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No. of Recommendations: 23
In 2000 Berkshire acquired Benjamin Moore for $1B
At that time Sherwin Williams market cap was $3.3B
Today Sherwin William's market cap has grown to $53B (~16x)

Using the same multiple (assuming similar growth), is Benjamin Moore worth around $16B ?
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In 2009, Berkshire acquired BNSF for $44B
At that time CSX market cap was $18B
Today the market cap is $61.5B (~3.4x)

Using the same multiple (assuming similar growth), is BNSF worth $150B.
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This pattern is repeated e.g. Geico -> Progressive market cap (~48B)

On the other hand Mr. Market is saying the equities that BRK holds are valued at $248B

Crudely arithmetic with only these 4 components: BNSF+Benjamin+Geico+Equities=$462B.

Now add cash and rinse and repeat with each company under the umbrella to this.

The fact is that the businesses is doing terrific but WEB is lowballing this.
There is too much over engineering of PBV, 4 column, 5 Groves etc.
I would say wild guess BRK is closer to being worth $1T.

WEB has built a rocket ship that is better, faster, tougher and can withstand huge disasters and demolish the competition.
He is riding it like a bicycle.

bearmarketbully is right.

I am happy since I am accumulating so I prefer the price to be low
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No. of Recommendations: 2
Curious case of Conglomerate Discount

Curious case of Ship Without a Captain Discount

Curious case of Reminiscing Discount

Curious case of BRK Echo Chamber & Crude Math

O Captain! My Captain! Overstaying thy energy is not a good look.
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No. of Recommendations: 5
Here are few more acquisitions and today's potential value 
assuming they compounded at S&P500 return rate

-------------------------------------------------------------
Acquisition     Date            Cost    *S&PRet **TodayValue   
-------------------------------------------------------------
General Re	Jun-1998	$23.5B	7.10%	$106B
Marmon		Mar-2008	$7.5B	10.2%	$24B
Precision	Jan-2016	$32B	16.5%	$59B 
Mid American	Oct-1999	$9B	6.6%	$34B
Lubrizol	Mar-2011	$10B	13.2%	$31B
Shaw Ind	Sep-2000	$2.1	6.6%	$7B
---------------------------------------------------------------
Total						$261B 
---------------------------------------------------------------

* S&P Returns is with div reinvested
** Ideally, each of these capital allocation by WEB should compound faster than S&P 
otherwise what is the point in acquiring. 

https://berkshirehathaway.com/subs/sublinks.html

Additionally, WEB has always told us that 
"At Berkshire, the whole is greater 
-- considerably greater -- than the sum of the parts

Berkshire works so well as a business because its various parts complement each other so well. 
In fact, its structure allows us to seamlessly and objectively allocate major amounts of capital, 
eliminate enterprise risk, avoid insularity, fund assets at exceptionally low cost, 
occasionally take advantage of tax efficiencies, and minimize overhead."
 
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No. of Recommendations: 2
Here are few more acquisitions and today's potential value 
assuming they compounded at S&P500 return rate

Adding Geico, BNSF and equities

-------------------------------------------------------------
Acquisition     Date            Cost    *S&PRet **TodayValue   
-------------------------------------------------------------
General Re	Jun-1998	$23.5B	7.10%	$106B
Marmon		Mar-2008	$7.5B	10.2%	$24B
Precision	Jan-2016	$32B	16.5%	$59B 
Mid American	Oct-1999	$9B	6.6%	$34B
Lubrizol	Mar-2011	$10B	13.2%	$31B
Shaw Ind	Sep-2000	$2.1B	6.6%	$7B
Geico           Aug-1995        $4.6B   9.5%    $46B
BNSF            Nov-2009        $44B    13.7%   $165B
Equities                                        $248B
---------------------------------------------------------------
Total						$720B **
---------------------------------------------------------------

* S&P Returns is with div reinvested
** Ideally, each of these capital allocation by WEB should compound faster than S&P 
otherwise what is the point in acquiring. 
*** Many acquisitions not included. Cash not included. 
Should be at $1T market cap (and that too conservatively).

https://berkshirehathaway.com/subs/sublinks.html

Additionally, WEB has always told us that 
"At Berkshire, the whole is greater 
-- considerably greater -- than the sum of the parts

Berkshire works so well as a business because its various parts complement each other so well. 
In fact, its structure allows us to seamlessly and objectively allocate major amounts of capital, 
eliminate enterprise risk, avoid insularity, fund assets at exceptionally low cost, 
occasionally take advantage of tax efficiencies, and minimize overhead."
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No. of Recommendations: 6
The fact is that the businesses is doing terrific but WEB is lowballing this.
There is too much over engineering of PBV, 4 column, 5 Groves etc.


