Author Topic: BRK Book Value Feb 2018?  (Read 3452 times)

wescobrk

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BRK Book Value Feb 2018?
« on: February 05, 2018, 06:19:55 PM »
What is best guess estimate of Berkshire's book value they will report in a couple of weeks?


longinvestor

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Re: BRK Book Value Feb 2018?
« Reply #1 on: February 05, 2018, 07:25:26 PM »
~$215000 (A)
$143 (B)

John Hjorth

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Re: BRK Book Value Feb 2018?
« Reply #2 on: February 09, 2018, 02:40:10 AM »

From the "what are you buying today" topic:



I also bought some BRK.B recently although my logic might make some cringe.  I'm a big believer in the "cover your ass" incentive.  Barclays and UBS put price targets on the B shares for ~$240.  I'm betting that money managers will herd into Berkshire by  year end in a volatile market because it's easy to justify to unsophisticated retail customers.

Any thoughts on my reasoning?

A belated welcome to you here on CoBF, Nell-e! [: - ) ]

Personally, I'm more interested in tinkering with Berkshire earnings numbers like attached! BV and analyst price targets less.
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DooDiligence

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Re: BRK Book Value Feb 2018?
« Reply #3 on: February 09, 2018, 06:07:54 AM »

From the "what are you buying today" topic:



I also bought some BRK.B recently although my logic might make some cringe.  I'm a big believer in the "cover your ass" incentive.  Barclays and UBS put price targets on the B shares for ~$240.  I'm betting that money managers will herd into Berkshire by  year end in a volatile market because it's easy to justify to unsophisticated retail customers.

Any thoughts on my reasoning?

A belated welcome to you here on CoBF, Nell-e! [: - ) ]

Personally, I'm more interested in tinkering with Berkshire earnings numbers like attached! BV and analyst price targets less.

5 hundo's per second!
abc | abev | aapl | bbh | brk.b 5.1% | cvs | dva | dis | ew | gpc | mo | nvo | sftby | vde

(hoping 4 a BRK selloff 2 go all in!)

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Dynamic

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Re: BRK Book Value Feb 2018?
« Reply #4 on: February 09, 2018, 06:46:38 AM »
Welcome from me too, Nell-e.

I'd be interested to hear you expand on your psychological/incentive insights, which I can't say I've quite understood.

I'm not sure I believe I have any ability to time the market and predict its movements within a year or judge other investors' psychology (and I'm wary that any apparent success anyone might have peering at charts or judging newsflow could either be illusory or could show a fair success for 9 times in a row but then spectacularly fail the 10th time wiping out all the profits of the other 9 trades and more). Even if it's possible for a few people, it's likely to be a negative-sum game compared to just buying and holding the market thanks to frictional costs, so the winners have to win by enough to overcome such frictional costs, which seems challenging. Value Investing with little regard to short-term price movements seems to produce more reliably good returns.

I do think that disciplined Value Investing by pricing of purchases to provide a large 'margin of safety' can give the illusion of successfully buying the dips or timing the market quite often, and the bigger the 'margin of safety' you insist upon (i.e. the bigger discount from Intrinsic Value you require) the more likely you are to buy only at unusually low market prices from where there's often a good upside. If you set the margin very high, you hardly ever buy, so you'd better buy big when you have such high conviction opportunities so that you make them count!

I do sometimes look ahead on the basis of fundamentals that are likely to result in increased price or increased downside protection in the near term and record these alongside my purchase notes so I can later compare what happened to my thesis at time of purchase. That might be projecting the Book Value per share for BRK.B that is to be reported at the end of February, providing a soft floor not too far below my purchase price in the near future (or even above my price, when I got some really cheap back in Feb 2016). Or in the case of Apple when I took a 25% position when it was very cheap due to unfavourable year-on-comparisons against their best quarter ever, I looked ahead to what future earnings, iPhone releases and year-on-year comparisons might do to investor psychology to 'out the value' when planning ahead, and considering how large my position might become (I considered it could potentially double within a year and I might have to trim back (tax-free) for risk management if AAPL rapidly rose to 50% of my portfolio). Fortunately, everything rose (Apple rose about 20%-40% more than the rest of my portfolio from time to time) and we brought more cash into the trading accounts, so I kept my full stake and despite rising 63% since purchase AAPL remained a 25-35%% position pretty much the whole time).

