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Stocks B / Berkshire Hathaway


Subject:  Confused Mr. Market? Date:  12/13/2012  11:38 AM
Author:  rationalwalk Number:  196898 of 236865

So Berkshire is trading below 1.2x book value and the other guy on the side of the trade could very well be a guy in Omaha who happens to be the best capital allocator of the past fifty years.

The same weird behavior took place right after the September 2011 buyback announcement. Shares traded slightly below 1.1x book for a few days. Then the shares never again returned to buyback territory. In the chart below, I show the P/B for Berkshire's A shares at each day's closing price vs. June 30, 2011 book value per share (last published book value) for the couple of days preceding the announcement to a month after the announcement:

The ratio had a tendency to hover between 1.15-1.20x book after the market digested the news. If the same behavior occurs this time, we could see a regular trading range of 1.25-1.3x book by the middle of January. That would be $140-$145K vs. 9/30/2012 book value.

Not a prediction, just an extrapolation of Mr. Market's confusion and eventual dawning of comprehension based on the last similar event ...
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