Based on my estimates, Berkshire’s book value as of today (June 13, 2022) is $210 per share, a decrease of 8% from year-end 2021. If $210 is correct, BRK is trading at 1.34x book value.
If the stock portfolio remains at current levels, Berkshire’s full-year 2022 book value would be around $216 (given that its subsidiaries will earn and retain additional cash between now and year-end). At $216, Berkshire’s book value would decline 5.3% year over year. BRK is trading at 1.31x this 2022 estimate.
It is rare that Berkshire has a down year in book value per share. It has happened only twice in the last 30 years, and those losses were easily made back the following calendar year.
Apple (AAPL) represents 41% of Berkshire’s stock portfolio so naturally changes in its market price have a big impact on book value. APPL is down 27% ytd and 23% since the end of Q1. It now trades at a P/E of 21 (net of cash). Buffett was buying more in Q1 (at higher prices) so he must have thought it was attractively priced. If AAPL rises from its current price of $132, Berkshire’s book value will benefit and vice-a-versa.
RoughlyRight
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Thanks for this. Maybe PER SHARE is wrong due to buybacks?
It is rare that Berkshire has a down year in book value per share. It has happened only twice in the last 30 years, and those losses were easily made back the following calendar year.
But the accounting rules had changed. The investment portfolio now needs to be marked-to-market.
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Based on my estimates, Berkshire’s book value as of today (June 13, 2022) is $210 per share, a decrease of 8% from year-end 2021. If $210 is correct, BRK is trading at 1.34x book value.
Two thoughts:
Technically, book value is a thing that exists only on a day that a set of books is prepared.
There are lots of adjustments that go into that, not just marking positions to market and totting up the recent earnings.
One can estimate what that might be if a set of books were prepared today, but bear in mind that it isn’t up to date book value.
For a firm like Berkshire with steady earnings, dips in book value are transient, and are almost entirely a result of dips in the prices of equities.
So you’re really better off ignoring the dips.
Both from a theoretical point of view…Berkshire is NOT worth less now than it was at March 31…
and from an empirical point of view: historically peak-to-date book has been a better predictor of forward value and stock price returns than at-the-moment P/B using most recent statements.
And FAR better than attempt-to-be-up-to-date P/B done during a market dip.
If you want to be fancier, you could allow that book value sometimes gets a bit stretched when a big stock position gets a slightly bubbly valuation. Coke, Apple, whatever.
There is a case to be made for using this for your book value denominator:
The higher of (most recently reported book) and (98% of the highest-to-date book).
The theory is that the peak is the better metric in general, but a couple of percent of a transient spike in book might be unreliable.
Jim
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But the accounting rules had changed. The investment portfolio now needs to be marked-to-market.
The investment portfolio was always marked to market for the purpose of calculating shareholders’ equity (book value).
There is no change on that front.
The new rule merely made the change appear in the current period earnings line on the income statement rather than the “accumulated other comprehensive income” line.
In short, book value reporting is unchanged, it’s just that price changes show up in EPS now.
Jim
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