No. of Recommendations: 4
Why are new cash increases worth a 1.40-45 multiplier in estimating IV?
Mr Buffett laid out a simple way of thinking about estimating Berkshire IV in the 2018 annual report. We refer to it as the 5-Groves. A handful of us on here seem to do it, including Jim who does a version of it he came up with himself (two-and-a-half column).
This values cash at face value, or sometimes less than face value if you think some of it will never, ever be used, and, of course, it won’t.
FWIW, using a strict interpretation - cash and equities at face value, 6% earnings yield on the subs - comes to $505 per B share as of June 30.
I can post historical numbers later. If I remember correctly, the 5-groves IV/book has been trending down the last few years.
