Berkshire Hathaway 3rd quarter 2017 Form Q-10

[John Hjorth]

Is now available here.

[Dynamic]

Book Value Per Share = Berkshire Hathaway shareholders’ equity / shares outstanding

 

BVPS for BRK.A = $308,278 x 1,000,000 / 1,644,789.52 = $187,427

1.2x BVPS buyback threshold = $224,912 for BRK.A

 

BVPS for BRK.B = $308,278 x 1,000,000 / 2,467,184,283 = $124.95

1.2x BVPS buyback threshold = $149.94

 

I make it 24% growth since Year End 2016, (edit - oops I meant 2015) i.e 1.75 years. That's 13% CAGR. I appreciate that's possibly helped by mark-to-market gains in BV, but it seems pretty high, albeit that such figure can be a little lumpy over a fairly short time period.

 

Can anyone confirm my calculations?

[gfp]

Book Value Per Share = Berkshire Hathaway shareholders’ equity / shares outstanding

 

BVPS for BRK.A = $308,278 x 1,000,000 / 1,644,789.52 = $187,427

1.2x BVPS buyback threshold = $224,912 for BRK.A

 

BVPS for BRK.B = $308,278 x 1,000,000 / 2,467,184,283 = $124.95

1.2x BVPS buyback threshold = $149.94

 

I make it 24% growth since Year End 2016, i.e 1.75 years. That's 13% CAGR. I appreciate that's possibly helped by mark-to-market gains in BV, but it seems pretty high, albeit that such figure can be a little lumpy over a fairly short time period.

 

Can anyone confirm my calculations?

 

Berkshire's book value per share has grown 8.9% since year end 2016, but I suspect you meant something else since you also said year end 2016 was 1.75 years ago.

[rb]

Book Value Per Share = Berkshire Hathaway shareholders’ equity / shares outstanding

 

BVPS for BRK.A = $308,278 x 1,000,000 / 1,644,789.52 = $187,427

1.2x BVPS buyback threshold = $224,912 for BRK.A

 

BVPS for BRK.B = $308,278 x 1,000,000 / 2,467,184,283 = $124.95

1.2x BVPS buyback threshold = $149.94

 

I make it 24% growth since Year End 2016, i.e 1.75 years. That's 13% CAGR. I appreciate that's possibly helped by mark-to-market gains in BV, but it seems pretty high, albeit that such figure can be a little lumpy over a fairly short time period.

 

Can anyone confirm my calculations?

Your share count is a bit off. The share count is 1,644,716.39 A equivalent or 2,467,074,578 Bs.

 

So for the As BVPS is $187,435.36 and buyback threshold is $224,922.43 MV is $280,470.

For Bs BVPS is 124.96, buyback threshold is 149.95 and MV is $187.27

 

It's not a big difference, but hey... you asked.

 

Also not sure how you get 1.75 years from year end 2016 to Q3 2017. From end of 16 to Q3 17 (0.75 years) I get BV growth of 8.9% or 12.1% annualized.

[Dynamic]

Sorry I meant to write year end 2015 which is 1.75 years ago. I'll modify my post.

 

Thanks for the correction to share count. I used the figures from p1 of the 10Q from 26 October but just plugged them in a spreadsheet. Maybe there's an error.

[John Hjorth]

It seems that globalfinancepartners & rb agree on the BVPS progress for the year 2017. [i haven't worked on it - I'm just too tired to do so here this friday night].

 

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Dynamic, your posts within the last recent months here on CoBF about Berkshire are very much appreciated!

 

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Berkshire cash position end of September 2017: Now at USD 109.290 B, as I calculate it [including T-Bills].

[Cigarbutt]

"Berkshire cash position end of September 2017: Now at USD 109.290 B, as I calculate it [including T-Bills]."

 

Here's a relatively recent link:

http://www.silverlightinvest.com/blog/when-cash-king

 

If the author wants to update the chart, there needs to be more room at the top.

Go for gold or sky is the limit?

 

 

 

 

[treasurehunt]

I make it 24% growth since Year End 2016, (edit - oops I meant 2015) i.e 1.75 years. That's 13% CAGR. I appreciate that's possibly helped by mark-to-market gains in BV, but it seems pretty high, albeit that such figure can be a little lumpy over a fairly short time period.

 

Can anyone confirm my calculations?

I only get growth of 20.54% over the same period, using the numbers given in Berkshire Hathaway's press releases from Feb 27, 2016 and today. Book value was $155,501 per class A equivalent share on 12/31/2015 and $187,435 as of 9/30/2017.

[Dynamic]

That's 11.3% CAGR in BV. I see that where I grabbed my figure from for convenience was actually 2015Q3 from a note I made in Feb, implying much the same CAGR.

[John Hjorth]

... Here's a relatively recent link:

http://www.silverlightinvest.com/blog/when-cash-king

 

If the author wants to update the chart, there needs to be more room at the top.Go for gold or sky is the limit?

 

The author definitely needs to update the website. Forget gold. Sky is not a limit here. Compounding does not-at least to my knowledge-contain the concept of a cap. [: - ) ].

 

All cartoon BRK figures here - plain and simple. We just have to get used to, and comfortable with, this.

[mjs111]

This was an interesting accounting nugget on page 39 of the 10-Q (bold type is mine)

 

As discussed in Note 2 to the Consolidated Financial Statements, we will adopt a new accounting standard on January 1, 2018 that will change the reporting of unrealized gains and losses on our investments in equity securities. Beginning as of that date, unrealized gains and losses on investments in equity securities will be included in our Consolidated Statements of Earnings along with realized gains from dispositions. This new standard is required to be adopted prospectively and prior years’ statements of earnings may not be restated to reflect the change. Upon adoption of this accounting standard, we will reclassify the net unrealized gains related to our investments in equity securities from accumulated other comprehensive income to retained earnings. As of September 30, 2017, accumulated after-tax net unrealized appreciation related to our equity securities was approximately $53 billion.

