BRK-A book value and intrinsic value

[John Hjorth]

Not exactly what you requested, SlowAppreciation,

 

but I found this article on CNBC: JPMorgan becomes just seventh bank to cover Buffett's Berkshire Hathaway, calling it a screaming buy.

 

Gesture of mutual goodwill, perhaps?

[Valuehalla]

There are aspects which could soon cause a massiv increase in BV or a massiv increase of the operating profit.

 

I think there is a high probability to see a Melt Up concerning the stock price soon:

 

1) The Tax Reform

    - reduced deferred taxes will increase the BV app. 10 %

    - FCF will increase, because operative gains will be taxed lower

 

2) The existing cash pile of more than 100 B 

      - could lead to a mighty acquisition - up to 80 B in standby -  maybe plus additional funds from 3G,

        KHC, BUD, QSR and / or leverage  ... the dream of a 250 B elephant could come true ....

      - depending on the details, this could increase the operating profit of BRK massivly

        if 80 B are invested for just (!) 5 % this will increase the operating profit from 20 to 24 = 20 % increase!

      - could lead to an adjustment concerning the stock repurchase program, which will also drive the stockprice

 

In the medium or long term:

 

3) A broader market set back

    - maybe caused by TECHs / FANG: BRK could start a big wide range shopping

 

4) A heavy damage for the broader insurance businesses

    - after which strong BRK will exit in a better position than other weaker competitors

 

;D In case of a lucky quarter we can see a melt up of 40 % till end of 2017. (Taxreform + Acquisition)  ;D

 

[sleepydragon]

Not exactly what you requested, SlowAppreciation,

 

but I found this article on CNBC: JPMorgan becomes just seventh bank to cover Buffett's Berkshire Hathaway, calling it a screaming buy.

 

Gesture of mutual goodwill, perhaps?

 

I wonder which bank will have the nuts to publish a sell ratings on Brk? It will be instant fame but high risky move.

[rb]

Not exactly what you requested, SlowAppreciation,

 

but I found this article on CNBC: JPMorgan becomes just seventh bank to cover Buffett's Berkshire Hathaway, calling it a screaming buy.

 

Gesture of mutual goodwill, perhaps?

 

I wonder which bank will have the nuts to publish a sell ratings on Brk? It will be instant fame but high risky move.

I think Berkshire has more maturity than to engage in vindictive behavior because an analyst published a sell rating on it.

[Valuehalla]

3rd Quarter is done.

 

30.6.2017

BV per B-share was 121,877 US$

Price B-share was 169,37 US$

MarketCap app 417,6 B

BV 300,659 B

 

3 month till today 30.9.2017:

Estimated Operative Gains: 5 B  less tax                =  app 3,5 B

Estimated Gains Portfolio: 3,2 B  less deferred tax  = app 2,3 B

results in:

BV =306,46 B

BV B-share = 124,23 US$

 

KHC adjustment: 25,253 B (marketvalue of the KHC position today) - 15,3B (BV KHC) = + 9,953 B

results in:

BV = 316,413 B

BV B-share = 128,265 US$

 

B-share closing price on Friday 29th Sept. was 183,32 US$, so we are 1,429 above KHC adjusted BV

                                                                                              and 1,476 above published BV by BRK

 

(The BAC exercise is included in the figures above)

 

IMO the quarter was a more weaker quarter, cause i expect in avg an increase of BV per B share of 1,00 US$ per month in 2017.

 

But there is huge upside potential, cause of taxreform & cash pile. See further my other post from today above.

 

[Guest longinvestor]

Not exactly what you requested, SlowAppreciation,

 

but I found this article on CNBC: JPMorgan becomes just seventh bank to cover Buffett's Berkshire Hathaway, calling it a screaming buy.

 

Gesture of mutual goodwill, perhaps?

 

I wonder which bank will have the nuts to publish a sell ratings on Brk? It will be instant fame but high risky move.

I think Berkshire has more maturity than to engage in vindictive behavior because an analyst published a sell rating on it.

+1

Berkshire has the habit of ignoring the analyst community. It's generally a waste of time for analysts to follow Berkshire. Either you parrot what's in the letter or covered at the meeting. Or look stupid trying to get cute with analysis. This is because Buffett wants us to have more than full disclosure. He's trying to educate.

[John Hjorth]

Not exactly what you requested, SlowAppreciation,

 

but I found this article on CNBC: JPMorgan becomes just seventh bank to cover Buffett's Berkshire Hathaway, calling it a screaming buy.

