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Author: rationalwalk Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 211925  
Subject: Updated Tilson Presentation Date: 12/12/2012 6:06 PM
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Tilson's IV estimate is $180K:

Updated presentation:

http://www.valuewalk.com/2012/12/berkshire-hathaway-long-the...
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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 196896 of 211925
Subject: Re: Updated Tilson Presentation Date: 12/13/2012 11:26 AM
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Tilson's IV estimate is $180K

Seems a little more reasonable than his figures usually do.

For earnings, he pencils in $8000 pretax plus $600 cyclically adjusted underwriting profit, total $8600.
FWIW that's 13.5% higher than my $7236 pretax plus $344, total $7580.
He used a figure for underwriting profit that implies -1.39% cost of float versus my -0.8%.
The derivation of my figures is described here boards.fool.com/valuation-agrave-la-tilson-30414581.aspx
Using my earnings and his multiples you get a value of $173,473.

He actually uses a higher earnings multiple than mine: 8x pretax earnings rather than the 9x I use.
That's extremely conservative on his part.
A P/E of 12.3x is pretty darned good for that set of businesses.

On the other hand, mine is more conservative mainly due to placing a 20%
haircut on investments per share due to the perpetual drag of cash.

It's pretty much impossible these days to come up with a value figure under $150,000.

Jim

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Author: littlebow Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 196917 of 211925
Subject: Re: Updated Tilson Presentation Date: 12/13/2012 4:01 PM
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Jim,

I have been reading your posts for a long time, just not a big "poster" myself. I just thought I would chime in on this point that you make re. the money manager having other agendas. You are absolutely correct on this, and no you are not "being to hard on money managers". Tilson will love the fact that he now has a higher floor on the BRK position, offering safety on his investment(not sure if this will actually translate to a sense of increased safety at his investor level) Unlike the many investors on this board most do not take a long term view in thier investments. With the constant onslaught of market related news today it is no wonder. Investors placing funds for management tend to place far more emphasis on the nearterm returns than on what the manager is actually buying, or whether it is a good business - they may ask the question but seldom listen to the answer. You can consider the Fund Flow data showing the mass retreat from equities as a sign of shortterm investors voting with their feet. Whether you are buying a business, a car, or investing in whatever - asking "what is the agenda?" of the person(party) on the other side can be a very valuable question. It shouldn't necessarily change the decision - but it can be valuable information.

LB

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 196920 of 211925
Subject: Re: Updated Tilson Presentation Date: 12/13/2012 4:54 PM
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I have been reading your posts for a long time, just not a big "poster" myself.
I just thought I would chime in on this point that you make re. the
money manager having other agendas. You are absolutely correct on this,
and no you are not "being to hard on money managers".


To be balanced, I can make a case the other way.
I think we can all agree that Mr Buffett is pretty good at capital
allocation, company valuation, knowledge of Berkshire, and a feel for
what constitutes a good margin of safety. We should do our own homework,
but starting from hints from Mr Buffett isn't entirely a waste of time
if it's a topic involving all of those skills.

If his assessment was that 1.1x book was a good enough margin of safety
to constitute "definitely undervalued with room to spare",
we can probably believe him. 1.15x or 1.2x or 1.25x might also
be good enough, but we can be pretty sure that 1.1x definitely was.

We all know that the fair price/book value for Berkshire should be
rising slowly over time, but of course we didn't expect a change in the
threshold any time soon. With the buyback number changed to 1.2x, the
number Mr Buffett has prominently declaimed as "definitely cheap enough" is now higher.
With "definitely cheap enough to give a margin of error and margin of
safety" moved up, we the unwashed onlookers can reasonably reconsider
what ranges of price/book now constitute "fair value" and "moderately underpriced".
In short, it would not be nonsensical to adjust our expectations for
those to be a bit higher than they were before as well. So, though the
company is not worth any more to a well informed observer, investors
who are mere humans might reasonably be expected to have higher valuation
multiples in mind for "cheap" and "fair", and (importantly) this adjustment of
attitudes came pretty directly from the guy who probably knows best.
It's unlikely in the extreme that this was an unforeseen consequence of the change:
Mr Buffett wants us to understand that higher multiples make sense.

So, one could conclude that Mr Tilson's purchases were sensible to the
extent that the announcement might rationally colour one's estimate of
fair value, including his. Maybe the attitude should have changed more
for uninformed observers than for a prominent professional valuer of
BRK like Mr Tilson, but an adjustment isn't crazy.

Jim

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