BRK - Berkshire Hathaway

[el_chieh]

"1. Why shouldn't you include earnings from insurance when coming up with a valuation? "

 

You can.  Some like Tilson do.  I do too but use normalize insurance u/w earnings + lower multiple than operating businesses.

 

Buffett's two-column method includes accumulated after-tax insurance underwriting earnings via inclusion of cash and investments.

 

"2. What liabilities should be subtracted out?"

 

None when you used two-column methodology properly.

 

In fact, two column method implicitly adds back insurance liabilities (float) via inclusion of cash and investments (these are proxy for float, insurance capital and accumulated retained earnings).

 

You also don't subtract debt because operating biz earnings are pre-tax (i.e., they exclude interest expense).

 

 

 

[abcd]

Question to experts.

 

Hypothetically, if Berkshire would have been an entirely different entity, would WEB considered it an attractive investment?

 

If the answer is 'Yes', why would Berkshire not consider buy back?

 

 

[DCG]

Question to experts.

 

Hypothetically, if Berkshire would have been an entirely different entity, would WEB considered it an attractive investment?

 

If the answer is 'Yes', why would Berkshire not consider buy back?

 

 

 

I think it's more of a question of whether it's the best investment, or the best way to deploy cash, not just an attractive investment. He didn't buy back stock during the crash of 07-08, so I have a hard time thinking he'd do it now.

[Viking]

Here is another nice concise summary for BRK from March: www.gurufocus.com/news/125970/march-value-idea-contest-berkshire-hathaway

 

BRK earnings look to be coiled like a spring. I really like the recent decisions (last few years) and how the company is positioned. Given the current price ($76 per B share) the risk/return trade off looks quite good to me (it looks like dowside risk is priced into stock not upside potential). BRK is now my largerst position at 10%.

 

Being Canadian, one factor I do not like is the currency risk as it looks like the CAN$ is on its way higher (to $1.10???) versus the US$.

[ericd1]

Seems to me Buffet has and will continue to invest in better opportunities than BRK, especially ,when you consider BRK's size. I prefer him to add value to the business the way he knows best. In the future without him mgr might take a different approach.

[Viking]

Yes, there are many opportunities out there with more upside than BRK; most also have much more downside risk. BRK to me is a no brainer right now as a core holding (in place of a bond). Limited downside risk and solid upside potential of 8 to 12% per year going forward. I think many of its businesses are earning a decent amount below what they would in an average (or more normal) year. In the next few years I see upside to:

1.) BNSF: railway is very cyclical; as the economy improves, earnings will jump.

2.) insurance: as we transition to a hard market, top and bottom line will improve

3.) housing related businesses: we are perhaps at the bottom; as things slowly improve earnings will grow quite a bit

4.) WFC: as the economy improves, earnings will jump

5.) Future decisions: with +$17 billion coming in each year we know Buffett will continue to make good capital allocation decisions

 

The good news is pretty much none of the above is factored into the current stock price. I don't need any off the above to happenn for BRK to be a solid investment at current prices. Should the above happen over the next few years, BRK will increase a bunch in price.

 

Safe. Lots of moats. Predictable. Limited downside; solid upside. Oh, and unloved and really boring. So boring in fact it is rarely ever discussed even at at the Corner of Berkshire & Fairfax Message Board. Nice contrarian indicator if I ever saw one.

[twacowfca]

Yes, there are many opportunities out there with more upside than BRK; most also have much more downside risk. BRK to me is a no brainer right now as a core holding (in place of a bond). Limited downside risk and solid upside potential of 8 to 12% per year going forward. I think many of its businesses are earning a decent amount below what they would in an average (or more normal) year. In the next few years I see upside to:

1.) BNSF: railway is very cyclical; as the economy improves, earnings will jump.

2.) insurance: as we transition to a hard market, top and bottom line will improve

3.) housing related businesses: we are perhaps at the bottom; as things slowly improve earnings will grow quite a bit

4.) WFC: as the economy improves, earnings will jump

5.) Future decisions: with +$17 billion coming in each year we know Buffett will continue to make good capital allocation decisions

 

The good news is pretty much none of the above is factored into the current stock price. I don't need any off the above to happenn for BRK to be a solid investment at current prices. Should the above happen over the next few years, BRK will increase a bunch in price.

 

Safe. Lots of moats. Predictable. Limited downside; solid upside. Oh, and unloved and really boring. So boring in fact it is rarely ever discussed even at at the Corner of Berkshire & Fairfax Message Board. Nice contrarian indicator if I ever saw one.

 

Also, the alpha in BRK's price action generally increases when the S&P500 trends down.  Why would anyone want to hedge by shorting stocks, that at best is a strategy that may merely break even over the long haul, when BRK will likely not only outperform, but show positive returns in all but the worst down markets?