In the four groves I used a multiple of 14. The market is assigning much higher multiples to similar businesses, e.g. CSX is 19, Vanguard Utilities ETF is about 25. If I plug in, say 20, in my 4 groves, "intrinsic value" is now approximately $440K A ($293 B), 1.7x book. That's probably closer what exuberant Mr. Market should be offering for Berkshire in comparison with alternatives, but Berkshire don't get no respect no more.

If the last know buyback was a 95 cent dollar, that's a multiple of 11.5, or perhaps more likely, a bit higher multiple with a haircut on investments like Jim does (12.5 and a 10% haircut gets you there).

WEB, of course, isn't interested in Berkshire's stock price going to exuberant levels - even though it would benefit the charities he supports. I think that at least while he's around, an owner of Berkshire will get a return close to how the business performs. Multiple expansion simply isn't on the cards.
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No. of Recommendations: 3
I think that at least while he's around, an owner of Berkshire will get a return close to how the business performs. Multiple expansion simply isn't on the cards.

I agree and said much the same thing in an earlier post. Mr. Market hates conglomerates, even the most successful one in history. Most others are being pressured to spin-off unrelated or low-growth businesses.

Only a very large acquisition of a growth business will excite Mr. Market into revaluing BRK. Or maybe a significant share buyback.
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No. of Recommendations: 10

If the last know buyback was a 95 cent dollar

I'm not sure where people are getting this 95 cent dollar implication from.

I don't think Buffett is saying that the current price represents 95 cent vs intrinsic value at all.

I took the line in the letter to point out the fact that intrinsic value is imprecise and that requires a reasonable margin to the calculation to be sure you are under it. He has pointed this out many times before as well so this is hardly new.

If you look at some information on the 10-K you get a pretty good idea that the current price is comfortably below their calculation of intrinsic value ( and other analysts arriving at these independently ranging from $253-$300 per B)

- He paid up to $222 per B till Dec 31
- Modest buybacks continued between Jan 1 and Feb 13 where the price was close to today's.
- He is inviting people to call with offers to sell $20m+ blocks. For this to make any sense and have a chance of being taken up, a prospective seller would require at least a 5% premium to the current market price which they can access with ease for a liquid share like Berkshire.

Having said that. I think Buffett continues to make things unnecessarily complicated for himself on buybacks with these rules that he needs to keep explaining all the time. The problem is that some of his execution then becomes hard to understand. For example, according to the 10-K in 2019, they increased the buybacks after the price increased by 10% but barely did anything when the price was languishing. In fact in the last 2 years, the volume of buybacks has been the lowest when the price was the most attractive ( Q4 2018) and highest when the price was the highest ( Q4 2019).
It would be a lot easier if they moved to a simple buyback program and really tucked in when prices are low and they have more than ample cash which does not have a clear current use in reinvestment ir acquisition opportunities.
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No. of Recommendations: 6

If the last know buyback was a 95 cent dollar


I'm not sure where people are getting this 95 cent dollar implication from.

I don't think Buffett is saying that the current price represents 95 cent vs intrinsic value at all.

I took the line in the letter to point out the fact that intrinsic value is imprecise and that requires a reasonable margin to the calculation to be sure you are under it. He has pointed this out many times before as well so this is hardly new.

If you look at some information on the 10-K you get a pretty good idea that the current price is comfortably below their calculation of intrinsic value ( and other analysts arriving at these independently ranging from $253-$300 per B)

- He paid up to $222 per B till Dec 31
- Modest buybacks continued between Jan 1 and Feb 13 where the price was close to today's.
- He is inviting people to call with offers to sell $20m+ blocks. For this to make any sense and have a chance of being taken up, a prospective seller would require at least a 5% premium to the current market price which they can access with ease for a liquid share like Berkshire.

Having said that. I think Buffett continues to make things unnecessarily complicated for himself on buybacks with these rules that he needs to keep explaining all the time. The problem is that some of his execution then becomes hard to understand. For example, according to the 10-K in 2019, they increased the buybacks after the price increased by 10% but barely did anything when the price was languishing. In fact in the last 2 years, the volume of buybacks has been the lowest when the price was the most attractive ( Q4 2018) and highest when the price was the highest ( Q4 2019).
It would be a lot easier if they moved to a simple buyback program and really tucked in when prices are low and they have more than ample cash which does not have a clear current use in reinvestment ir acquisition opportunities.
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No. of Recommendations: 1
"I'm not sure where people are getting this 95 cent dollar implication from."

Right from the Annual Letter unfortunately . I believe it was an illustrative comment.


I asked the below question for the #askwarren segment for WEB's 3 hour CNBC interview tomorrow.



