Author Topic: BRK Valuation  (Read 13780 times)

aceskc

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Re: BRK Valuation
« Reply #110 on: June 30, 2020, 10:16:50 PM »
BRK may have been priced lower but not necessarily cheaper relative to book, when marked to market. Even when Berkshire traded into the 160s, AAPL their biggest holding  was in the 220s. That one position alone reflects a difference of 35B or  b/w March lows and end of qtr mark to market.  Thats not to say buybacks are happening in volumes, cos that does seem unlikely given how the stock is trading but P/B <1.1 is cheap relative to history, relative to other securities and relative to Buffett's past comments , and may not be as conflicted as it may appear by his inaction through April lows, when his book has been decimated,  economy shutdown and acquisition opportunities front run by the actions of the Fed.


kab60

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Re: BRK Valuation
« Reply #111 on: July 01, 2020, 05:19:15 AM »
It seems the range of outcomes in March was higher than it is now. Covid19 has hardly been the deadly killer some feared though the economic impact of the close-downs are obviously hard to gauge. On that account I'd venture it's a much better risk/reward today than it was back then. And correct me if I'm wrong, but he did seem to indicate it was cheap at 160 - but also that it wasn't possibly to accumulate anything meaningfully since it just traded down for a short while. I really hope he took advantage of the price in Q2, but I'm not getting my hopes up based on his meager buyback track record. On the other hand, he's never had as much cash, and so little to deploy while at the same time Berkshire trades at a - relative to history - very low price.

SwedishValue

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Re: BRK Valuation
« Reply #112 on: July 01, 2020, 11:52:40 AM »
Buffett has said time and again that "it's better to be approximately right than precisely wrong."  I think it's less important to know whether Berkshire's intrinsic value is $235/$240 and more important to know that it's significantly higher than it's current market price today.
According to Buffett, it isn't trading at a discount to intrinsic value. He didn't buy any in March when it was cheaper than what it is now. If Buffett showed signs of dementia at the 2020 annual meeting, then it would be easy to dismiss him, but he was as sharp as he has been the last 10 years. I think Buffett knows more about intrinsic value for Berkshire than anyone else. I don't mean for that to come across as a criticism of your post, just that the man that created Berkshire and knows more about the company than anyone on the planet disagrees with you.

I think you make a very good point, but like Buffett said - Things change. Maybe Buffett considers the worst case scenarios to be far less likely today?

Id argue that Berkshire could be considered cheaper at year-end 2019 than it was around the lows in march, and that Berkshire today is cheaper than it was at year-end 2019 again.

Covid aint going nowhere for now, but we have eliminated a lot of the worst case scenarios. If Buffett disagrees well now soon enough.

buffetteer1984

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Re: BRK Valuation
« Reply #113 on: July 01, 2020, 01:58:49 PM »
Buffett has said time and again that "it's better to be approximately right than precisely wrong."  I think it's less important to know whether Berkshire's intrinsic value is $235/$240 and more important to know that it's significantly higher than it's current market price today.
According to Buffett, it isn't trading at a discount to intrinsic value. He didn't buy any in March when it was cheaper than what it is now. If Buffett showed signs of dementia at the 2020 annual meeting, then it would be easy to dismiss him, but he was as sharp as he has been the last 10 years. I think Buffett knows more about intrinsic value for Berkshire than anyone else. I don't mean for that to come across as a criticism of your post, just that the man that created Berkshire and knows more about the company than anyone on the planet disagrees with you.

I think you make a very good point, but like Buffett said - Things change. Maybe Buffett considers the worst case scenarios to be far less likely today?

Id argue that Berkshire could be considered cheaper at year-end 2019 than it was around the lows in march, and that Berkshire today is cheaper than it was at year-end 2019 again.

Covid aint going nowhere for now, but we have eliminated a lot of the worst case scenarios. If Buffett disagrees well now soon enough.

I agree with this assessment.  Warren said the difference between intrinsic value and price was not significantly greater during march crash than when he bought in q1 around 220.  Now the price is close to the march lows with a few variables that have changed.  One, less uncertainty around the pandemic and how the feds and markets would react.  Two, some of his bigger holdings have increased substantially in price from the lows namely apple, bnsf (i assume this one based on other rails) while brk stock has languished.  178 today is a better bargain than 178 in march imo and I'd be surprised if he didn't dip his toe into buybacks this time around.

CorpRaider

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Re: BRK Valuation
« Reply #114 on: July 01, 2020, 07:16:44 PM »
The Rational Walk on twitter posted this and I totally agree with this approach...its neat way to value BRK:

3/31/20: Cash & Investments = $349.5B + $33B gain in Q2 = $382B vs. Market Cap of $427B

Implied Value of $45B for non-insurance wholly owned subs (BNSF, GEICO, Clayton, PCP, Utility etc etc) .... man this thing is CHEAP

He also pegs P/BV at 1.08x

Thoughts?  It's an interesting way to triangulate valuation

Munger has commented on a similar way of approaching the question a number of times.  I noted one time he mentioned this maybe a week ago when I was watching an annual meeting on the cnbc archive.  I think I tweeted about what year it was.  I will see if I can find it.  He also has said before (essentially), "It used to be like shooting fish in a barrel, you could buy Berkshire below the book price of the marketable securities and get the insurance and the other wholly owned subs for free."

Yes - would be interested in seeing this ... Thx

He briefly mentioned it in the 1999 meeting in response to a question about how to value berkshire.  I think the other time I am rememebering was at a DJCO meeting, maybe a year or two ago, where he was kind of discussing why he's rich and you are not (haha) and he was really kind of like "duh, you could get BRK for less than securities portfolio and get operating businesses and negative cost float for free."