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This isn't an estimate of intrinsic value, it's just a yardstick.
My attempt to find a set of numbers that, when multiplied by some unknown constant, give IV.

The trend is just for convenience...it's a best-fit to (log) of the p rices in this range.
This year is pretty weak, primarily because things not keeping up with inflation, particularly subsidiary earnings
which have been below my predictive models by 10-14% for the last three quarters.

THESE NUMBERS ARE ALL AFTER INFLATION.
The rate of growth of the trend line is inflation + 8.58%...this has been a good stretch.
Perhaps a little bit too good...more than I usually anticipate.

Year    Metric    Trend     Vs trend
2012    242880    249709      -3%
2013    282056    271144       4%
2014    304681    294420       3%
2015    321701    319693       1%
2016    331418    347136      -5%
2017    363225    376935      -4%
2018    399628    409292      -2%
2019    460609    444426       4%
2020    481529    482577       0%
2021    556656    524002       6%
2022    547244    568983      -4%

I'm not as confident of these numbers as I usually am.
There are some adjustments that I'd like to make that I have not done.
I really need to yank out all the "equity method" stuff, currently counted at sliding book value, and replace it with a multiple of earnings on them.

I did put in an adjustment for the value of Alleghany Capital earnings rate.
Since they were acquired so late in the year, we took the hit on the full cost of purchasing them but didn't get the full year of earnings.
That adjustment added $1233 per share, if you're interested.

Jim

This year is pretty weak, primarily because things not keeping up with inflation, particularly subsidiary earnings
which have been below my predictive models by 10-14% for the last three quarters.

Thanks for posting this Jim.

I saw a reference from the annual letter to this statement on inflation:
"Berkshire also offers some modest protection from runaway inflation, but this attribute is far from perfect."

Berkshire's 2022 after-inflation performance makes me wonder if it prompted this statement, though I wouldn't characterize last year's inflation as "runaway" exactly.

There's been discussions in the past on Berkshire's perceived power to keep up with inflation given the considerable moat many Berkshire companies are perceived to have, the theory being that they should have greater pricing power than the average stock to keep up in a high inflation environment.

Does the decline illustrated in the metric above concern you at all, or make you question Berkshire's ability to be inflation protected? With the relatively hot and rebounding January CPI reading, it's a burning topic on my mind.

Berkshire's 2022 after-inflation performance makes me wonder if it prompted this statement, though I wouldn't characterize last year's inflation as "runaway" exactly...

Though the absolute rate isn't at 1970s levels, I suppose it's fair to call it "runaway" in terms of rate of acceleration.
It picked up a lot faster than most people thought, even those who expected inflation to pick up.
Bam!

There's been discussions in the past on Berkshire's perceived power to keep up with inflation given the considerable moat many Berkshire companies are perceived to have, the theory
being that they should have greater pricing power than the average stock to keep up in a high inflation environment.
Does the decline illustrated in the metric above concern you at all, or make you question Berkshire's ability to be inflation protected? With the relatively hot and rebounding January CPI reading, it's a burning topic on my mind.

Well, for sure, the acid test of pricing power is to see what happens when they raise prices.
I am sure most Berkshire units are raising prices now.
It will be very interesting to see how that shakes out...will it be a transient dip in profitability, or a real drag.
It's a bit too soon to tell.

As I mentioned a year or so ago, for once this might be one of those times to watch top line revenue numbers.
Maybe margins will suffer for a while because of all the one-time shifts in pay, fuel, staffing levels and so forth.
But if the revenue is holding up and rising in real terms, that gives hope that the all-important pricing power is for real.
The clients are still buying the product, in real terms.

Early signs, as far as I can tell, are that profits definitely aren't keeping up.
They seem to have weakened more than the economy has. For now.

Jim

Sorry, not following.
I see that the first two columns are related by the percentage of the third column. But not totally clear on first two columns:

The trend is just for convenience...it's a best-fit to (log) of the prices in this range.
Is the 'trend' related to slope of log(price) vs time, if so over what trailing time period?
What does the phrase "in this range" refer to, perhaps the date range, and if so what's the starting date?

Could you define precisely variables please, "metric", "trend"?


The rate of growth of the trend line is inflation + 8.58%
'Rate' is related to 'slope' ?

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