tag:blogger.com,1999:blog-5389144729834496735.post1011180724536868976..comments2024-03-17T05:15:55.634-04:00Comments on The Brooklyn Investor: So What is BRK Really Worth? (Part 4)Unknownnoreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5389144729834496735.post-28518262664527433892014-02-06T21:34:16.436-05:002014-02-06T21:34:16.436-05:00That's a good way to look at it. I've see...That's a good way to look at it. I've seen similar analysis and think it's a good way to look at it. In my posts before, I was just thinking through various ideas so I don't actually have just one way to look at BRK. I do look at what others do too and I don't really think one is right or wrong etc... <br /><br />Thanks for reading. <br />kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-38338397714452166352014-02-06T21:29:51.409-05:002014-02-06T21:29:51.409-05:00That's a good point and good example. I used ...That's a good point and good example. I used book value including goodwill because we tend to use book value including goodwill as a proxy for intrinsic value. If we used tangible book value per share as a proxy, then return on tangible book value would make sense. <br /><br />So that was the argument. Your Coke example makes sense too. I guess the question becomes what multiple of earnings you want to put on the non insurance business. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-22248710865116844312014-02-06T19:42:04.777-05:002014-02-06T19:42:04.777-05:00So for me, I value Berkshire's companies indiv...So for me, I value Berkshire's companies individually then add the value of the stocks (I value things to a 10% return too, and I realize that valuing stocks at carrying value at that case will probably overstate their value, but I'm okay with that).<br /><br />My value comes out to approximately:<br /><br />Insurance underwriting profit - $1B, value of $10B<br />Insurance income on float/bond portfolio - $2.5B, value of $25B<br />BNSF earnings - $3.7B, value of $66.6B (PE of 18)<br />Utilities earnings - $1.5B, value of $16.5B (PE of 11)<br />Other business earnings - $4.1B, value of $70B (PE of 17)<br />Financial Products earnings - $670M, value of $8B (PE of 12)<br />Equities - $115B<br /><br />These numbers are a guess of the yearend figures, but adding all of that up gets me to a value of around $320B, or $130 per share. I know we might disagree some on exact valuations, but I think taking another look at it shows that there's a lot of value around $110.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-1715993763322527562014-02-06T19:31:40.276-05:002014-02-06T19:31:40.276-05:00I know that this is an old post, but I think you s...I know that this is an old post, but I think you should look through this again. When you were looking at ROEs by segment, you included goodwill, which I would say should be excluded. <br /><br />Just a quick example on my thought process:<br /><br />Let's say you bought coke for $100B (admittedly ridiculous but bear with me). Earnings would be $9 billion and Coke's equity is around $34 billion. However, goodwill on Berkshire's balance sheet would be $66 billion. If you didn't exclude the goodwill, you would say that the ROE would be 9/100 or 9% and that Coke was worth around carrying value on Berkshire's books. In reality, it would be worth somewhere around $150-200B.<br /><br />I think a good way to summarize it would be that if you buy a company that earns a good return on its tangible assets for a fair price (say 15x earnings), looking at ROE for the parent without taking out goodwill will undervalue the company, and the undervaluation will go up over time if the company increases its earnings.<br /><br />Anonymousnoreply@blogger.com