Subject: Re: Second quarter comments
Also, from Tilson's recent Daily email- his current BRK simple 2-prong IV and commentary:

'I've used a consistent method to estimate Berkshire's intrinsic value for the past two decades, which I believe is similar to the one Buffett uses: take the cash and investments per share and add the value of the operating businesses.

At the end of the second quarter, cash and investments were $380,000 per A-share. Since then, Berkshire's stock portfolio has risen by $8,000 per share, so that's $388,000 today.

Berkshire's pretax operating earnings over the past 12 months were $19.1 thousand per share (excluding volatile insurance and investment income, but adding back an estimated $1.4 billion of annual normalized insurance earnings). To this, I apply a conservative below-market multiple of 11 times to arrive at a value of $210,000 per share.

Thus, my estimate of Berkshire's intrinsic value is $388,000 (investments) plus $210,000 (operating businesses), for a total of $598,000 per A share or $399 per B share.

The A-shares closed yesterday at an all-time high of $551,920, meaning that the stock is currently trading at an 8% discount to my estimate of its intrinsic value.

That's the smallest discount since the stock hit its prior all-time high in March of last year, but I still like it because it's still somewhat undervalued, incredibly safe, and its intrinsic value is growing nicely.

That said, it's important to have reasonable expectations...

Given its moderate undervaluation today, I think over the next five years, Berkshire's stock is likely to do perhaps two percentage points (compounded annually) better than the S&P 500. In other words, if the S&P compounds at 5%, I'd expect Berkshire will do 7%.'