Berkshire has over $100B in debt. Should that be factored into the equation?

In terms of thinking about multiples, a pretty good way to look at things from a top level is to break Berkshire down into the following categories:

Cash and other investments with obvious market prices
Long term debt
Deferred liabilities: float and deferred taxes
Other: operating subsidiaries without their attached debt

The first two should arguably be valued at face value, a multiple of 1.
The third one--trickier, but could be treated like debt as well, at face value, a multiple of 1.

If you take the market cap, and subtract those first three, you are left with the market cap of the "other" category. They currently have annual after-tax earnings of about $27.5 billion, so you could calculate their P/E ratio from that.

It's a big messy because float is only sort-of like debt. It costs nothing and never has to be paid back, so it's always a debate about which way to count it.


I would also try redoing the exercise counting only the head office debt, not the non-recourse debt within the utilities and rails. You could view the investments in those as arm's length, so the debt inside BNSF doesn't matter to head office any more than the debt inside Coke does. In this view, you have to make sure the cost of that debt is subtracted from the earnings you're ascribing to them. I think (?) that is already done if you use the earnings figures from the Management Discussion section of any financial report.

Jim