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Stocks B / Berkshire Hathaway

URL:  http://boards.fool.com/questions-about-brk-30304768.aspx

Subject:  Questions About BRK Date:  10/6/2012  10:33 PM
Author:  dsciola Number:  194709 of 212951

Fools,

Fairly Nube Fool here who just discovered, sadly, the usefulness of the Fool BRK boards. I've sub'd to SA and typically have read those boards instead.

But Not anymore! :) Got pnt'd out to a few great posts on BRK on this board after starting a thread on SA about BRK's value and R/E exposure. Really enjoyed reading them all...

http://boards.fool.com/past-four-years-30272943.aspx
rationalwalk suggested that the A shares might be worth $185,682. Divide by 1500 to get the B share value of $123.79.

http://boards.fool.com/two-column-30189296.aspx
A month earlier, rationalwalk used a different method to calculate an intrinsic value of $182,400 for the A shares (or $121.60 per B share), and said the range of the actual value was almost definitely between $160,000 and $190,000 (or $107 to $127 for the B shares).

http://boards.fool.com/quotwould-the-portfolio-allocation-pe......
Here, LONGREITS came up with $180,000 (or $120 for the B shares).

First off, thx for all the great analysis. Had some questions relating to BRK in general and also in response to some of the above posts.

First off, Bigshan pts out in Column 1 and 2 valuation, that Cash and investments is not = in value to sh'holders as op earnings, seems to equate it to just excess cash on a BS and earning no real return. Any further commentary on this aspect of BRK? My inclination it is of some greater value than just excess cash, since the cash is put towards investments here that should earn x return, but of course I could be wrong. Would love to hear more thoughts / commentary here.

Also, curious about what ppl on this board think about Tangible Book Value vs Book Value when valuing BRK. WB has emphasized that BV is the best metric for valuing BRK and Im curious about the validity of TBV vs BV. Looking at BRK's past valuations, it has a TTM p/BV of approx 1.24, 10yr median of 1.56x, 5yr med of 1.36x, and 3yr med of 1.29x, vs for TBV a TTM multiple of 1.92x, 2.18x for 10yr, 1.97 for 5yr, and 1.87x for 3yr. Curious about this pronounced discrepancy in valuation and whether it may mean anything about BRK's true value.

Finally, a lot of ppl seem to argue that a multiple of about 10x seems reasonable for value of BRK's operating subsidiaries and an overall multple of 1.5x for BRK's entire value. My question is, other than WB asserting these are reasonable, what's the validity of these multiples as being fair indicators of Intrinsic Value? Granted, WB is a smarter guy than me. I simply think its smart to ask these questions, simply if to fight against confirmation bias, groupthink. IMO, a great way to see if an investment makes sense is to challenge the bullish / reasonable arguments, and if the challenge proves non-sensical, than perhaps the bull argument is much more valid and there is value yet to be recognized in x investment, here of course BRK.

Thanks again, hope to learn more.

Dom
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