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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺🐝 SILVER
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Number: of 22346 
Subject: Re: Book vs. Peak Book as Measure of Value
Date: 12/20/22 8:27 AM
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Could someone explain to me if peak book is a superior measure of value for Berkshire and if so why. I seem to recall various posts from Jim on this but can't recall the details.

'superior' is a pretty loaded word.
I find it more useful.

Two reasons.
First, a dip in book is almost certainly not a dip in the actual value of a share.
Price squiggles on the listed securities are generally transient. True value per share rises over time, it's only the proxy metrics that dip sometimes.
Besides, lower market prices tend to make improved periods for allocating capital.
For example, I think there is essentially no chance that a share of Berkshire is worth less than it was six months ago.

The other reason is that, empirically, the price-to-peak-book number has been a better predictor of average forward returns than price-to-current-book has.
Presumably because of reason #1.

In fact, buying whenever book per share has fallen a lot would probably not that bad a rule!
That's one I haven't tried.

Jim
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This community has written 21,850 posts about Berkshire Hathaway. The article-length ones it recommended most:
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