Let’s say that Berkshire’s price-to-book value declines from the present 1.72x to 1.5x. If this occurs, assuming 8% annualized growth in book value, we can expect Berkshire’s Class A stock to trade at ~$995,000 in five years and ~$1,463,000 in ten years. Given the current price of $775,000, shareholders could expect annualized returns of 5.1% over the next five years and 6.6% over the next ten years.

In other words, if we assume that growth in book value per share to 8% and the price-to-book ratio will contract to 1.5x, returns for shareholders holding the stock from current levels will be materially below 8%. Of course, there is no law that says that the price-to-book ratio will be 1.5x in the future or that growth of book value per share will be 8%.

Substack: Warren Buffett on Berkshire’s Valuation

Excellent post by Rational Walk on BRK valuation using Buffett’s writings and repurchase actions.