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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 22350 
Subject: Re: Reversion to .....mean? S&P?
Date: 04/20/25 10:41 AM
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On June 17, 2005, just under 20 years ago, the S&P 500 was valued about 5% more richly than its average valuation multiple since then.
On June 17, 2005, just under 20 years ago, Berkshire was valued about 5% more richly than its average valuation multiple since then.
Since those are the same, it seems like a reasonable starting point.

Currently, the S&P 500 is valued about 25.6% more richly than its average since that same date in June 2005.
Currently, Berkshire is valued about 27.5% more richly than its average since that same date in June 2005.
Again, pretty close, so it's coincidentally not such a bad end point to consider.


First, I fixed the typo, the above is correct. I said S&P twice in the last section.

And PS, that last bit should NOT be interpreted as saying that the S&P and Berkshire are equally overvalued at the moment.
They are equally overvalued relative to their respective 20-year average valuation levels, which is not the same thing.

Berkshire's 20 year average price-to-peak-book is 1.397, which is hardly high, so being a little above that would not count as overvalued in my books. We're quite a bit above that, so today might amount to "moderately overvalued"?

And the S&P's 20 year average trend real earnings yield of 4.16% equates to a P/E of 24, so even that average level seems a bit rich. As we are now sitting 27.5% above that at 30.6 times trend real earnings, it really does seem overvalued to me.

Jim
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This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 58 recs · 2023
Summary of 2Q 2026 · 55 recs · 2026
3Q Summary · 53 recs · 2024
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