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General Category => Berkshire Hathaway => Topic started by: wescobrk on February 09, 2016, 07:50:46 AM

Title: BRK Ever Hit 1.2?
Post by: wescobrk on February 09, 2016, 07:50:46 AM
In a couple of months, I may have access to my 401k as I may start a new job.
I would love to put a huge amount in BRK if it were to go below 1.2.
Even in this volatile market brkb doesn't seem to go below $125.

This seems like waiting for Godot.
Hopefully it drops below in March or April.

Anyone know the 1.2 number.  Does it have to drop another 4% or so?
Edit as I should have put prospective 1.2 book over the next quarter or so, as a 2 second google search I can pull up the last q number.
I don't want to come off as a lazy ass.
Thanks.
Title: Re: BRK Ever Hit 1.2?
Post by: petec on February 09, 2016, 08:25:58 AM
If it is a significant amount and for a long time, 4% won't affect your eventual outcome.
Title: Re: BRK Ever Hit 1.2?
Post by: DCG on February 09, 2016, 09:36:36 AM
I don't think there's a great way to track this. As BRK stock goes down, so likely do the shares of it's equity holdings, which in turn lowers BRK's book value.
Title: Re: BRK Ever Hit 1.2?
Post by: longinvestor on February 09, 2016, 11:11:16 AM
No.

If it does, unlikely to stay below 1.2x for very long. $60+B cash, that's some "legs" to take on.
Title: Re: BRK Ever Hit 1.2?
Post by: wescobrk on February 09, 2016, 11:22:51 AM
what was twocfa's option trade for BRK he talked about?
It'll probably never happen as this board has probably already forever removed the possibility.
It was nice of him to share, though.
Title: Re: BRK Ever Hit 1.2?
Post by: Palantir on February 09, 2016, 11:29:49 AM
Sell puts yo.
Title: Re: BRK Ever Hit 1.2?
Post by: thepupil on February 09, 2016, 11:34:02 AM
I don't think there's a great way to track this. As BRK stock goes down, so likely do the shares of it's equity holdings, which in turn lowers BRK's book value.

while this is true, it is not 1 for 1. because of the counter-cyclical deferred tax liability and because Berkshire holds a lot more other assets than stocks, the sensitivity of the book value relative to the change in equity portfolio is about 0.3

Title: Re: BRK Ever Hit 1.2?
Post by: HWWProject on February 09, 2016, 03:00:02 PM
Patiently waiting as well.  My current buy price is $178,500 at A shares. 

Title: Re: BRK Ever Hit 1.2?
Post by: fareastwarriors on February 09, 2016, 04:52:43 PM
Patiently waiting as well.  My current buy price is $178,500 at A shares.

Buying A shares? Baller...
Title: Re: BRK Ever Hit 1.2?
Post by: gfp on February 10, 2016, 04:23:24 AM
Current buyback number is between 120 and 121 on the B shares.  If you want BRK shares the difference between 125 and 121 isn't going to materially change your results.  BRK doesn't have $60 Billion cash on the balance sheet, but they are plenty flush to buy in a ton of shares if the opportunity presents itself.  It usually doesn't.  Declines in the stock portfolio are usually offset by retained earnings over the course of the quarter, as well as the previously mentioned swings to deferred tax liability.  I don't believe that Book Value per share has declined quarter to quarter since the buyback was instituted.  BV obviously did decline during the financial crisis, pre buyback policy.  Wells, Amex, DaVita are down a lot but most of that will show up in Q1 results if prices stay where they are or decline further, not the annual report BV number.  That gives BRK another 3 months of retained earnings to offset any after tax declines.  When it comes to buying BRK at the buyback number, close is good enough
Title: Re: BRK Ever Hit 1.2?
Post by: Dynamic on February 10, 2016, 09:32:52 AM
I bought a new batch of BRK.B on 3rd Feb at about $124.26 (not completely sure, as I bought in British pounds at 85.121 GBP for my tax-exempt Individual Savings Account and estimated the USD price using the exchange rate a few minutes later). That's a P/BV of about 1.234 using 3Q2015's BV.

My purchase decision was both that BRK's price was attractive and that I was fund it by selling a fully-valued position without having to pay tax on my gains on it over the last 14 years. By my estimation, at a P/E of 28.8 when I sold, it had ~10% per annum long-term upside, the highest P/E in recent years was about 34 last year, so limited short-term upside, and it had plenty of short-term downside risk, despite being a fundamentally good company.

Having both of these in my favor made my decision easier.

I figure that once BV is announced for the year ended 31 December 2015 (announcement due around 25th Feb), it could well be higher BV so my price could well be below 1.2 anyway. I'm not sure if Berkshire's authorised buyback at P/B <= 1.2 is based on current book value as it varies day by day or the last SEC-reported book value (which would seem fairer as it uses only publicly disclosed data).

That fact that everyone knows about the buyback option probably will stop it from regularly getting that low as for most it provides a fairly good 'floor' below the price that provides a feeling of safety to many investors, myself included. I think enough people use it as an approximate buy price target that short of major adverse world events creating near-term fear and panic, it's likely to remain a pretty good downside buffer.

The new UK tax-year starts on 6th April and I'll then be able to invest more within this tax-free account, so I'm hoping the price will remain close to 1.2x BV for some time. My wife's own account isn't fully funded this year, so we'll be considering adding within her account before then.
Title: Re: BRK Ever Hit 1.2?
Post by: HWWProject on February 10, 2016, 05:52:54 PM
Patiently waiting as well.  My current buy price is $178,500 at A shares.

Buying A shares? Baller...

Ha!  No but I wish.  Just using A shares as a proxy.  My buy price is actually based on Buffett's '2-Column' valuation method.  Was pleased that it correlates well with 1.2 x BV