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You should read Value Investing : From Graham to Buffett and Beyond by Bruce C. N. Greenwald, Judd Kahn, Michael Van Biema, Paul D. Sonkin. http://half.ebay.com/cat/buy/prod.cgi?cpid=1186149793&pr=4446397 I give this book two thumbs up.

In there you will learn that liquidation value is just one way to estimate the value of a business. If the business is a going concern, its liquidation value will be lower than its value as a business, by definition of going concern.

The fundamental definition of Intrinsic Value is the current value of the future cash flows available to its owners. If a company is a going concern, it will NOT be liquidated, it will continue to run as a business tossing cash back to its owners. Thus liquidation value would not be a good estimate of IV. But in the event the company were to be liquidated soon, then liquidation value would be a good estimate of those cash flows, and so it would be a good estimate of IV.

The shorthand of estimating IV as "what a good businessman would pay for the business" only works because we define a good businessman as someone who can value things pretty well. The fact that BRK is so big is irrelevant to finding its IV. Go with the DCF concepts and other shorthands for estimating that in the book I mention above.

Assuming humans have free will (a better assumption than that the market is efficient, IMHO) IV can never be known ahead of time. It can only be probabilistically estimated. And the probabilistic variables are things like you don't know when management will get stupid or smart, when recessions and booms will affect the business, when disruptive new information will come to light (large hidden liabilities of the company from criminal accounting acts for example), etc. etc.

This is what makes investing fun. You need to find things whos price is below its IV in order to outperform the market. Price is more or less the consensus estimate of a company's IV. How far can you deviate from the consensus in your estimate, and still be right?

The good news is that even if you don't outperform the market, you still generally make money, because generally the market makes money. This is because these are businesses that are being owned, and for the most part businesses make money.

Enjoy,
R:
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