As with any trend line of value that roughly tracks price over time, it's not a bad predictor of stock returns.
I calculated the stock price divided by a simple average of the two smoothed value methods since 2008.
I used the value estimate for a given quarter starting on the release date of those statements, not when the quarter ended.
Dividing all start dates since January 2008 into 25 equally sized buckets, these are the average one year forward returns:

Inflation + 32.5%  (starting the 4% of days with the lowest ratio of price to smoothed value estimate)
Inflation + 26.1%
Inflation + 23.1%
Inflation + 19.8%
Inflation + 18.7%
Inflation + 13.2%
Inflation +  9.8%
Inflation +  7.1%
Inflation +  6.0%
Inflation +  3.1%
Inflation +  6.6%
Inflation +  6.8%
Inflation +  2.7%
Inflation +  1.7%
Inflation +  0.6%
Inflation +  0.2%
Inflation   -1.8%
Inflation   -5.6%
Inflation   -6.5%
Inflation   -8.8%
Inflation  -13.3%
Inflation  -24.1%
Inflation  -26.9%
Inflation  -19.1%
Inflation  -32.2%   (starting the 4% of days with the highest ratio of current price to smoothed value estimate)

Depending on whether you look at data from 1999 or 2003 or 2008, models applied to today's ratio suggests one might anticipate a one year forward return of inflation + 14.0% to inflation + 14.9% from here.
That's starting from a price of $480795 (320.53 per B) and CPI 301.836.

That's if the next year resembles the range of the last 15 or so years in both value growth rates and valuation multiples, which it might not.
In essence, this value model is highly dubious of the recent drop in book per share as an indicator of a lower value per share.
Consequently it thinks the current valuation multiple is a bit below the average of recent years, maybe 5%, not a bit above.

Jim

Berkshire Hathaway FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.