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Cash as % of investments 31%.
Of the prior 17 year ends, it was higher percentage 7 times, lower 10 times.
Currently 2 percentage points above the average in that stretch of 29%.
The big reason for the percentage drop is the rise in the market value of the equity portfolio.
Forget the headlines, no story here that I can see.

As I've mentioned before, I think it's often useful to view cash as merely the extreme short/liquid end of the fixed income allocation.
So:
Cash+fixed income as % of investments 36%.
It was higher than this 16 of the prior 17 years, down 11 percentage points from the average.


But back to the equity portfolio:
When estimating the value of the firm, one big question is deciding regularly whether the equity portfolio contains positions which are both big and potentially overvalued.
I don't want to count chickens that don't yet exist.
The positions that stand out are Coke and Apple, both big, both seemingly richly valued. Charter and Moody's are also seemingly pricey, but smaller.
Taken together, these four have a trailing P/E of about 26.7 today and using an estimate of "current run rate" earnings a P/E of 25.1.
These four represented about 41% of equities at year end, and about 43% today.

To feel really confident they're worth the value I'm ascribing to them, I think I'll apply a haircut.
I'd rather value them at <=20 times "current run rate" earnings, and be pleasantly surprised if I'm wrong.

When speaking of haircuts for conservatism, one might also want to remove the $3.3bn by which the booked value of Kraft Heinz exceeded its market value at year end. (the gap is $4.9bn right now).

So, some arithmetic:
At a P/E of 20 on "current run rate" earnings today, those pricey four would be worth $88.2bn instead of $110.4bn now, for a haircut of $22.3bn.
That reduces the income tax provision, so it becomes a haircut of $17.6bn to booked value.
Add the $3.3bn hit from KHC (which doesn't have tax effect), you get a total haircut today of $20.9bn.

For a sense of scale, that size haircut would reduce my year end "total investments" figure from $412.2bn to $391.3bn, or 5.1%.
Phrased another way, I estimate that Berkshire's investments per share are worth maybe 94.9% of their current market value because the equities are worth only 92.1% of bookable value.

Sure, I realize that maybe Apple might be worth more than 20 times my estimate of current earnings (more than $266 a share) today.
I just don't want to count on it.
Conversely it's hard to convince me that Coke is worth even 20 times flat-for-a-decade earnings, let alone today's 29.

Jim
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