Price targets from sell-side analysts are something I mostly ignore but they are very rarely lower than current price (unless they have a Sell or Strong Sell rating) so they always seem anchored to recent market prices plus some room to appreciate, and are likely to get lowered again in light of sharp the market falls and high volatility of late. They're supposed to be some kind of price that if it reaches within 12 months, you might want to sell to lock in gains. With such targets they're also providing 'simple recipes' sent from the-gods-on-high for naive investors to buy now and sell when it hits this level, that provide a reason for people to trade in and out and generate trading commissions, knowing also that they may also have a 'stop loss' to see them trade out if it falls too. A lot of their reason-for-being seems to be to encourage retail trading.
I would say that $240 would be a point where BRK is not greatly discounted from Intrinsic Value, and is probably somewhere in the distribution of values where IV lies after the tax cuts, and that if there's an economic downturn in the offing, IV itself may lower a little but not enormously.

There do seem to be some quarterly patterns about investor inflows and outflows from time to time, and this showed in 2015 and perhaps at least some of 2016 too (see p15 of this Dalbar "QUANTITATIVE ANALYSIS OF INVESTOR BEHAVIOR" report: https://www.qidllc.com/wp-content/uploads/2016/02/2016-Dalbar-QAIB-Report.pdf )

However, I suspect such trends could easily change from year to year and for me they'd just be a distraction from my focus on buying quality compounders only when undervalued by a good margin of safety and remaining invested to reap the rewards of compounding value.

longinvestor

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Re: BRK Book Value Feb 2018?
« Reply #5 on: February 09, 2018, 10:25:36 AM »
Bought at $190.5 today.

Have some more GTC buys out there just in the event that the market continues the temporary insanity streak. I hope there is gridlock in Congress or another spat between countries or a tweetstorm or the new Fed chief utter something ...anything to spook the market and thereby fill my orders is welcome here ;)

Nell-e

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Re: BRK Book Value Feb 2018?
« Reply #6 on: February 09, 2018, 12:11:24 PM »
"Welcome from me too, Nell-e.

I'd be interested to hear you expand on your psychological/incentive insights, which I can't say I've quite understood."

Thanks for the welcome, Guys.  Let me say (1) I don't have magical psychological insights (2) there are many things I believe which I can't prove.  One example is that I think insider trading is rampant but obviously that's something I can't prove. 

Anyway, my guess that BRK.B will go up this year is based on the concepts of herding, institutional imperative, and the belief that money manager's primary goal is job security.  If a money manager severely underperforms and they don't own well known stocks, it's quite likely that some of their clients will question their competence and bail.  It's the reason that in every cycle there are certain glamour stocks that everyone piles into.  In past cycles, IBM, GM, MSFT, were "can't miss" stocks.  Last year, it was the FANG stocks. I also don't think it was a coincidence that Apple's stock took off after Warren Buffett endorsed it.  Every money manager piles in because they can say Apple is a great company even a value investor like Buffett is buying.

The stock market is already more volatile this year.  A money manager's worst fear is that their clients pull money out as the stock market goes down thereby forcing them to sell assets.  The thinking goes that money managers will be motivated to pile into well known "safer" names this year.  I think Berkshire fits the bill. Easy story to tell- Berkshire is a world class company run by world's greatest investor that will benefit immensely from tax reform and then they can pull up Berkshire's historical chart.

The reason for posting my thinking is because I'm hoping there are retired or active money managers on this board who can dispute or confirm my hypothesis.
« Last Edit: February 09, 2018, 12:18:15 PM by Nell-e »

longinvestor

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Re: BRK Book Value Feb 2018?
« Reply #7 on: February 09, 2018, 12:49:57 PM »
Nell-e,
I can't comment on how managers think (don't care really) but if we can call that sort of institutional behavior as idiocy, thanks to them for behaving so. Buffett's oft repeated line comes to mind; we do well when the markets don't. That probably captures what you are seeking, the flight to safety and such. Munger was more direct: We wouldn't be so rich if there were not that many idiots.

Dynamic

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Re: BRK Book Value Feb 2018?
« Reply #8 on: February 09, 2018, 02:35:07 PM »
Thanks Nell-e. I get what you're saying. I could imagine a top mark for BRK.B this year being around $250 but I wouldn't expect it. If 2017Q4 BV were to be $145 and it rose to around $159 by 2018Q3 (a slight stretch but very possible), 1.6x BV is a viable price. Also I could see it going down a fair bit if there was a big market crash perhaps even $150-160 with mark-to-market declines in the portfolio.

Spekulatius

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Re: BRK Book Value Feb 2018?
« Reply #9 on: February 09, 2018, 09:34:09 PM »
I always look at BRK compared to what else is offered by Mr. Market right now. Just a short while ago, you could buy RE, which is a very well managed insurer for book value (they donít carry a lot of goodwill and intangibles either ). I do think that buying RE at book is better than buying BRK at 1.5-1.6x book. Just right now, you can buy AXS at ~0.93x book well, AXS isnít the greatest insurer,  but they are far from the bottom too and have a history of reserve releases, which means that their reserving is conservative.

I think geht RE might compound just as well as BRK.
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