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- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 6
I believe in the comment below on $1.2 Trillion in 12-15 years, Warren is referring to book value. He explicitly states
"if we don't pay any dividends"
Rarely does he give an implicit view of growth in book value.
Would be interested in other views on this.
"I think it's fair to say we think about it plenty, but I don't worry enormously. It is true that Greg and the Directors will have a honeymoon period for a long time simply because of the bolts that will still remain. I mean, and -- but it's true that eventually, they will get judged based on how well our operation fares versus others. Now if we don't pay any dividends in 12 or 15 years, you're talking $1.2 trillion would take to take over. And I think if we can't - that limits the group. They like to think about how much they can borrow against it. It doesn't work. When you -- and - and some of these - - there's nobody to come close to doing it themselves. And I think that the important thing is that Berkshire regarded - will be regarded as a national asset rather than a national liability. We've got to be a plus to the country with our form of operation, and we certainly have got a record which will then be 12 or 15 years longer, done with much more capital, more companies."
No. of Recommendations: 2
For sure an intriguing comment. He is usually very careful and specific with numbers so after the meeting I went back and heard this answer a few times. I am not sure I get his point. The question was on a "corporate raider" gaining control over BRK, so the relevant metric would be market value. $1.5tn in 12 years, assuming no capital return, would be a 6% TSR. That seems lower than his conservative estimates of the past. Guess might be misinterpreting him or simply wrong.
No. of Recommendations: 7
I hate to went back and watched the clip. I agree that he was likely referring to market value and not book value of Berkshire.
He said it would be a trillion and a half in 12 to 15 years. If you assume that the share count then remains the same as now, then yes, the return per annum from now will be around 6 percent.
However, if the share count reduces (which is very likely), the return will be much higher.
As a rough example, if they are able to buy back half the shares during the period, then the return per annum will be over 12 percent.
Chris Bloomstran has modeled the share count reduction in his models of future return from Berkshire, and I would be surprised if Mr. Buffett has not done so.
No. of Recommendations: 0
I meant to say that 'I too went back'''(not 'I hate went back'.'). Apologies for the typo - I'm using a small device.
No. of Recommendations: 1
"$1.2 trillion BV in 12-15 years"
Thank you for catching that. It's certainly slower growth rate than Warren forecast at the 2017 annual meeting of 10% IV growth over the next 10 years (which so far has been an underestimate).
