Buffett might have eventually come to the same decision, or he might have come to that decision but decided to let Abel make the call.

To me it seems gigantically unlikely that Abel and Buffett could sustain a material disagreement over what the Intrinsic Value (may peace be upon its name) of the company. But maybe, I guess.


But I'm not saying they necessarily have any disagreement about what the intrinsic value.* Buffett's idea was to purchase when the price is "meaningfully below" intrinsic value. Both can have the same assessment of what intrinsic value, but a different judgment about what constitutes 'meaningfully below'. In my example, they could both thing that 2x BV is about right for intrinsic value, and Buffett interprets 'meaningfully below' as being <1.5x BV, whereas Abel thinks <1.75x BV is still a meaningful discount to the same IV.

dtb

*What is the definition of 'intrinsic value', anyway? Buffett has defined this as being the discounted value of all future cash flows, with the discount rate usually understood to mean somethiing like the 10-year Treasury rate (currently about 4.2%). This is not really a meaningful definition, for a firm that is growing faster than the discount rate, as the total of future payouts will be infinite.

But restricting value to the next 20 years, and using a five groves analysis, normalizing underwriting and investment returns to their 10-year average rate, gets Berkshire roughly $60b in annual earnings, for a market cap of $1050b, gives them a price earnings multiple of about 17. A multiple of 24 would be appropriate if they can increase their earnings 2% faster than the treasury rate. So I would say they are trading at a 'meaningful discount to intrinsic value'.