Author Topic: Berkshire closed down to near book value  (Read 6916 times)

scorpioncapital

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Re: Berkshire closed down to near book value
« Reply #10 on: March 23, 2020, 04:32:33 AM »


Xerxes

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Re: Berkshire closed down to near book value
« Reply #11 on: March 23, 2020, 06:49:52 PM »
Is that calculation with the lower book value that will kick in ?

John Hjorth

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Re: Berkshire closed down to near book value
« Reply #12 on: March 23, 2020, 10:40:38 PM »
Xerxes,

Well, the basic assumptions appear to be present in the tweet. [Btw, Kyler Hasson is our fellow board member khturbo.]

- - - o 0 o - - -

Another good piece on the matter at hand : Ravi Nagarajan : Berkshire Hathaway and the Coronavirus Crash.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

Cigarbutt

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Re: Berkshire closed down to near book value
« Reply #13 on: March 24, 2020, 04:57:47 AM »
Xerxes,

Well, the basic assumptions appear to be present in the tweet. [Btw, Kyler Hasson is our fellow board member khturbo.]

- - - o 0 o - - -

Another good piece on the matter at hand : Ravi Nagarajan : Berkshire Hathaway and the Coronavirus Crash.
Thank you. The last piece was very interesting. I have a personally favorable bias for analysts who present information in a 'scenarios' way and who let you decide (raw data and analysis versus already chewed up data). And there's a lot to chew on.
The rational piece seems to confirm that the pandemic will have a relatively small direct impact on insurance businesses.
"The fact that Berkshire’s current price-to-book ratio is historically very low does not necessarily mean that Warren Buffett is repurchasing stock because he could have current or anticipated future opportunities that he considers superior to repurchases."
So, I guess it's up to all of us to make up our mind about this but one has to consider that this is, in a way, a "to be or not to be" type of question and, somehow, i wish that the existential side of the question did not exist.

woodstove

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Re: Berkshire closed down to near book value
« Reply #14 on: March 24, 2020, 06:15:07 AM »
There was an interview with Ackman on Bloomberg yesterday, in which he mentioned an interesting valuation method for epidemic impairment to value:  For a business that is survivable (ie, not risk of debt default or forced restructuring), assume loss of next 12-18 months of normal-conditions earnings.  Then value the business based upon your customary model.  That may suggest a way to think about BRK intrinsic value, and also value of the portfolio aside from market quotes.

Xerxes

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Re: Berkshire closed down to near book value
« Reply #15 on: March 24, 2020, 11:25:03 AM »
Thx John for the link.
Very informative and timely.

My view is that Berkshire has no interest in buybacks in the short term (close to BV or not ) till they know which direction the event will take the US economy. Once certainty is established on the vector then perhaps it become 1 bird in the hand vs. 5 bird in the bush (as oppose to 2 bird in the bush)


Woodstove
I saw the very same interview. I think he was making up for his last interview where he said “hell is coming”. I am glad to see he is long and Optimistic

scorpioncapital

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Re: Berkshire closed down to near book value
« Reply #16 on: March 24, 2020, 05:16:58 PM »
I've looked at the balance sheet of some other industrial companies or conglomerates. Some have shrunk their equity to near Zero with buybacks. This implies a belief the business is a gift from above. It's a little presumptuous by some managements. Meanwhile others have just retained cash and over the years were able to add better businesses by merger or enter new lines. Cash is freedom. So I don't think berkshire likes to buy back unless it's massively undervalued. Not a little.

John Hjorth

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Re: Berkshire closed down to near book value
« Reply #17 on: March 24, 2020, 05:33:09 PM »
... Some have shrunk their equity to near Zero with buybacks. ...

So what? - what has that to do with Berkshire?
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

scorpioncapital

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Re: Berkshire closed down to near book value
« Reply #18 on: March 26, 2020, 02:36:20 AM »
It's an example showing how flexibility to grow is impaired by buying back too much shares at the wrong price. Arguably nobody knows the right price. Not even Buffett can time the low.

aws

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Re: Berkshire closed down to near book value
« Reply #19 on: March 26, 2020, 01:31:22 PM »


My view is that Berkshire has no interest in buybacks in the short term (close to BV or not ) till they know which direction the event will take the US economy. Once certainty is established on the vector then perhaps it become 1 bird in the hand vs. 5 bird in the bush (as oppose to 2 bird in the bush)

I disagree strongly with this.  Buffett isn't one to think a pandemic is going to destroy the US economy on a long-term basis, and so therefore a 25% haircut in the price is a huge incentive to be buying back shares, because I seriously doubt he thinks the IV of Berkshire has dropped by that much.  After all, what's he saving $120b cash for if not to use in a time like this? 

Berkshire is much cheaper now in both absolute terms and relative to the market than it has been in years.  Even after the pop this week, it's still about 2% lower than the lows in December 2018, despite huge gains in book value since that time.  For perspective, the S&P 500 total return index is 15% above the December 2018 low.  I'd think he would be spending $5b+ on buybacks this month, assuming he's not been hindered by a blackout period.