No. of Recommendations: 7
Someone asked about calculating intrinsic value and I meant to reply. Can’t remember which thread it was in now.
Mr. Buffett laid out his thinking on the subject quite succinctly in the 2018 letter. Greg Abel basically reiterated the same method when talking about buybacks at the meeting last week.
https://www.berkshirehathaway.com/letters/2018ltr....Mr. Buffett: “I believe Berkshire’s intrinsic value can be approximated by summing the values of our four asset-laden groves and then subtracting an appropriate amount for taxes eventually payable on the sale of marketable securities.”
It’s surprising to me that many avid Berkshire watchers don’t do it. You do have to dig for the numbers a bit. You have to make a stab at an earnings multiple for the wholly owned companies*. And it does often spit out numbers that aren’t pleasing to those who listen to Bloomstran, Tilson, and the other perma-bulls. Like now, for instance.
I often riff on Mica 6:8 in my head:
He has shown you, O mortal, how to estimate IV
And what does Mr. Buffett require of you?
To sum the values of our four asset-laden groves and then subtract an appropriate amount for taxes eventually payable on the sale of marketable securities.
* or you can solve for X and see what multiple the market is assigning to the subs, and see if that is good value or not.
