No. of Recommendations: 16
From the article:
Thinking like an owner, Berkshire's current $900 billion valuation buys you:
$370 Billion in Equities, but with the caveat that you can't sell your large holdings for anywhere near the quoted price. Your basis is low so you'll owe taxes, and both the size of your sales will negatively impact the price. This isn't a hypothetical challenge. Look what happened when Berkshire panic sold the airline stocks in 2020.
$167 Billion in Gross Cash, $39 Billion Net Cash, but again with the restriction that you have to keep a lot of it on hand, regardless of what the prevailing interest rates are.
$363 Billion in Operating Companies - These operating companies produced $27 Billion in Earnings (14x) and $20 Billion in FCF (18x) on the back of an extraordinary year in insurance underwriting. If we normalize this for an "average" underwriting year with a $1.5 billion profit, we have $23 Billion in Earnings (16x) and $16 Billion (23x) in FCF.
Equities: $354bn, take some off for taxes. Say $307bn.
Cash: Jim explained the debt. Cash + fixed income $187bn. Take $50bn off for reserve. $137bn
Earnings: $25.5bn at 16x = $408bn.
Total $852bn
A Share equivalents: 1,441,483
$591/A
$394/B
Make your own adjustments.
Other methods:
Look through: $388/B
Shareholder Equity + Float + 1/2 Deferred Taxes: $349/B
Highest buyback: $367/B
Berkshire is overvalued by 10-20%?
If I sell, I get hit with a 20%+ tax bill.
Wake me up when it's 2x book.
