No. of Recommendations: 0
I calculated owner earnings for Berkshire myself. I stayed simple and conservative by subtracting full capital expenditures from cash from operations.
Did you use operating earnings instead of net earnings? Did Mr. Buffett mean the latter?
Also, Chris Bloomstran has been making the case that Berkshire spends significantly more on its operating businesses than what it claims as depreciation (not necessarily on each individual business but in aggregate) so as to widen the moat of the businesses and increase the earnings power going forward. A couple of years ago, he estimated that Berkshire spent about $5 billion more on its operations than Capex.
If so, will subtracting full capital gains from earnings capture that part?
Also, I'm not sure if that amount qualifies as "required to maintain its competitive position and unit volume" (which would be subtracted from net earnings, according to Mr. Buffett) or investment to pursue growth (which would be added to net earnings). Bloomstran argues that it is the latter.
Bloomstran does compute Berkshire's normalized net earning power, though it looks like you are focusing only on the operating side of the business, whereas he calculates it for Berkshire as a whole (including the stock portfolio using dividends and look-through earnings).
For year end 2022, he calculated that to be $53.9 billion for Berkshire See p.99 of his latest annual report.
The growth rate of the earnings is interesting and I'm curious to know if anyone has any estimates of that.
