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Tilson's IV Valuation of BRK


biaggio
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Not that it really matters, but why does he use the wrong share count and the wrong Shareholder's Equity?

 

Tilson's BRK shares outstanding: 1.636 million

Actual BRK shares outstanding: 1.6486 million

 

Tilson's BRK equity: $163 Billion

Actual BRK equity: $157.3 Billion

 

Using $163 B ignores the 5.6 Billion that doesn't belong to BRK shareholders.

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  • 5 weeks later...
Guest Bronco

Earnings are terrible.  On a forward p/e basis, based on these annualized results, the stock is way overpriced.

 

Maybe time to retire.

 

Is it time to short this washed up conglomerate?

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Am I the only one wondering what the market is doing?

 

 

$120000 price for BRK.A would imply you pay +-$20000 for rougly $7000-$10000 in normalized pre-tax earnings, not giving any value to the track record, the safety of the business as a whole, the kind of businesses that are owned.

 

Comparing price vs value of investments + EPS, the same undervaluation was present at the start of 1997. Helped by the general stock market the stock soared for almost 2 years.

 

 

Would Buffett almost consider buybacks?

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hey tombgrt, i agree with you. i have some smart friends who have been pounding the table about brk for a while now. i've recently purchased a small position jan 2013, 55 calls. This wasn't my idea, but an idea a friend mentioned to me. Those calls are selling for about 28, which means they break even at 83. The brk. b's are trading for 80. Brk seems cheap + the calls seem stupid cheap.

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I bought but haven't done the calculus yet. I think I am looking at a P/E of 10 buying today for the P and 18 months out for the E.

 

If you add 1) some underwriting profit (you have to given GEICO and some others) to Buffet's normalized earnings and then 2) add look-through earnings net of dividends of the equity portfolio (KO, WFC, AXP, etc..) as the divs are in normalized earnings and then 3) add that one $15B acquisition in the next 18 months will occur increasing earnings by a 10 percent yield (net of say the 2 percent being earned on bonds presently with the cash) so 8 percent net or roughly another $1 billion... you have to get to around 20 billion in "adjusted" normalized earnings power or a P/E of 10 or damn close.

 

Like I said I have to look at it more closely - am being very lazy. Irrespective, regardless of whether its 10, 11, or whatever times earnings, BRK is better value than the stock market which carries a higher multiple. As such a long-term BRK position and short the stock market should outperform cash in your portfolio (note: stock market is high, only times it has been higher in the last 120 years relative to GDP or long-term earnings, etc. is, in order of bubbliness 1) 1998-2007, 2) 1929 and 3) sometime in the 60s when Buffet closed his partnership. Good to stay hedged.

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As such a long-term BRK position and short the stock market should outperform cash in your portfolio (note: stock market is high, only times it has been higher in the last 120 years relative to GDP or long-term earnings, etc. is, in order of bubbliness 1) 1998-2007, 2) 1929 and 3) sometime in the 60s when Buffet closed his partnership. Good to stay hedged.

 

Are you using the Russel 2000 index again?  It seems to be the small caps are where the highest prices are, and the most vulnerable.

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Yes Ericopoly, I am using deep in-the-money Russel 2000 puts again as the small caps are even more over-valued relative to the S&P. Its like deja vue all over again. The only tweak I have now relative to pre-financial crisis is I own gold and out of the money long-term calls on silver.

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  • 2 months later...

Looking this over, doesn't it seem like Tilson's double-counting?  I mean he's making the assumption that Berkshire's $97k of investments are unrelated to the insurance businesses, and that the businesses would be able to underwrite the insurance that they do without the investments.  (And it seems to me that excluding the dividends and interest from the investments to the businesses' earnings doesn't account for this....)

 

Just a thought.

 

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