Valuebo Posted July 27, 2011 Share Posted July 27, 2011 Bring it on. http://i51.tinypic.com/2d1usep.jpg Bought more today and will be "all-in" at $66-70 per BRK.B. 20% cash now. Good article : http://seekingalpha.com/article/282116-berkshire-hathaway-worth-its-salt Link to comment Share on other sites More sharing options...
Valuebo Posted August 2, 2011 Share Posted August 2, 2011 http://www.hamincny.com/docs/Horizon_Commentary_1stQuarter_2011.pdf Very intresting read about P/B & ROE valuations of the S&P500 compared with BRK. (sorry for the spamming ;)) Link to comment Share on other sites More sharing options...
Viking Posted August 3, 2011 Share Posted August 3, 2011 tombgrt, thanks for posting the links. The seeking alpha article has some good comments attached to it. BRK is now my largest holding. Should it fall under $70 I likely will get very aggressive. Link to comment Share on other sites More sharing options...
Viking Posted August 7, 2011 Share Posted August 7, 2011 Here are some comments from Buffett from 2009 on buying back stock... the last time we were in a similar situation to what looks to be brewing... dealbook.nytimes.com/2009/01/22/buffett-hints-at-buyback-of-berkshire-shares/ Link to comment Share on other sites More sharing options...
Viking Posted August 11, 2011 Share Posted August 11, 2011 I spent the last few days reviewing BRK-B price and book value over the past few years to get some perspective on the valuation trend. How does current valuation compare to the lows from 2009? Price to BV Aug 10 2011: BRK-B = $67.50; Q2 2011 BV = $65 = 1.04 Price to BV low: March 5 2009 BRK-B = $46.00; Q1 2009 BV = $44.17; P/BV = 1.04 The kicker are exchange rates: March 2009 = 1.20 and Aug 2011 = 0.99 Before currency, BRK looks to be trading at historic lows for P/BV. For CAD investors BRK looks to be trading at the lowest in has ever traded BY FAR. avg price BV USD/CAD Oct 2006 to Aug 2007 $72 $47 1.12 Aug 2007 to Oct 2008 $85 $52 1.00 Jan to July 2009 $58 $44.19 Q1 1.20 $49.20 Q2 July 2009 to Jan 2010 $66 $55 1.08 Jan 2010 to May 2011 $80 $60 1.03 May 2011 to July 2011 $75 $65 1.01 Average Price = about what stock traded at during period BV = as reported (A share / 1,500) USD/CAD = average exchange rate during period Link to comment Share on other sites More sharing options...
Grenville Posted August 11, 2011 Share Posted August 11, 2011 I spent the last few days reviewing BRK-B price and book value over the past few years to get some perspective on the valuation trend. How does current valuation compare to the lows from 2009? Price to BV Aug 10 2011: BRK-B = $67.50; Q2 2011 BV = $65 = 1.04 Price to BV low: March 5 2009 BRK-B = $46.00; Q1 2009 BV = $44.17; P/BV = 1.04 The kicker are exchange rates: March 2009 = 1.20 and Aug 2011 = 0.99 Before currency, BRK looks to be trading at historic lows for P/BV. For CAD investors BRK looks to be trading at the lowest in has ever traded BY FAR. avg price BV USD/CAD Oct 2006 to Aug 2007 $72 $47 1.12 Aug 2007 to Oct 2008 $85 $52 1.00 Jan to July 2009 $58 $44.19 Q1 1.20 $49.20 Q2 July 2009 to Jan 2010 $66 $55 1.08 Jan 2010 to May 2011 $80 $60 1.03 May 2011 to July 2011 $75 $65 1.01 Average Price = about what stock traded at during period BV = as reported (A share / 1,500) USD/CAD = average exchange rate during period Not to be nit picky, but just keep in mind that as Buffett does more acquisitions goodwill becomes a larger portion of book value than in the past. Link to comment Share on other sites More sharing options...
