No. of Recommendations: 11
My updated (see my previous post) chart „BRK-Price to WMAof BV 1,7" contained a wrong data point, a more than $100k too high Book Value for end of 2022. As the chart uses "Peak BV" it carried that too high Peak BV through all of the following quarters. That resulted in the yellow trendline being too high for the last two years, so Berkshire in fact is more "overvalued" since two years than the previous chart suggested. Sorry.
To make up for that mistake I additionally added in the corrected chart the so often spoken about "channel" in which Berkshire since at least year 2000 quite reliably trades. The result:
https://drive.google.com/file/d/1TcWuqXsDUJTMqYI_T...The two black lines mark the lower and upper borders of that channel. The area between covers practically all BRK prices, expressed as a multiple of (smoothed) Peak BV (Book Value).
The yellow line as in the previous chart is 1.7 x WMA16 (weighted moving average) of the higher value of "Peak BV" and "90% of smoothed Peak BV"
My Interpretation: BRK's price since 2000 practically always is in a channel, ranging from 1.2 x Peak BV to 1.7 x Peak BV. If it reaches the upper border it comes down again, if it reaches the lower border it comes up again. Both extremes do not persist.
For a full year now the share price is over the upper end of that range, an unusually long time, only comparable to around 2007/8 (so that I personally expect it to come down again --- which is why I still have some puts :)
Methodology (based on Jim):
- The basis for the whole chart: Quarterly share prices and quarterly book values, so for each there are only 4 data points per year
- For each quarter "Peak BV" (Peak Book Value) up to that date is used*
- This "Peak BV" now is interpolated/smoothed**
- Then the higher value of "Peak BV" and "90% of smoothed Peak BV" is taken, let's call it "VALUE"
- 1.7 x WMA16 (weighted moving average) of that "VALUE" results in the yellow line
- 1.2 x (smoothed) Peak BV results in the lower black line
- 1.7 x (smoothed) Peak BV results in the upper black line
*Inflation adjusted, so actually resulting in what Jim calls "Real Peak BV"; not important for the interpretation of the chart.
**This is a deviation from Jim, as he does not do that step; actually it changes nothing as you can see if you compare the newer chart with the one in my previous post, as I added that smoothing only to this newest chart; I can't see any difference in the yellow lines.
