BRK PBV in frothy territory

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Unless you use BV as of today. Then I believe it is closer to or below 1.45.


I sold some BRK and bought TSLA and OXY 2026 leaps. I plan on doing some more of this today.

BRK is at all time high and raising. Why sell now?

BRK 1.55 pbv is frothy.

It’s getting up there, but book is a moving target.

Estimates of end of year book are around $260, which puts p/b at 1.45. That’s within the zone of reasonable valuation.

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Seriously, this is a joke. 1.45 is reasonable, but 1.55 is frothy?

I would add that most of the historical data points (pre-2017) reflect a higher corporate tax rate. Current tax rates justify a higher P/BV multiple. Maybe 10% or more higher IMO. A possible offset is the Percentage of BV generated from operating businesses versus equities & cash which should be close to 1X.

The sites I visit are closer to 1.53.

My view

BRK should be trading around 1.4PBV. Warren should have never said his thing about 1.1PBV and then 1.2PBV and associated buyback thresholds.

Warren has been saying that intrinsic value and BV have been diverging for a while. BV is understated.

BRK is safe and price will continue to rise. However, growth will be slow due to size, operating businesses are in slow industries and capital allocation has not been good and starting point today is high.

Even if BV is rising, PBV has risen faster. BRK will come down from its 1.5PBV and trade again at 1.3 PBV level. OXY leaps will do much better in 5+ years and TSLA leaps will do outstanding.

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You sites likely are using QE BC as of Sept 30th. A lot has happened since then.

Surprised to hear you like Tesla in view of Musks resent comments. Good luck bud.

My conviction in Tesla is very high. My time horizon is 10 years.


So I guess you are going to accumulating, a la IBM while Tesla is

between between two major growth waves

Right. Tesla has by far the best engineering talent, ideas and leader.

Now they have built up a war chest of $30B and a global foot print.


Here is the Tesla performance for the last 5 years. I specifically want to call out what happened in 2023, sales growth is only 18.8%, to drive the demand price cut was done. The effects of the price cut is visible in COGS, SGA, and operating margin.

I am not going to say $TSLA is hitting plateau but growth is decelerating, and the price cut to drive growth is hurting the margins.


Here are my major concerns:

  1. From the conference call, it is not clear whether TSLA is done with cutting price. Further price cut means margins will be seriously eroded

  2. TSLA stock price always priced in the optionality of AI, Self driving, robotics etc. Now, Musk saying he may take that out to a separate company is a serious valuation risk. Right now, the market has not taken Musk seriously, but if he makes any move towards that, the valuation is going to be decimated

You mentioned about $30 B cash, what are they going to do with it? buybacks, some AI/ robotics acquisitions? expand capacity? we don’t know. When it comes to Tesla, you have to trust the jockey, the details are going to be skimpy. Which is okay, but for me to get into it, it has to get to stupid cheap, or at least reasonably cheap, and it will be never more than 1% position.

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Well, we kind of know based on history. They are definitely increasing capacity by building new factories and expending existing ones. They are definitely spending a lot on AI. And they are spending a bit on robotics as well. I highly doubt they will resort to gimmicks like share buybacks until the cash is rolling in faster than they can spend it, or even plan to spend it (like Apple, for example). It probably costs a few billion to build a new factory, so 10-20% of that cash is already “spent” in Mexico.

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Here is the table of Tesla share buyback history. If the stock price continues to fall, they may do it. It is not the $$$ value of the buyback, but the buyback signals Musk view of the stock price. So I expect it to happen, again it will be pretty arbitrary and depends on share price.

Share buybacks are dumb for Tesla. It are one of the very few companies with immense compounding ideas but will take time. They are responsibly deploying capital wherever and whenever it makes sense.


TSLA stock price always priced in the optionality of AI, Self driving, robotics etc. Now, Musk saying he may take that out to a separate company is a serious valuation risk.

Great point!
Justification for the price always was that TSLA “is so much more than a car company”.