Seems cheap

Executive summary: Buy.

I don’t know what market prices will do next.
But the omens are pretty good for buyers of Berkshire’s stock today.

Berkshire’s valuation multiples have been much lower since the credit crunch.
Considering only the lower results since January 2008, starting from the price now of $265.80 per B ~= $398700 per share,
the average one year forward return was inflation plus 22.6%.

That’s using my own valuation metric, not price/book.
My calculations have included quite a large haircut on equities lately, so there is no obvious recent overhang of overvaluation built into the value estimate.
The same might not be true of book per share…a bit of retrenchment among the equities might have been in the cards.

Jim

26 Likes

Has your major bottom detector fired yet?

Executive summary: Buy.

The road behind my truck is littered with turnips.

Jeff

2 Likes

Hi Jim.

Do you know you per chance how much company book value declined for Berkshire is the great financial crisis from top to bottom?

2 Likes

Jim,

I think I recall you saying that you prefer using price to peak book value per share as a valuation metric. Are you using the reported ~$230 per B for peak book/share? That would put the ratio at about 1.16x, correct?

Rob

“Do you know you per chance how much company book value declined for Berkshire is the great financial crisis from top to bottom?”

This post from Jim updated thru Q2 provides a great historical overview of Berkshire performance relative to several valuation factors. The performance thru the 2008/9 financial & more recent COVID crisis relative to these valuation measures is especially interesting considering our current “inflation-control” attempt and market reaction. Thanks Jim!

http://www.stonewellfunds.com/BuybackChart2022.png

https://discussion.fool.com/i-do-not-have-a-link-to-the-chart-at…

ciao

4 Likes

So looking at the chart even after the stock price had dropped 50% it was still trading at 1.2 x peak book? Or was that a written down 1.2x most recent book?

Has your major bottom detector fired yet?

Nope.
Not particularly close to triggering

Jim

8 Likes

Do we think multiples could expand because of all that cash on the balance sheet with rates headed higher?

1 Like

Thank you! Hopefully, first major bottom indicator, already triggered, intact and BRKB a no brainer from this valuation?

I think Berkshire’s valuation will head lower if it turns out they still have $100bn in cash.

2 Likes

BRKB looking $260 pre market

1 Like

I think of Braveheart on days like today.

2 Likes

Yeah, but remember in the end those in power won and he lost everything.

Don’t fight the Fed…?

3 Likes

“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.”—Sir John Templeton

Wow, so much pessimism out there but so hard to be a contrarian here. Already added a good bit of BRK this summer, but leaning towards sitting on the sideline until Q1 2023 when maybe a Powell pause will lift all boats and spirits. Really hope we will see a lot of Q3 BRK (and AAPL) buybacks next month.

2 Likes

Don’t fight the Fed is right. And they are projecting multiple increases soon. One perhaps .75% in November. I’m remaining very cash heavy for this reason.

2 Likes

Mr Market off his meds today

2 Likes

It’s likely the unknowns that are the issue, no? Will it be worse than the projected multiple increases? Can we expect more negative surprises like today’s? Even a positive surprise along the lines of “it’s still bad, just not as bad as we thought” could cause the market to rise.

1 Like

I’m going on a bit of a gut feeling that the Fed’s tightening is still mis-understood by the markets and there’s still a lot more pain to be felt.

4 Likes

FWIW - Totally agree and I ain’t putting my money on the BUY button yet.

'38Packard

4 Likes