Skip to main content
This Board Has Moved

This board has been migrated to our new platform! Check out the new home page at or click below to go directly to the new Board on the new site.

Go to the New Site
Message Font: Serif | Sans-Serif
No. of Recommendations: 12
I think that, despite the dire economic outlook, the prospects for Berkshire's stock remain very good in the next couple of years.
Not certain, of course, but the bell curve is skewed far to the good side.
In pre-market the last BRK/B trade was $169.15, equating to $253725 per share.
That's 97% of peak book per share and 1.106 times of last-published book per share.
Book is imperfect, but it's still a darned useful rule of thumb.
I'm pretty confident that Berkshire will trade at at least 1.4 times book again at some point, being the "normal" in the last 15 years.
Even if book value never again rises from its end March level, that's up 26.5% from here to $214 per B.
Timeframe unknown : )

You have the advantage that there is a lot of time left on your calls.
A lot can happen in the next 617-764 days, and much of it might be good.
I'd sit tight.

If you want to actually profit from the price drop, and have spare cash, there is a great trade you can do.
Pick a calm day on the markets, and roll your highest strike calls down to a lower strike, longest expiry.
Even if the implied interest rate is fairly high on the ones you're buying, you'll probably find that it's extremely profitable.
The amount of improvement in your breakeven price is probably a big percentage of the amount of cash you'll tie up.
Random example: a June 2022 $190 can probable be sold for about $18.33 right now.
That's like selling stock at a price of $208.33 ($312495).
You could probably buy June $100 for $78.95, equating to a breakeven of $178.95 per B or $268425.
This ties up $60.62 more in cash, but improves your breakeven by $29.38.
So, that's a profit of 48.5% on the incremental cash tied up, or 23%/year compounded.
Pretty good for a "guaranteed" profit, provided only that Berkshire's price isn't much lower in 764 days.

Of course, if you think the price of Berkshire is going to just keep on dropping and stay down there indefinitely, your optimal action would be to sell.
I don't think that's a defensible view, but opinions can differ.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.