Subject: Re: The shoemaker's child
Did you use operating earnings instead of net earnings?
Net Earnings. Mr. Buffett divulged his recipe for owner earnings a year or so before the cash
flow statement became mandatory. I had the luxury (curse?) of using Berkshire's cash flow
statements going back 20 years. To keep it simple, I started with cash from operations which
is derived starting with net earnings.
Also, Chris Bloomstran...
He values Berkshire in a number of ways. My simple strawman resembles one of them. He starts
with cash from operations like I did. Then he subtracts maintenance capex rather than all capex
like I did. After that, resemblance fades. He adds adjustments -- the major one being the
retained earnings of the stock portfolio -- to get what he calls Economic Earnings.
Here's a comparison of my strawman to his method for 2021:
me him
---------- ------------
Cash from Operations 39,421 39,421
Capex -13,276 all capex -9,500 just maint capex
------ ------
Owner Earnings 26,145 29,921
Stock portfolio retained earnings 11,800
Other adjustments 5,179
------
Bloomstran's Economic Earnings 46,900
An advantage to both is removing the noise of the stock portfolio.
Ears