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Tilson - BRK valuation update for 2011


omagh
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A little bit of inversion.

 

Value = Investments + P/E * Pre-tax earnings from non-investments

 

Current Price = 120,600

Investments = 88,000

PTEFNI = 7,200

 

Set Value = Price, solve for current P/E

 

P/E = (120,600 - 88,000)/7,200 = 4.5

 

Seems like a low multiple.

 

Now consider a 30% discount for the investments.  Like a rather out of favour closed end fund without the Buffett factor.

 

P/E = (120,600 - 88,000*.7)/7,200 = 8.2

 

(Pre tax P/Es)

 

Time to breakup the company to unlock value?  ;)

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Thanks for the link.

 

Norm - what do you propose they break up?  The railroad / utilities from the rest?  They just bought it!

 

Breakup ain't going to happen.

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Guest longinvestor

Thanks for the link.

Norm - what do you propose they break up?  The railroad / utilities from the rest?  They just bought it!

Breakup ain't going to happen.

 

Agree, no breakup happening. That would be complicating the job of preserving the Berkshire culture in two parts versus one. Having said that, who knows what kind of operational problems the company will see when they double in operating revenues. The Netjets saga will surely replicate in other places in the coming years. Surely they have learned from this experience, more importantly if Sokol is going to get the reins, that is a good thing as he was in a  hand-to-hand combat @ Netjets. I am hoping Netjets comes up during the AGM this year.

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If you step back and think about it, a lot of the companies owned by BRK seem like pieces of crap.

 

Dear God, if Biglari was running dairy queen we would never hear the end of it.  What about if Eddie Lampert bought Acme Brick?  Or if Immelt bought Shaw Industries?

 

My point isn't to insult the master, but to point out there is a lot of opporunity for BRK to start adding some real companies.  I see utilities in the future.  How much would Buffett love the privatized Wrigley or the private Mars for that matter?  How about a beer company (BUD or TAP?).

 

All kinds of potential moving forward.  How about a Quest Diagnostics?  A Becton Dickinson? 

 

There is all kinds of massive potential for BRK.  At least that is my vision.

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If you step back and think about it, a lot of the companies owned by BRK seem like pieces of crap.

 

Dear God, if Biglari was running dairy queen we would never hear the end of it.  What about if Eddie Lampert bought Acme Brick?  Or if Immelt bought Shaw Industries?

 

My point isn't to insult the master, but to point out there is a lot of opporunity for BRK to start adding some real companies.  I see utilities in the future.  How much would Buffett love the privatized Wrigley or the private Mars for that matter?  How about a beer company (BUD or TAP?).

 

All kinds of potential moving forward.  How about a Quest Diagnostics?  A Becton Dickinson?  

 

There is all kinds of massive potential for BRK.  At least that is my vision.

 

 

DQ has a great ROC as almost all of their units are franchised.  :)

 

NetJets had the same potential, but WEB allowed their former manager to give puts to the buyers of fractional shares in their planes.

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Twa - I hear you my friend, but you know we would hear how the stores are run down, etc. if this was a Biglari company.  I really wasn't picking on any particular business but I do think BRK has entered a new phase and that is buying entire companies at higher $$ (larger market caps or absolute dollar amounts).  I guess Marmon was fairly big but you get my point.

 

Still think a utility is next.

 

I guess I am on the same page as Tilson in this report - so much $$ will be generated over the next 5 years...what to do, what to do?

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I guess I am on the same page as Tilson in this report - so much $$ will be generated over the next 5 years...what to do, what to do?

 

That is what's so great about BRK... What to do? Nothing if it's something stupid.

 

There are not a lot of managers with that discipline!

 

BeerBaron

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