Author Topic: berkshire - cheap?  (Read 10681 times)

shalab

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berkshire - cheap?
« on: July 16, 2017, 11:34:29 AM »
Book value at end of Q1 - $124 (including KHC stake of 10B  not counted in book value - actual value is close to 15 B, -5B for tax allowance)
Book value at end of Q2 - $129  SP500 perf + ~1.5% => 4.5% gain from Q1. If book value is $128, P/B is 1.32, if book value is 129, P/B is 1.31.

For comparison - average P/B for SP500 company is 3.1.
The famous FAAMG stocks look like this:

AMZN => 27
FB => 7.2
GOOG => 5
AAPL => 5.9
MSFT => 7.7



rb

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Re: berkshire - cheap?
« Reply #1 on: July 16, 2017, 01:06:12 PM »
I don't think it makes sense to even look at P/B of any of the techs. I mean.. what's the book value of Google's search algorithm?

shalab

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Re: berkshire - cheap?
« Reply #2 on: July 16, 2017, 05:36:18 PM »
The P/B of different insurance companies as follows:

W.R Berkley => 1.6
Progressive => 3.1


crastogi

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Re: berkshire - cheap?
« Reply #3 on: July 16, 2017, 06:14:37 PM »
Book value at end of Q1 - $124 (including KHC stake of 10B  not counted in book value - actual value is close to 15 B, -5B for tax allowance)
Book value at end of Q2 - $129  SP500 perf + ~1.5% => 4.5% gain from Q1. If book value is $128, P/B is 1.32, if book value is 129, P/B is 1.31.

For comparison - average P/B for SP500 company is 3.1.
The famous FAAMG stocks look like this:

AMZN => 27
FB => 7.2
GOOG => 5
AAPL => 5.9
MSFT => 7.7

Well, Berkshire's P/B will always be lower because they are in different kind of businesses as the list above.  The returns on capital employed are much higher for companies like Google, as they have fewer hard assets. 

Buffett is looking to soak up all the capital Berkshire is creating by deploying in businesses which will provide a predictable return, even if the returns are not spectacular. 


scorpioncapital

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Re: berkshire - cheap?
« Reply #4 on: July 17, 2017, 01:58:06 AM »
cheap? verdict is out. Expensive? Doesn't seem so. You could do this - take all of their 4 major categories, financial products, insurance, manufacturing & retail, energy and calculate the sectory P/BV. Then weight it according to the size of that business to Berkshire. Then you can see if it's below that.

boilermaker75

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Re: berkshire - cheap?
« Reply #5 on: July 17, 2017, 06:57:05 AM »
Buffett is a buyer at a P/B of 1.2. So does that mean he thinks at P/B = 1.2  buying BRK is like buying a dollar for fifty cents? That would mean at current prices you are getting a dollars worth of BRK for $0.55.

tombgrt

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Re: berkshire - cheap?
« Reply #6 on: July 17, 2017, 07:10:29 AM »
Buffett is a buyer at a P/B of 1.2. So does that mean he thinks at P/B = 1.2  buying BRK is like buying a dollar for fifty cents? That would mean at current prices you are getting a dollars worth of BRK for $0.55.

No, he doesn't think that.

What happened with this forum? Or is it mainly this thread? Where we you guys when berkshire was trading at $70 and it's BV had much more margin of safety?
« Last Edit: July 17, 2017, 07:18:43 AM by tombgrt »

Jurgis

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Re: berkshire - cheap?
« Reply #7 on: July 17, 2017, 07:25:41 AM »
Where we you guys when berkshire was trading at $70 and it's BV had much more margin of safety?

To be fair, people may have been buying BRK at $70 whenever that was. And people are looking for investments now when BRK is at $16X and may still be relatively attractive compared to other opportunities in the market. Sure it's not gonna return 20% or probably even 15% a year. But it could return annual 10% and outperform the market (and a lot of other ideas).

tombgrt

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Re: berkshire - cheap?
« Reply #8 on: July 17, 2017, 07:29:32 AM »
Where we you guys when berkshire was trading at $70 and it's BV had much more margin of safety?

To be fair, people may have been buying BRK at $70 whenever that was. And people are looking for investments now when BRK is at $16X and may still be relatively attractive compared to other opportunities in the market. Sure it's not gonna return 20% or probably even 15% a year. But it could return annual 10% and outperform the market (and a lot of other ideas).

Yes, of course. I just meant that people didn't even discuss the much bigger margin of safety back then except for a few members. Now they are starting to compare it versus BV of tech companies and making silly assumptions concerning what Buffett thinks BRK is worth.

Jurgis

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Re: berkshire - cheap?
« Reply #9 on: July 17, 2017, 07:34:09 AM »
Where we you guys when berkshire was trading at $70 and it's BV had much more margin of safety?

To be fair, people may have been buying BRK at $70 whenever that was. And people are looking for investments now when BRK is at $16X and may still be relatively attractive compared to other opportunities in the market. Sure it's not gonna return 20% or probably even 15% a year. But it could return annual 10% and outperform the market (and a lot of other ideas).

Yes, of course. I just meant that people didn't even discuss the much bigger margin of safety back then except for a few members. Now they are starting to compare it versus BV of tech companies and making silly assumptions concerning what Buffett thinks BRK is worth.

I see. Yeah, comparing BV to tech companies is not very productive.