Subject: Re: Todays Barron's, Buffett moves on from buy and hol
"However, more or less entirely by coincidence, so far it's [book value] about as good a yardstick as ever."

Agreed. Berkshire's price/share, and I would argue IV/share, has tracked BV/share for 58 years, and it has continued to do so since Berkshire began repurchasing shares more or less regularly. The biggest swings in BV/share result from swings in the equity portfolio, which still makes up 50% of Berkshire's BV and IV. The equity portfolio, like the broad stock market, swings from being significantly overvalued to being significantly undervalued, and it can remain overvalued or undervalued for a decade or more. Therefore, when valuing Berkshire by BV/share we need to consider whether the equity portfolio is currently overvalued or undervalued. One way to do this is to plot the stock price versus BV/share, and to use the trendline (power law) as an estimate of IV. The trendline smoothes out the ups and down in the stock price and in the BV of the equity portfolio. The only assumption in this method is that over long periods of time the price/BV oscillates about the IV/BV, i.e., that the market is a weighing machine. The growth rate of BV does not need to be constant, and indeed it hasn't been. Neither does the growth rate of the stock price need to equal the growth rate of BV, and in fact over the last 58 years the stock price has increased somewhat faster than BV, reflecting a gradual increase in IV/BV.

At times, such as in 1981 or 1998, Berhshire's price can vary significantly from the trendline of price versus BV, but I would argue that the trendline remains a reasonable estimate of Berkshire's IV, requiring no assumptions about the future growth rate of BV or of free cash flow, and no assumptions about appropriate price multiple or discount rate. Simply plot share price versus BV/share over a sufficiently long period of time to average out the up and downs, generally 30+ years, and use the trendline (power law) as an estimate of IV. BV per share remains a very good indicator of IV per share, provided that one looks at the long term trendline of price versus BV.