Author Topic: BRK Valuation  (Read 14997 times)

Xerxes

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Re: BRK Valuation
« Reply #10 on: June 23, 2020, 08:50:31 AM »
I don’t know who said it some weeks ago.
But a comparison was made with MSFT in Ballmer era and how after ValueAct got in with a more aligned BoD things start to look differently.

I kind of agree with that. To be clear, In no way is Buffet is comparable to Ballmer but I agree that ‘hidden value’ can only by unearthed by the next management. Wether is implementing Precision Scheduling on BNSF or deploy some of the cash.

My investment in BRK is really based on what next management will do and am just buying is close to book now .... while dealing with the pain of going sideways for some more years. And I am ok with whatever Buffet does in the meantime.

I think that a low risk proposition.

+1 I think WB's involvement is irrelevant moving forward especially if you're relatively young and holding long.

Cheers !
I am very close 40, so not that young.

BRK is one massive call option with no expiry.


AzCactus

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Re: BRK Valuation
« Reply #11 on: June 23, 2020, 08:50:39 AM »
My investment in BRK is really based on what next management will do and am just buying is close to book now .... while dealing with the pain of going sideways for some more years. And I am ok with whatever Buffet does in the meantime.


For those holding Berkshire with the above statement in mind---I think this is a little naive.  There has been limited communication that Buffett will step down anytime soon.  I think it's possible he is in charge another 5-7 years. Buffett clearly feels he has earned the right to continue running the show even if he is no longer the best man for the job.  This seems akin to owners giving loyal players big contracts at the end of their career-ala Lakers with Kobe Bryant in 2013.  Except in this case Buffett is both owner and operator. 

Xerxes

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Re: BRK Valuation
« Reply #12 on: June 23, 2020, 09:06:53 AM »
I am ok for holding for the next 10 years with Buffet and another 15 years without him. 
That is why I called it one giant call option that one can buy today at fair or below fair price.

And I don’t really care much about any succession communication from Omaha.
When it happens it will be sudden and he won’t telegraph it I think. If he doesn’t telegraph his investments and buybacks, he won’t telegraph anything tangible related to succession.

All I am saying that “juice” wont be extracted in Buffet era

Mephistopheles

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Re: BRK Valuation
« Reply #13 on: June 23, 2020, 09:12:36 AM »
For those mentioning precision railroading post WEB, you're assuming the BNSF management wanted to implement it but Buffett stopped them? I am having trouble believing that because Buffett is generally very hands off. So why would he get involved for this?

Maybe BNSF has a better reason not to do it, or maybe they wanted to wait it out to see how it affects customers in the rest of the industry?

Xerxes

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Re: BRK Valuation
« Reply #14 on: June 23, 2020, 09:17:36 AM »
It was just an example.
I agree that HQ is probably not that involved and they give lot of room for the operating business to do what they believe best.

Castanza

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Re: BRK Valuation
« Reply #15 on: June 23, 2020, 09:37:27 AM »
My investment in BRK is really based on what next management will do and am just buying is close to book now .... while dealing with the pain of going sideways for some more years. And I am ok with whatever Buffet does in the meantime.


For those holding Berkshire with the above statement in mind---I think this is a little naive.  There has been limited communication that Buffett will step down anytime soon.  I think it's possible he is in charge another 5-7 years. Buffett clearly feels he has earned the right to continue running the show even if he is no longer the best man for the job.  This seems akin to owners giving loyal players big contracts at the end of their career-ala Lakers with Kobe Bryant in 2013.  Except in this case Buffett is both owner and operator.

WB is going to be 90 in a few months...I don't think it's naive to think with some degree of certainty that he won't be the head of Berkshire Hathaway sometime in the near future. That being said, I have no problem with him. The man is skilled and has definitely earned his championship rings. I'm just saying (as someone in their late 20's) that I don't really care what WB does in the next few years because 1.) I trust him that if he does anything it will be on the conservative side and is likely to not impair the conglomerate in any significant manner. 2.) like X said above...an under performance in the short term is insignificant to me in the long term. 3.) If one and two are both true then this provides me a few more years to accumulate shares are cheap prices.

So my investment decision in BRK is not built on the back of the Wizard of Omaha's future decision making. It's built on his diligent commitment to value investing in the past, his diligence in establishing a diligent management team which embodies his general principles with perhaps some affluence to the changing climate of the world (perhaps a bit out of WB's circle of competence).

I liken WB to a highly respected surgeon that is now in his 70's. Clearly respectable and renown. But unlikely to learn new methods and approaches. That's not to say he wont complete some miraculous surgeries near the end of his career to the best of his ability. It's simply he isn't likely to view surgeries in a new light with new methods which could potentially give better results maybe in a less invasive, quicker recovery type manner.
Core: BRK | MSFT | GOOG | RTX | MSGS | TPL | WFC | VZ | VNO | PCYO | PLNT | ESPO | HACK

AzCactus

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Re: BRK Valuation
« Reply #16 on: June 23, 2020, 09:45:46 AM »
This part of what you mentioned Castanza is interesting:

an under performance in the short term is insignificant to me in the long term

I am similar age to you early 30's.  However, Berkshire has underperformed for a pretty long time---I believe the past 10 or so years.  If you think that underperformance continues for another 5-7 years we are at 15 years of underperformance.  Just to get back to even with VFIAX or something is no easy chore.  I am long Berkshire because I believe that it is undervalued today and things will be done sooner rather than later. Some things that come to mind off hand are buybacks and making an acquisition.

ValueMaven

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Re: BRK Valuation
« Reply #17 on: June 23, 2020, 09:50:36 AM »
Can we take this back to the specific topic thread of VALUATION

I have Fair Value pegged at $260 - $280 currently.  Would love to know what others think around valuation.  It seems like the Street is giving little credit for the Operating Income at the parent company more broadly. 

AzCactus

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Re: BRK Valuation
« Reply #18 on: June 23, 2020, 10:09:19 AM »
I think fair value is around 230-240 per share.  A couple of reasons I don't have a number closer to Value Maven's:
1. Heavy cash balance-This only really helps if recession is much longer than people except.
2. Buffett's inactivity-Heavily covered.  I won't reiterate.
3. Buffett's inability of unwillingness to do buybacks at a bigger scale.  One thing Buffett has said many times is we could move fast or make a deal quickly.  Well he had the opportunity to snatch up shares around 160/170 and didn't.  Now they have spent most of this quarter around 180---we'll see if he did anything. 

longinvestor

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Re: BRK Valuation
« Reply #19 on: June 23, 2020, 10:57:26 AM »
For those mentioning precision railroading post WEB, you're assuming the BNSF management wanted to implement it but Buffett stopped them? I am having trouble believing that because Buffett is generally very hands off. So why would he get involved for this?

Maybe BNSF has a better reason not to do it, or maybe they wanted to wait it out to see how it affects customers in the rest of the industry?

I believe that is the reason given during the 2019 annual meeting. PSR is fancy jargon used by the RR majors for effing their customers.