 

While the adoption of this standard will not affect our total consolidated shareholders’ equity, it will almost certainly produce a very significant increase in the volatility of our periodic net earnings given the magnitude of our existing equity securities portfolio and the inherent volatility of equity securities prices. To illustrate the impact of this standard, our other comprehensive income in the third quarter and first nine months of 2017 included after-tax net unrealized gains from equity securities of approximately $2.8 billion and $10.9 billion, respectively. Had this new standard been in effect as of the beginning 2017, these amounts would have been included in our Consolidated Statements of Earnings. However, our consolidated comprehensive income for those periods would have been unchanged.

 

 

Until now unrealized gains have always bypassed the income statement in the past according to GAAP rules.  Did this change? Is it just changing for holding companies like Berkshire?  It was news to me.

 

Mike

[Cigarbutt]

mjs111,

 

Not the accounting pro here, but what you describe simply seems to correspond to the "convergence" that leads to the progressive incorporation of the IFRS policies into US GAAP.

[Dynamic]

Book Value Per Share = Berkshire Hathaway shareholders’ equity / shares outstanding

 

BVPS for BRK.A = $308,278 x 1,000,000 / 1,644,789.52 = $187,427

1.2x BVPS buyback threshold = $224,912 for BRK.A

 

BVPS for BRK.B = $308,278 x 1,000,000 / 2,467,184,283 = $124.95

1.2x BVPS buyback threshold = $149.94

Your share count is a bit off. The share count is 1,644,716.39 A equivalent or 2,467,074,578 Bs.

 

So for the As BVPS is $187,435.36 and buyback threshold is $224,922.43 MV is $280,470.

For Bs BVPS is 124.96, buyback threshold is 149.95 and MV is $187.27

 

It's not a big difference, but hey... you asked.

 

Although it's splitting hairs, I see the discrepancy now. You used the shares outstanding at quarter end (from Note 19 on p21 of the 10-Q)

 

I used the number of shares outstanding as of Oct 26, 2017 from the un-numbered cover page of the 10-Q, which is just a little higher than your number, but which I preferred over the average outstanding over the whole quarter, or the shares outstanding at the end of Q3, being more recent.

 

Number of shares of common stock outstanding as of October 26, 2017:

 

Class A — 753,528

Class B — 1,336,892,283

 

Class A equivalent = 753,528 + (1,336,892,283/1,500) = 1,644,789.522

Class B equivalent = (1,500*753,528) + 1,336,892,283 = 2,467,184,283

 

That's a 0.0044% difference (44 ppm), so pretty much negligible, making a penny difference on a B share. I believe that the buyback threshold is supposed to be based on the last published Book Value (not a 'live book value' that hasn't been disclosed to the public), but not sure whether it's also based on the last published number of shares outstanding. To some extent using the number of shares from Note 19 would make sense (as would the more recent number from the front page of 10-Q), as the actual number of shares outstanding would decline as repurchases were made, boosting the threshold slightly, and the number of shares outstanding would not be public knowledge until a filing is published.

[John Hjorth]

That's a 0.0044% difference (44 ppm), so pretty much negligible, making a penny difference on a B share. ...

 

Thank you for providing the exact numbers for Berkshire end of 3rd quarter 2017. A bit entertaining - at least to me -, and stated not to be misunderstood - I hold both you gents' posts here on CoBF about Berkshire very high, Dynamic & rb! [ : - ) ]

 

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On another note: No further information about the Pilot Flying J aquisition in the Form Q-10 compared to what we already knew, exactly as predicted by globalfinancepartners earlier here on CoBF.

[Dynamic]

Not totally on-topic, but the form SC 13G/A regarding the Beneficial ownership of Bank of America Corporation Common Stock raises a few questions. I wondered if anyone might be able to help be understand.

 

https://www.sec.gov/Archives/edgar/data/70858/000119312517280738/d411721dsc13ga.htm

 

As we know, Berkshire Hathaway Inc. (Delaware) exercised warrants to purchase 700 mn shares of BAC, representing 6.6% of the common stock at the time (6.7% now, presumably indicative of buybacks)

 

The form also includes other entities that own stock, but none of these have been mentioned on the 13-F to my knowledge.

 

For example:

4.6% (488.88 mn) by National Indemnity Co (Nebraska)

3.0% (311.78 mn) by GEICO Corp (Delaware)

2.2% (229.60 mn) by Government Employees Insurance Co (Maryland)

0.8% ( 81.20 nm) by GEICO Indemnity Co (Maryland)

and plenty more, much smaller positions by subsidiaries, but it's over 17% of BAC common stock already.

 

I believe >10% ownership would be in excess of the bank holding company rules (same as Wells Fargo, forcing sales as they buy back stock to stay below 10%).

 

Could these be pension assets or something not beneficial to BRK shareholders?

 

Or am I just getting confused by the layout of the form? The numbers just seem remarkably large to me.

[gfp]

700 million is the total number of shares owned by Berkshire. The other share holdings are not additive, they just reflect the ownership chain within Berkshire ‘s organizational structure. Certain BRK subsidiaries are owned by other BRK subsidiaries.

[Dynamic]

Thanks, globalfinancepartners, I thought the numbers just added up to too much but it's nice to have that confirmed