Viking Posted August 11, 2011 Share Posted August 11, 2011 The summary above may be viewed as flawed because it does not factor in the potential for BRK-B book value to fall in the coming quarters. In 2008-2009 BRK BV fell 15%. If the same happens in the next few months then the P/BV is not so compelling. So far BRK-B stock price has fallen a great deal from its highs (20% to 25%) while BV has likely not changed much, even with the recent stock market decline. So what happened in 2008/2009? During the 2008/2009 bloodbath BRK-B BV fell from $52 (2008YE) to $44.17 (Q1 2009) = 15% decline. The decline was driven largely by fall in market value of stock holdings. Three stocks make up 50% of stock holdings: Sept 30/08 Dec 31/08 Mch 31/09 KO $54.16 $45.27 $43.95 WFC $37.53 $29.48 $14.24 AXP $35.43 $18.55 $13.63 It is highly unlikely that these stocks will fall to the same degree that they did in 2008 & 2009 so I feel current P/BV relationship is telling us that BRK-B shares are a great buy especially under $70.. Link to comment Share on other sites More sharing options...
biaggio Posted August 11, 2011 Share Posted August 11, 2011 Viking, thanks for your analysis (a good buy <$70), which makes sense. I think that book value is underestimating the real value---as the book value of companies they have owned for quite a long time are not adequately accounted for by looking at BV alone-e.g. Geico, Sees, other long term holdings. Link to comment Share on other sites More sharing options...
Valuebo Posted August 11, 2011 Share Posted August 11, 2011 Short term fluctuations in BV don't matter. In fact, a lot of extra value can and will be added in corrections like these which ultimately give you a higher intrinsic value than if no correction would have occured. If you buy companies like BRK at current depressed prices you will win twice in the end. Buffett's annual letter of this year had an interesting part covering brk's goodwill for GEICO : Let me quantify Tony’s achievement. When, in 1996, we bought the 50% of GEICO we didn’t already own, it cost us about $2.3 billion. That price implied a value of $4.6 billion for 100%. GEICO then had tangible net worth of $1.9 billion. The excess over tangible net worth of the implied value – $2.7 billion – was what we estimated GEICO’s “goodwill” to be worth at that time. That goodwill represented the economic value of the policyholders who were then doing business with GEICO. In 1995, those customers had paid the company $2.8 billion in premiums. Consequently, we were valuing GEICO’s customers at about 97% (2.7/2.8) of what they were annually paying the company. By industry standards, that was a very high price. But GEICO was no ordinary insurer: Because of the company’s low costs, its policyholders were consistently profitable and unusually loyal. Today, premium volume is $14.3 billion and growing. Yet we carry the goodwill of GEICO on our books at only $1.4 billion, an amount that will remain unchanged no matter how much the value of GEICO increases. (Under accounting rules, you write down the carrying value of goodwill if its economic value decreases, but leave it unchanged if economic value increases.) Using the 97%-of-premium-volume yardstick we applied to our 1996 purchase, the real value today of GEICO’s economic goodwill is about $14 billion. And this value is likely to be much higher ten and twenty years from now. GEICO – off to a strong start in 2011 – is the gift that keeps giving. If anything, BRK's stated BV is probably quite conservative compared with the overal market average BV which at times can be viewed as highly questionable. Also, operating businesses account for a larger share of the BV. How is it logical that BV now is much lower than 10 years ago when investments/share were about 90% of BRK's business when it is close to 50/50 now? Link to comment Share on other sites More sharing options...
BargainValueHunter Posted August 14, 2011 Share Posted August 14, 2011 http://walrusvalue.blogspot.com/2011/08/berkshire-hathaway-simple-valution.html Conclusion: Berkshire is currently selling at a reasonable value. There are a few possible catalysts. First, Berkshire Insurance subsidiaries have excess capital in order to generate new float which if written conservatively can translate to an instant increase of Berkshire's value. The second, Berkshire's investment portfolio is filled with blue chip companies which are selling at historical lows; if blue chip stocks start to rise, Berkshire’s portfolio will rise with it. Thirdly, about a billion dollars in housing earnings has disappeared since 2006 – which will eventually come back. Link to comment Share on other sites More sharing options...
Shane Posted August 14, 2011 Share Posted August 14, 2011 I don't really see BRK as such a screaming buy like everyone else seems to. I would take 15-20% off the investments valuation because you do have to assume you sell them on the day of valuation + I doubt he is really going to outperform the market going forward if there is a bull market and I'd rather have cash than BRK in a bear market. Why hasn't he outperformed the market? Because even a genius will have trouble investing that much cash! He admits it, the facts are clear... I just can't make much sense out of it. Don't get me wrong, I have a 4% position in BRK but mostly because I see at as a place to park cash when I can't find really exceptional investments but want to be in the market. I don't see it as a way to create lots of wealth anymore. Personally I'd love to find a Jockey like Buffett if I thought he would keep crushing the market, MKL & FFH are really interesting to me but I am running into the same problem in those companies... to a lesser degree. Klarman said to look for forced sellers to find undervalued stocks... BRK is the ANTI forced seller stock. A huge portion of the stockholders know about his past and are die-hards. Link to comment Share on other sites More sharing options...