@SquawkCNBC
"Consequently, neither of us feels any urgency to buy an estimated $1 of value for a very real 95 cents." #askwarren - does this mean intrinsic value is only 5% higher than the repurchases?
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No. of Recommendations: 6

Right from the Annual Letter unfortunately . I believe it was an illustrative comment.


Yes I know that and mentioned that in my post. I didn't take that line to have any reference to the current price at all and am surprised people interpreted it in that way.

As explained it would make no sense to invite people to contact them to sell directly if the discount was just 5% to an imprecisely determinable intrinsic value.
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No. of Recommendations: 5
Benjamin Moore is nowhere near $16B.

The model of owner/franchise didn’t work as well as the SHW model.

BM is dumped into other when discussing revenue/operating profit —Meaning de minimis.
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No. of Recommendations: 1
Bing. Bing. ppant wins again.

Every word. It is SO refreshing to read objective, accurate analysis of WEB & BRK rather than the std self-delusional defenses & reminiscing.
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No. of Recommendations: 0
It would be a lot easier if they moved to a simple buyback program and really tucked in when prices are low

For someone who can communicate so clearly, WEB's communication on buybacks are tortured. Setting aside that, I think price should not dictate the buyback pace, rather go automatic like buy some # of shares daily and you can always pull back if the price gets too high or accelerate if it gets too low.

Trying to game the buyback just doesn't work.
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No. of Recommendations: 0
Benjamin Moore is nowhere near $16B.

The model of owner/franchise didn’t work as well as the SHW model.


I wonder if they would have changed their model if they were independent, now they might feel that they are reasonably safe and there is not large rewards for growing the business, so why not just keep on going.
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No. of Recommendations: 16
I'm generally positive on Berkshire, likely because I've owned it since 1975. I agree however with the buyback comments that Buffett has made it more complicated than necessary. It seems to me Buffett makes a big deal out of his valuation metrics and along with that the historical "it is worth far more than book value." But at the same time comment in the annual report may suggest otherwise and there's been a pretty pathetic amount of stock repurchased.

Just way too much chatter and way, way, way, WAY too little actual action. If the action - buybacks - is going to be this small I'd just stop discussing buybacks altogether. It seems to me that: A) Buffett won't buy back (relative to today's intrinsic value estimate) at say $200 because "we won't support the stock price"; but also B) But we won't buy back much at $222 becuase it isn't enough of a bargain.

Seems like a tad of psycho-tennis is being played these days. I personally don't need any of this garbage. Run the company and just quit talking or writing about it is my suggestion.
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No. of Recommendations: 0
I'm not sure where people are getting this 95 cent dollar implication from.

I was trying to make a point about the earnings multiple you’d have to use to get to last known buyback being a 95cent dollar. It’s a multiple of like 11 or 12, which seems very cheap.

So, unless Buffett really does think they’re only worth that, the 95cent thing is not implying that’s what any buyback was at.

So why ain’t he buying back in volume? Easy - he don’t want to. In his mind it’s not a good use of the cash unless Berkshire is very cheap
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No. of Recommendations: 4
Easy - he don’t want to. In his mind it’s not a good use of the cash unless Berkshire is very cheap

Unfortunately sending the signal - "If Buffett won't buy it, why should we?"

Has the real result of the buyback announcement - and subsequent actions - been to set a market price that others follow? At least the broad market aside from a few value investors? Too few to move the market.
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No. of Recommendations: 1
Having said that. I think Buffett continues to make things unnecessarily complicated for himself on buybacks with these rules that he needs to keep explaining all the time.

Agree. In 2011, it was 1.1PBV. In 2016 it was 1.2PBV. In 2018, PBV was taken out.

https://berkshirehathaway.com/news/sep2611.pdf
Our Board of Directors has authorized Berkshire Hathaway to repurchase Class A and Class B shares of Berkshire at prices no higher than a 10% premium over the then-current book value of the shares.


https://www.berkshirehathaway.com/letters/2016ltr.pdf

I am authorized to buy large amounts of Berkshire shares at 120% or less of book value because our Board has concluded that purchases at that level clearly bring an instant and material benefit to continuing shareholders. By our estimate, a 120%-of-book price is a significant discount to Berkshire’s intrinsic value.
Our view is that Berkshire’s intrinsic value is significantly higher than 120% of book value.


https://berkshirehathaway.com/news/jul1718.pdf
The Board of Directors of Berkshire Hathaway Inc. has today authorized an amendment to Berkshire’s share repurchase program. The earlier share repurchase program provided that the price paid for repurchases would not exceed a 20% premium over the then-current book value of such shares. Under the amendment adopted by the Board of Directors, share repurchases can be made at any time that both Warren Buffett, Berkshire’s Chairman and CEO, and Charlie Munger, a Berkshire Vice Chairman, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined.
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