the impact of share buybacks while the insurance float has steadily climbed up, ergo, float/share has gone up 20+ % while share count has declined 10%…
To me, this was a refreshing change from other mundane valuations. Like the BV x…
The Yardstick has changed and the market has been slow to catch up.
Bear in mind that I’m not assuming that a multiple of book value remains a pretty good yardstick.
There are many good reasons to assume that a given P/B ratio might not mean the same thing over time, so that would be a bad idea.
Mr Buffett’s warning not to rely on it was a good warning.
Rather, I’m stating that it remains a pretty good yardstick.
That result may be because of a bunch of coincidences, and that might change at any time, but so far there is no
divergence between a dumb multiple of book valuation model and what I believe is a pretty sophisticated
one taking into account operating earnings, the value of float, cyclical adjustments on various units, etc.
A given P/B multiple is (so far) as good as it ever was, and means about the same as it meant many years ago.
There has been no reason to assume that this would be the case, but it is the case so far.
Many expect the fair multiple of book to drift upwards ever so slowly over time.
But if anything, to the extent there is divergence between P/B and other valuation models,
based on my figures the fair P/B is either flat or has slid down just a teeny tiny bit in recent years.
There are quite a few moving parts determining the “fair” P/B and its evolution.
Over/undervaluation of big equity positions, buybacks, big acquisitions driving the fair P/B down
organic growth and capex within subs driving it up, and inflation driving it up.
So far, those things are in balance within my measurement error.
On my reading, the biggest limitation of P/B at the moment is that I’m unwilling to assume that Apple is fully worth its current quote when counting my chickens.
If it is, great, but I’m unwilling to ascribe that high a value to it. I track the value of the holding with its earnings progress, not its market value.