Kinda cheap

Price $277.75 per B share as I type, 1.206 times last published book per share, and still falling.
If it drops another $1.38, it will breach the old “1.2 times book” buyback threshold.

Of course the future is never quite like the past, but sometimes there are similarities.
Starting at this valuation level, average one-year forward returns since '08 have been inflation + 20%.
My sundry models suggest numbers in the 15-22% range beyond inflation.

Valuation is generally a poor predictor of market returns for any stock or index, unless you look out several years.
The one exception is that moments of notable cheapness tend to work out quite well quite quickly.

From a buybacks point of view, I can picture the word “harem” soon arising unbidden in the mind of someone in Omaha

Jim

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“Would you rather” he buy back Brk at 1.2x book or buy Google at todays price?. Hypothetical 20bn.

And why would you pick one over the other?

I can picture the word “harem” soon arising

https://nymag.com/intelligencer/2008/09/warren_buffetts_dirt…

Quote:
In 1974, to Forbes, on stocks being undervalued: “[I feel] like an oversexed guy in a whorehouse.” [Forbes changed “whorehouse” to “harem.”]

“Would you rather” he buy back Brk at 1.2x book or buy Google at todays price?. Hypothetical 20bn.
And why would you pick one over the other?

Why should he limit himself to just one? : )
I added to both in the last few days, why shouldn’t head office?

They tend to serve slightly different purposes in a portfolio, and of course they have very different effects for Berkshire.

The smart answer to the question for Berkshire is

  • assuming that both have strong balance sheets and not undue leverage, and
  • assuming both businesses will be earning at least as much decades into the future, and
  • assuming both have strong management, and
  • assuming both have no unpleasant large tail risks, then
  • whichever one is cheaper today relative to almost certain value a few years out

I suspect that Mr Buffett would prefer Berkshire.
Alphabet has a small amount of optimism baked into its price. 19 times trailing earnings that might be a bit above trend.
I tend to think that optimism is warranted, but Mr Buffett is a little less willing to believe rosy futures, so I doubt he’s buying GOOGL.
The more interesting question…would he buy it if it were cheaper? How much cheaper?
Down another 20% do it? 30%?
Or does it not pass one of those tests for him? The second one might be an issue.
It’s not as if Google’s businesses are likely to disappear, but they are perhaps more likely to disappear than a railroad or a utility.
Not for nothing do they call that game Monopoly.

Jim

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"I feel like an oversexed guy in a whorehouse.”

Need to be careful there. At 91, and soon to be 92, do we want him exposed to an extended level of that kind of pleasure?

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“* whichever one is cheaper today relative to almost certain value a few years out

I suspect that Mr Buffett would prefer Berkshire.”

Agree and who knows the better risk and play for the next 5/10 years than The Man himself? I have been adding both as well but more BRK given less uncertainty in of future value imo. Kept nibbling today at 279 and sense WEB is shrinking share count in size so it’s like enjoying a double scoop, on sale. As he and Mae West have shared on many occasion, “Too much of a good thing can be wonderful!”

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