Valuebo Posted August 15, 2011 Share Posted August 15, 2011 I don't really see BRK as such a screaming buy like everyone else seems to. I would take 15-20% off the investments valuation because you do have to assume you sell them on the day of valuation + I doubt he is really going to outperform the market going forward if there is a bull market and I'd rather have cash than BRK in a bear market. Why hasn't he outperformed the market? Because even a genius will have trouble investing that much cash! He admits it, the facts are clear... I just can't make much sense out of it. Don't get me wrong, I have a 4% position in BRK but mostly because I see at as a place to park cash when I can't find really exceptional investments but want to be in the market. I don't see it as a way to create lots of wealth anymore. Personally I'd love to find a Jockey like Buffett if I thought he would keep crushing the market, MKL & FFH are really interesting to me but I am running into the same problem in those companies... to a lesser degree. Klarman said to look for forced sellers to find undervalued stocks... BRK is the ANTI forced seller stock. A huge portion of the stockholders know about his past and are die-hards. Why would you take 15-20% off of all investments (around $155b?) when stock holdings account for not even half of that? Most holdings like KO will probably never be sold which cuts down the number even further. Where hasn't brk outperformed the market over longer periods (in terms of increased BV)? Or are you talking about stock performance? Not sure what the relevance of stock performance could be. He has been seriously outperforming in terms of increasing BV over the last 10 years despite an ever growing capital base. It seems unlikely that this will suddenly disappear as most performance will come from what is already owned today. Furthermore, even if BRK did underperform in a long lasting bull market (which is doubtful in the current situation and overall stock market valuation) the current price would probably turn out to be a bargain, not even considering hot irons such as a hard insurance market and recovery in housing. The way I see it, BRK will : - outperform in a long-term "sideways market" - outperform in a bear market - not underperform terribly in a bull market. I don't need 70% undervaluation for BRK. I'll take that 30-50% any time of the week and let Buffett compound until it gets close enough to IV to sell or until I see companies with better risk/reward that I can be confident about in this market. I bet BRK is being "forced sold" by some, take Berkowitz for example with a fair stake in BRK facing redemptions. Lately, BRK and many other similar companies (LUK, BAM,...) are moving in a crazy trend with days far over -/+5%. I doubt all those stockholders are die-hards. ps : Ignore writing errors etc., it's way over midnight here and I have been studying for over 10 hours... Good night! ;) Link to comment Share on other sites More sharing options...
Shane Posted August 16, 2011 Share Posted August 16, 2011 Tombgrt - I do believe it is inexpensive at these prices, but not necessarily so cheap that I would gobble up shares and risk missing even better opportunities. Why take 15-20% off? Well you bring up good points, I must admit I am rethinking my reasoning. I want a margin of safety. I think there is a good chance Bonds / Cash will likely provide negative returns in the future. The argument is that Buffett can turn cash into great investments in a recession... Well he didn't invest enough of it in 2009, I would have put all of my cash in. He is better than me, no doubt, but I can get in and out of great investments while he is too large to do it now. It basically comes down to an opportunity cost, and I want a fat margin of safety to investment a huge amount of cash into anything right now. Bull-market: BRK likely underperforms and I regret putting a huge amount of cash into it Sideways market: If I have no cash I miss out on opportunities Bear Market: My BRK investment goes down (less than the market but still down) and I miss great buying opportunities. Over very long periods of time BRK will beat the market, agreed. I just want to crush the market not beat it ;) Sure some of the shares are being forced to be sold, but with $200 billion invested in it I estimate it is a TINY amount. I realize I can sell BRK to buy cheap stocks in a recession but the loss I would accept would eat into the potential gains. Link to comment Share on other sites More sharing options...
Valuebo Posted August 16, 2011 Share Posted August 16, 2011 Hi Shane.Smith. Thanks for your second input, I appreciate it. I incorrectly assumed you took the 15-20% off only for the 'deferred' taxes. Flawed reading skills, my bad! :) You to bring up valid points regarding bonds and cash that is being held and BRK's flexibility to move in and out of great opportunities. On the other hand I believe large caps aren't all that expensive at today's prices, especially when you look at companies such as WFC, JNJ and WMT. This should leave room for some error in the valuation of the investments. I agree that BRK will underperform in a bull-market like it has in the past, but given the current stock price I am confident the stock itself should outperform. To be honest, I have no idea what the impact can be of such selling pressure on BRK's price, especially given it's low average volume. If anyone has a vision on this, please do share. Maybe it just seems likely there is some impact because it strikes me as odd that BRK and others move in the same trend as riskier financials. To conclude, I should also note that my level of expertise and experience is below any standard at the moment which makes it very unlikely I am able to compose a portfolio of the greatest buying opportunities with better risk/reward. Loss of opportunity is bad, loss of capital is worse. I don't want to pretend I have anywhere near enough experience to handpick a complete portfolio of 'normal' investments, which should explain why BRK is a no-brainer for me. I would probably feel exactly the same in your situation, but I believe it would be foolish of me to think I can achieve satisfying analysis after one year of shallow investing experience and no business experience whatsoever. Plenty of time to learn and I am in no hurry to crush the market given that I have at least 43 years to go before I retire. ;D (Hm, what a rant...!) Link to comment Share on other sites More sharing options...
