Berkshire Hathaway is going gangbusters

[Charlie]

Tilson is not very popular here, but I always like to read his opinion about Berkshire.  :)

 

Forbes: You still own Berkshire Hathaway?

Tilson: Yes.

Forbes: One of your top ten?

Tilson: Yes, my second largest position today.

Forbes: Would you buy it today?

Tilson: This is the only stock I’ll admit that I do allow some emotion to creep into my analysis because Warren Buffett and Charlie Munger are really my mentors in this business. I learned value investing from them through their writings, through attending their annual meetings.

The underlying company, Berkshire Hathaway, is going gangbusters. They just reported an incredible quarter, and so every time the stock runs up a bunch, I re-do my calculation of intrinsic value and intrinsic value is going up as well. So the answer for Berkshire is the stock is around $160,000 per A-share. My estimate of intrinsic value is approaching $200,000 a share at this point. So I would say Berkshire today is call it an 85-cent dollar, probably.

It’s about a 15% discount to intrinsic value. But I think Berkshire is an incredibly safe and sound business. I don’t think you’re going to get blind-sided by any derivatives or something that would be a risk with other insurance companies. And I think there’s always a chance that Warren Buffett finds another big deal to do that really juices intrinsic value beyond the 10% growth of just the operating businesses of Berkshire growing every year.

So I would call it a safe, nicely growing but not incredibly cheap stock at this point, so I think it’s a good foundation for a conservative investor. I think if my choice was buy the S&P 500 index fund and hold it for the next five or ten years or buy Berkshire, I think odds are 80% to 90% that you will do better if you just sit there and hold Berkshire and forget about it. But it’s not as cheap as it was. The stock has had a nice run. A lot of stocks have had nice runs recently. But don’t fall into the “I missed it” trap with this one.

Forbes: Incredibly, is it true Berkshire Hathaway now has more people on their companies’ payroll than General Electric?

Tilson: Boy, I think I do recall that. They just bought Heinz. That deal hasn’t even gone through yet, but Berkshire Hathaway has something like 260,000 employees. So it’s certainly up there with one of the biggest by market cap. As of a month or two ago, anyway, it was the fifth largest company in the United States by market cap.

I suspect it’ll be number three before not-too-long. What’s really amazing is the company is run by 20 people at headquarters Warren Buffett and a chief financial officer and a couple secretaries. So it’s taken decentralization almost to a comical extreme, but it works.

 

http://www.forbes.com/sites/steveforbes/2013/06/27/whitney-tilson-wisdom-on-value-artists-like-buffett-and-klarman/?partner=yahootix

 

 

Cheers!

 

 

[mysticdrew]

I've always liked Tilson's articles and interviews.  This one as well. Thanks!

[Kiltacular]

A good article.  I've been a bit harsh on tilson a few times in the past. It seems that maybe he's reducing his profile a bit now that he's ended his partnership and maybe that's allowed him to tone things down.  Of course, he is touting a book!  But, maybe it worth a read.

[cubsfan]

I thought this book of his was really good. He gives most of credit to other great value investors by highlighting

their thinking. I agree he's viewed as promotional, but I do think Tilson has incredible energy. He's also

reducing his role in the Value Investor Congress, and maybe that will help his current investor's in his

new fund.

[Guest]

I've read some great things about his book. I know his returns aren't all that great, but I think Tilson would be a great professor of value investing.

[Palantir]

I like the fact that he is so open about his position and willing to share it with mortals like me, makes it very interesting to follow and grasp the logic, unlike managers who want NSA proof secrecy.