 

Gesture of mutual goodwill, perhaps?

 

I wonder which bank will have the nuts to publish a sell ratings on Brk? It will be instant fame but high risky move.

 

First of all, that bank will have to develop a sell case, based on recent price and released data from Berkshire HQ. To me, that's a tough one, compared to available investment alternatives, right now.

[Valuehalla]

+++++++++++ UPDATED ++++++++++

 

There are aspects which could soon cause a massiv increase in BV or a massiv increase of the operating profit.

 

I think there is a high probability to see a Melt Up concerning the stock price soon:

 

1) The Tax Reform

    - reduced deferred taxes will increase the BV app. 10 %

    - FCF will increase, because operative gains will be taxed lower

 

2) The existing cash pile of more than 100 B 

      - could lead to a mighty acquisition - up to 80 B inside BRK on standby -  maybe plus additional funds from

        3G, KHC, BUD, QSR and / or leverage  ... the dream of a 250 B elephant could come true ....

      - depending on the details, this could increase the operating profit of BRK massivly:

        if 80 B are invested for just (!) 5 % this will increase the operating profit from 20 to 24 = 20 % increase!

      - if not invested, could lead to an adjustment concerning the stock repurchase program,

        which will also drive the stockprice

 

3) Higher interest rates

- 1 % higher interest rates means 1 B or even slightly more profit, that is a 5 % increase of the profit

  (now app. 20B)

- Competition in insurance business will get more soft

 

In the medium or long term:

 

4) A broader market set back

    - maybe caused by TECHs / FANG: BRK could start a big wide range shopping

 

5) A heavy damage for the broader insurance businesses

    - after which strong BRK will exit in a better position than other weaker competitors

 

;D In case of a lucky quarter we can see a melt up of 40 % till end of 2017. (Taxreform + Acquisition)  ;D

[Valuehalla]

Avg price of 1 oz Gold  in March 1981                                    498,76 US$

Today:                                                                              1273,50 US$

 

Price of A share Berkshire Hathaway 1st March 1981              520,00 US$

Today:                                                                          278.010,00 US$

 

Whatever i tried, i could just find a price of gold: Bookvalue (BV) and Intrinsic Value (IV) for gold still missing.

Wanted! Dead or alive! If you will find these two, call the Sheriffs office in Omaha immediatly.

 

[SlowAppreciation]

http://brooklyninvestor.blogspot.com/2017/11/is-buffett-bearish.html?m=1

[no_free_lunch]

If you follow this twitter thread there is a lengthy breakdown and valuation of the various BRK subs.  They peg the total value at $517B.

 

[rb]

If you follow this twitter thread there is a lengthy breakdown and valuation of the various BRK subs.  They peg the total value at $517B.

 

Did he miss the stake in KHC?

[no_free_lunch]

I dont think he missed it.  Has 180b under securities.  I assume its in there. Its only 15b.

[Cigarbutt]

SlowAppreciation,

Thanks for bringing up the brooklyninvestor link.

Convincing data about the relative disregard for bonds.

Reviewing this, came across that, from another era:

http://fortune.com/2011/06/12/buffett-how-inflation-swindles-the-equity-investor-fortune-classics-1977/

[scorpioncapital]

I guess his argument is there is no protection except in high quality businesses that can have a high chance of earning a good spread regardless of changes in rates. Reminds me a bit of the tide showing who will be naked. Now the tide is lifting everyone.

 

 

[Cigarbutt]

This thread has a lot to do with the hypothesis that book value for BRK is becoming less relevant as a valuation input.

My understanding is that this may be true in the sense that book value will eventually reflect the unrecognized intangible value now.

A relatively simple way to deal with this "lag" effect is to put a higher multiple of the IV/BV ratio.

How much higher depends on your analysis but, in my book, the difference is relatively small.

Of course, over time, small differences do compound.

 

However this higher multiple due to the unrecognized potential may not apply to the whole market. Last time I looked for the S&P, price to book was around three to one.

 

If you apply a simplified way that Mr. Buffett has described over the years to use this parameter as a valuation input, the "coupon" on the stock index would be around 4% (retained portion compounding at 12%). The yield on USA 10 yr Treasuries is 2,33% this morning and the 30yr is 2,76%. The yield on cash this morning is 0%.

 

Ceteris paribus. Simple but not easy.