meiroy Posted August 16, 2011 Share Posted August 16, 2011 Bear Market: My BRK investment goes down (less than the market but still down) and I miss great buying opportunities. Well that sure is a convincing argument to hold BRK... if in a bear market it goes down less than the general market, sell it and buy other great opportunities. Link to comment Share on other sites More sharing options...
Shane Posted August 16, 2011 Share Posted August 16, 2011 Market goes down 30%, BRK down 10%. Yes you beat the indices. However you still have 10% less cash to put into opportunities that could go up 200-300% which amplifies the missed opportunities. If there were a near term catalyst then it would be a lot more attractive. Right now I see it as a long-term hold. I see a lot of trouble on the horizon and I think this market could give great opportunities in the next 5 years. It's all about demeanor I suppose. Link to comment Share on other sites More sharing options...
alwaysinvert Posted August 16, 2011 Share Posted August 16, 2011 Market goes down 30%, BRK down 10%. Yes you beat the indices. However you still have 10% less cash to put into opportunities that could go up 200-300% which amplifies the missed opportunities. If there were a near term catalyst then it would be a lot more attractive. Right now I see it as a long-term hold. I see a lot of trouble on the horizon and I think this market could give great opportunities in the next 5 years. It's all about demeanor I suppose. I don't see how that is relevant if the expected risk adjusted value on holding the stock is greater than holding cash (or any other investment you could find, obviously). Sometimes it's surprising to me how much people on this board try to forecast macro and time the market. Link to comment Share on other sites More sharing options...
Valuebo Posted August 16, 2011 Share Posted August 16, 2011 Market goes down 30%, BRK down 10%. Yes you beat the indices. However you still have 10% less cash to put into opportunities that could go up 200-300% which amplifies the missed opportunities. If there were a near term catalyst then it would be a lot more attractive. Right now I see it as a long-term hold. I see a lot of trouble on the horizon and I think this market could give great opportunities in the next 5 years. It's all about demeanor I suppose. There will always be opportunity loss, you can't time the market. Wether you have a lot of cash, are almost fully invested in high opportunity or have a combination of both, it is inevitable. Investing in BRK at current levels probably gives the same kind of win/win (anything that happens gives results and/or new opportunities) that a combination of enough cash and those 'opportunities' would give. Link to comment Share on other sites More sharing options...
Shane Posted August 16, 2011 Share Posted August 16, 2011 Alwaysinvert - Everyone is entitled to their own viewpoints. You apparently don't approve of my viewpoints. I simply recognize that the market is not cheap and serious economic issues will be dealt with in the coming years... I hope that the market drops so I can pick up great investments, and therefore prefer cash to being fully invested. Anyways please understand I do own BRK, a pretty significant amount. I agree it's cheap. I just don't see it offering tremendous upside like I hope to see in a large position. Link to comment Share on other sites More sharing options...
CassiusKing1 Posted September 9, 2011 Share Posted September 9, 2011 Think I may put in a limit order and see if it hits. Like to pick up a few more shares around here. Link to comment Share on other sites More sharing options...
rijk Posted September 22, 2011 Share Posted September 22, 2011 time to add regards rijk http://www.zerohedge.com/news/suck-it-buffett-brka-below-100000-first-time-20-months?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29 Link to comment Share on other sites More sharing options...
Valuebo Posted September 22, 2011 Share Posted September 22, 2011 time to add regards rijk http://www.zerohedge.com/news/suck-it-buffett-brka-below-100000-first-time-20-months?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29 Their articles are getting sadder with the day. How frustrated can you be. :o Over time BRK is going to make a killing if markets keep getting lower. No need for underperformance just yet... 1/4th market cap = cash Link to comment Share on other sites More sharing options...
gfp Posted September 26, 2011 Share Posted September 26, 2011 Historic Day! http://www.berkshirehathaway.com/news/sep2611.pdf Link to comment Share on other sites More sharing options...
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