Subject: Double digits
Berkshire's stock price has risen quite nicely lately, so some folks might be just starting to consider at what point they might even lighten up.
Write covered calls or something like that.
Maybe not now, but soon? Or a little after "soon"?

Today's price is 1.474 times known book. Book per share is at an all time high.
That multiple isn't high, especially as the June statements will soon bump up known book, but it's meaningfully above the average since the credit crunch, which is under 1.34.

But I wouldn't give up just yet.

One way to think of it:
Real inflation-adjusted known book per share peaked quite a while ago, at the end of February last year.

Now, book is an imperfect measure of value, maybe a peak is transient exuberance and a bit too optimistic.
Let's conservatively assume that there might have been 3-5% of value overestimation at that time using book as a proxy of value per share.
Apple stock finished 2021 at a temporary peak level, for example, flattering book value.
So, let's consider 96% of that inflation-adjusted peak as a not-bad conservative proxy yardstick for the real value of a share at the time.
In today's US dollars, that peak real book was $366747, and 96% of that is $352077.
We'll call that our "pretty darned sure it was worth that much then" figure for book.

The thing is, I am firmly of the opinion that squiggles in value metrics are pretty meaningless and true value does not stop rising just because of a bear market.
If nothing else, the cash stacks up at a rate of about a billion dollars each fortnight, which is not nothing. Plus, investments get made at better valuations.
With a sensible amount of smoothing, I think the more reasonable conclusion is that the value of a share generally just keeps rising.
I would pencil in inflation + 5%/year as sort of a floor on the rate of trend value growth, once you smooth out the unusually good and unusually bad numbers.
(this is, not entirely coincidentally, about the lowest rate indicated by my value smoothing exercise mentioned before)

That "pretty darned sure" book figure of $352077 would then rise 6.72% in 16 months to $375742, again all in today's dollars.
Think of that as today's "on trend" real book per share: smoothed, but conservatively estimated.
The price of a B share today is only 1.365 times that number, definitely not selling territory.

In fact, because I love Excel so much, I did approximately this same exercise for each day in the past, using the value smoothing method I have mentioned previously.
(basically a four year "weighted moving average" of book per share).
Looking at subsequent returns, today's valuation level has since the credit crunch been followed by average one year returns of about inflation + 10%.
Inflation is a bit of a wild card these days, but I'd turn that into a very reasonable expectation of low double digit nominal returns in the "roughly a year" time frame.
Might be better or worse than that, but I think the odds are 50:50 on that front.

So be of good cheer!
On this view, we are about to experience an above-average year, not a below-average one.

For the record, B shares at $342, CPI at 304.127.


Jim