1.2x.

[valuefinder0525]

Do you guys know where I could find the best writeup for BRK? Thanks a lot  :)

[CassiusKing1]

How much selling pressure will be on the stock while the charities are constantly selling off the stock to raise required capital?

[KinAlberta]

How much selling pressure will be on the stock while the charities are constantly selling off the stock to raise required capital?

 

Thats good isn't it?

 

Like buying shares after a company cuts its dividend. The sellers often are selling based on their own cash flow needs and not on an assessment of the company's prospects.

[John Hjorth]

Do you guys know where I could find the best writeup for BRK? Thanks a lot  :)

 

valuefinder,

 

BRK is a quite complicated group of companies, so it takes a lot of time to study up on the different parts of it, to get some kind of feeling of it as an investment.

 

Personally, I would suggest to start reading the financial statements available at the BRK website, including the yearly shareholder letters written by Mr. Buffett himself.

 

It's very informative, but also an entertaining read, though quite time consuming.

 

Max Olson [Max Program on this board] has created a compilation of the shareholder letters since 1965, the first one issued in 2013, a 50 years edition i 2015, and a later reprint available here :

 

http://www.lulu.com/shop/warren-buffett/berkshire-hathaway-letters-to-shareholders/hardcover/product-22445483.html

 

- Enjoy! :-)

[Bog]

Thanks for this book link. I didn't know about this and it will go on the to buy list.

 

 

 

Do you guys know where I could find the best writeup for BRK? Thanks a lot  :)

 

valuefinder,

 

BRK is a quite complicated group of companies, so it takes a lot of time to study up on the different parts of it, to get some kind of feeling of it as an investment.

 

Personally, I would suggest to start reading the financial statements available at the BRK website, including the yearly shareholder letters written by Mr. Buffett himself.

 

It's very informative, but also an entertaining read, though quite time consuming.

 

Max Olson [Max Program on this board] has created a compilation of the shareholder letters since 1965, the first one issued in 2013, a 50 years edition i 2015, and a later reprint available here :

 

http://www.lulu.com/shop/warren-buffett/berkshire-hathaway-letters-to-shareholders/hardcover/product-22445483.html

 

- Enjoy! :-)

[John Hjorth]

Thanks for this book link. I didn't know about this and it will go on the to buy list.

 

Glavacem,

 

You are welcome.

 

I ordered my copy of the reprint in the beginning of December 2015, based on an e-mail from Max. I don't remember the exact date of arrival here, but I think it was about 2 - 3 weeks after ordering. I'm in the Northern part of Europe, and I opted for cheapest freight, with no tracking available.

 

I was surprised - in a positive way - by the quality of the book. It's a yellow hardcover, in a very good quality. In the last months it has become a book, that I use frequently, "napping" a more or less random shareholder letter almost every evening before going to bed - as brain food - to "sleep on".