Author Topic: BRK Book Value Feb 2018?  (Read 10350 times)

longinvestor

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Re: BRK Book Value Feb 2018?
« Reply #20 on: February 25, 2018, 11:40:00 AM »
~$215000 (A)
$143 (B)

longinvestor, great estimate of BV :-)
Actual number = $211,750
John Hjorth also came up with identical numbers. Both of us were trying to point out that some around here were missing the massive single quarter jump that is now published. But the bigger story is the tax reform taking us to a higher plateau of earnings which is recurring, which makes the BV discussion the silly syllabus. It gets even sillier if one thinks along the lines of Semper Augustus re unreported earnings. I do. Buffett has a very old habit of understating his hand.

longinvestor, I agree, “the bigger story is the tax reform taking us to a higher plateau of earnings which is recurring”. Do you have thoughts on what normalized earnings look like for BRK post tax reform? Or have you come across any good estimated you can link me to?
No, I don’t. On a bridge basis, reported earnings and growth over the past 5 years line up well with that of the previous decade, circa 15%.  I especially liked the table of earnings that was provided in the 2016 report. That’s my source. I do like Semper Augustus for putting numbers to unreported earnings.


John Hjorth

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Re: BRK Book Value Feb 2018?
« Reply #21 on: February 25, 2018, 12:48:15 PM »
shalab,

If one do that, then we aren't talking about book value any longer.
« Last Edit: February 25, 2018, 01:06:29 PM by John Hjorth »
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shalab

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Re: BRK Book Value Feb 2018?
« Reply #22 on: February 25, 2018, 07:44:40 PM »
why not? it is here in the AR - page K-62:

Investments in The Kraft Heinz Company (Fair Value: 2017 – $25,306; 2016 – $28,418) ...... 17,635

Almost 8 billion is not showing up in book.

shalab,

If one do that, then we aren't talking about book value any longer.

John Hjorth

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Re: BRK Book Value Feb 2018?
« Reply #23 on: February 26, 2018, 01:56:11 AM »
Well, it's just not book value as such any longer then, but some kind of adjusted book value. The difference is conceptual.
« Last Edit: February 26, 2018, 05:13:22 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
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StubbleJumper

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Re: BRK Book Value Feb 2018?
« Reply #24 on: February 26, 2018, 05:06:10 AM »
Well, it's just not book value as such ant longer then, but some kind of adjusted book value. The difference is conceptual.


The difference is conceptual, and it's also half-assed.  With BRK, why would one bump BV to reflect and updated value of Kraft Heinz but not MidAmerican or BNSF?  We know that MidAmerican and BNSF are probably worth considerably more than their carrying value on the balance sheet, but we don't adjust their valuation because we wouldn't have the foggiest idea where to begin.  But, if you monkey around with the value of one large asset but not the others, your adjusted book value is neither fish nor fowl.

For Fairfax, some of us monkey around with BV to reflect the evidence from the market that certain assets are worth considerably more than their carrying value.  However, with Fairfax, it's less of an issue because with few exceptions their assets and liabilities are financial in nature, are relatively easily measured and are updated annually.  So at least with FFH, the updated BV isn't missing large chunks (the non-insurance subs are not so large).

It's still an interesting and worthwhile exercise to do, but it's just important to understand that it is half-assed by necessity.


SJ

Cigarbutt

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Re: BRK Book Value Feb 2018?
« Reply #25 on: February 26, 2018, 05:54:54 AM »
Basic notions in a sense but truly fascinating.
Statutory accounting rules has historically focused on the solvency aspect of the numbers but that's been changing.
It would be reasonable to conclude that book value as generally reported now is closer (?) to fair or intrinsic value.
In the last 20 to 25 years, in general, the market price to book "gap" has increased (especially the market to tangible) but specific reasons could explain that: larger buybacks, technology, more industries now characterized by an intangible "edge".
Bottom line: despite what Mr. Benjamin Graham was saying decades ago, book value as reported these days, in general, has a poor correlation with "market" value appraisal.

What is nice with BRK and many others, because of the nature of businesses assembled and the "culture", reasonable efforts can result in a fairly precise adjustment to book value. Of course, in a group exercise, the final number may vary but, if done in a value-based forum, maybe, the efficient theory may apply here to some degree. :)

At the end of the day though, derivation of an adjusted book value remains an individual exercise.

That can involve financial notes, fancy math, comparables etc. But, at the end of the day, the premium you pay should correlate to the actual amount that you would pay for the whole company if you were a private investor.

Theoretical exercise with BRK, but potentially rewarding nonetheless.

ValueMaven

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Re: BRK Book Value Feb 2018?
« Reply #26 on: February 27, 2018, 05:57:08 PM »
BV is currently $141

1.2x equates to $170,

at $210 brk.b is only trading at 1.5x BV currently...

very, very rough math - but should help some ppl out