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Stocks B / Berkshire Hathaway


Subject:  Re: Maystery purchase Date:  11/5/2018  4:54 AM
Author:  mungofitch Number:  239450 of 243205

I'm sure you know but you have to use some kind of annualized income number to get a meaningful result. I presume that explains most of the difference.

Ah! Sorry about that. Having a stupid day.
My usual spreadsheet for that tracks TTM numbers, but I did this directly from the statements.
Which, as you point out, is wrong unless it's an annual report.
The reason I never do BAC from my usual spreadsheet is that I don't track BAC closely, because the numbers have always been so reliably uninteresting.

As it happens, my huge mistake makes less difference than you might expect because Q4 last year wasn't very exciting.
Redone with trailing four quarters figures = (Q1-Q3 2018) + [(FY 2017) - (Q1-Q3 2017)].
ROA 0.95%, ROE 8.19% using trailing-four-quarters net income to common and average total shareholders' equity
ROA 0.69%, ROE 5.96% using trailing-four-quarters comprehensive income and average total shareholders' equity
I don't know what adjustments they do to get the headline numbers they report. Maybe some of them are meaningful.
These are straight from the consolidated statements, the way I'd do it for any company.
They remain, in my view, reliably uninteresting.

I think there may be some truth to the notion that Mr Buffett may be seeing more BAC shares as a cash substitute or placeholder position.
This doesn't reliably work out well as a rule of thumb, as the times that you want that money back are so often the times that the price of your cash proxy is low.
But Berkshire is very unlikely to be short of funds any time soon, so maybe it makes more sense for them than it does for most.
Much as I am not fond of them as a long term pick, I admit BAC shares are pretty likely to outperform cash over many different time frames starting from prices around $30.

Speaking of cash, Berkshire still has a lot.
Using 6 month T-notes as a proxy for their average yield, average rate in 2017 was about 1.05%.
Now it's 2.5% and still rising.
Still low, but on $100bn+ the difference adds up to something. Around $1.64bn more per year after tax, or $700 per share.
If the typical after tax dollar earned at Berkshire is worth $14.25 in market value, that's $10k more share value if sustained.
Unless you were already doing a cyclical adjustment on interest rates.

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