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I'm looking forward to seeing your updated IV and growth estimates. Tilson's latest estimate, from March, is $801K/A-share. Morningstar's estimate, from Oct 31, is $765K/A-share. With BV and IV growing 10.5%/year since Dec 1998, I expect Morningstar's updated estimate as of today to be about $805K/A-share. My own estimate, FWIW, is $790K/A-share, which corresponds to 1.55x BV, although I would not argue with 1.45x BV or 1.65x BV.

I'd be especially interested in seeing your estimate for BHE. Morningstar estimates BHE to be worth $59,600/A-share, or $85.7B. This figure is closer to the $87B valuation implied by the amount paid for Greg Abel's shares in 2022 than it is to the $49B valuation implied by the amount paid for shares owned by Walter Scott's estate in 2024.

As to growth, my best guess would be the 10.5%/year history of the last 27 years, although when I'm planning how long my retirement savings will last, I lop about 2-3 percentage points per year off that figure.

Best to all,
rrr12345

Berkshire's Sue Decker: Execution will be more important than capital allocation going forward.

I see there has been some discussion of the above quote. I was also struck by this statement. After decades of Buffett explaining his focus on capital allocation in a business, the power of retained earnings (2019 Letter), and so on, we are shifting gears. After decades of toasting the stewardship of Berkshire by the most celebrated capital allocator on the planet, we are told that this process will be de-emphasized.

I’m not saying this is wrong. Perhaps at the scale of the modern Berkshire and the difficulty of moving the needle, and given even Buffett’s lackluster results in recent years, the best course going forward may be to shoot for a market average rate of return and try to avoid any big blowups. Likewise - at the scale of the modern Berkshire - maybe there are simply too many far-flung operations to continue Buffett’s hands-off approach. And this dramatic juncture in the Berkshire leadership timeline is probably the best opportunity to make the change.

After all the fine talking about consistency of the Berkshire culture, in a sense Greg has flipped the script. He is saying: I don’t have Warren’s gift for capital allocation, though I’m reasonably intelligent and hopefully I won’t muck things up too badly.

But I am taking a much closer look at operations going forward. The subsidiary heads are on notice. There’s a new sheriff in town.

Morningstar was posted already: no change $765k/$510

I tweaked my 5-groves after the buyback announcement to be more in line with how I'm guessing Berkshire management thinks about it. This is a guess.
FWIW, 5 Groves 16.7x Op. earnings (6% earnings yield), nothing deducted from cash, BNSF cash not included, underwriting profit not included, partially owned at carrying value, equities at book value.
2025 $485
2026Q1 $486

2026Q1 Shareholder Equity + Float + 1/2 Deferred Taxes: $429

2026Q1 book value: $337.15

Current price to book: 1.4

I have no idea what this week will bring.

As to growth, my best guess would be the 10.5%/year history of the last 27 years, although when I'm planning how long my retirement savings will last, I lop about 2-3 percentage points per year off that figure.

I have a real 5-year IV growth (5-groves) of 4.8% CAGR. I lop 1% off that.

For those who can access SeekingAlpha, this article by Gary Gambino reviewing the Annual Meeting and valuing BRK is worth reading. He uses peer companies in each business segment to value them. It is an interesting approach to use market multiples of peer companies. I don’t believe peers in BRK’s segments are excessively valued and need to be adjusted. His valuation is $510 per B share.

https://seekingalpha.com/article/4897906-berkshire...

"I have a real 5-year IV growth (5-groves) of 4.8% CAGR."

I am getting book value increase of 11.5% CAGR for the last 5-years. ChatGPT tells me that the average inflation in the last 5 years has been 4.5%. Hence, the real increase in book value was likely around 7%.

What might explain this discrepancy?

Since the firm also bought back stock during the last 5 years, I would have expected the increase in book value to trail increase in IV. But here, we have the opposite. While, as Jim has noted, relatively modest buybacks (relative to Berkshire’s size) shouldn’t create a large short-term divergence between book value and IV growth, the gap here still seems notable.

Separately, if real IV growth has indeed been only ~4.8% annually over the past five years, does a price-to-book multiple of 1.5–1.6x seem justified? Berkshire has repurchased shares at levels just below ~1.5x book, which implies that management views intrinsic value as at least 1.5–1.6x book (given their mandate to buy back stock only below their conservatively calculated estimates of IV).

Estimates so far:

rrr12345, $790K, 1.55x BV
Morningstar, $765K, 1.50x BV
Tilson, $801K, 1.57x BV
AdrianC, $729K, 1.43x BV
G. Gambino, $765K, 1.50x BV
Rochish, $$765K-$816K, 1.50x BV - 1.60x BV

range, $729K-$816K, 1.43x BV - 1.60x BV
average, $773K, 1.52x BV

How are people reflecting OxyChem in their IV estimates? $9.5B went out the door to buy it. The add-back is....

The 10-Q notes that OxyChem had a small loss during Q1 which was mainly due to deal related costs.

I am adding back $9.5B for the time being which is probably a little low. Presumably BRK thought we were getting at least that much in value.

"I have a real 5-year IV growth (5-groves) of 4.8% CAGR."

I am getting book value increase of 11.5% CAGR for the last 5-years. ChatGPT tells me that the average inflation in the last 5 years has been 4.5%. Hence, the real increase in book value was likely around 7%.

I'll change the real 5-year IV growth (5-groves) to 5.4% CAGR. I had bad inflation data.

Using the same inflation data, I get the same as you for book value growth: real 5-year book value per share growth 6.9% CAGR

What might explain this discrepancy?

All that cash with a close on zero real return? Cash + fixed went from 37% of book to 54% of book over those five years.

Anyone have yearly ROE numbers for Berkshire?

Separately, if real IV growth has indeed been only ~4.8% [changed to 5.4%] annually over the past five years, does a price-to-book multiple of 1.5–1.6x seem justified?

No, that 5-groves calculation I'm using now has a price to book of 1.44. More of the firms assets are being put into things that should be valued at 1x book, or possibly a little less.

Berkshire has repurchased shares at levels just below ~1.5x book, which implies that management views intrinsic value as at least 1.5–1.6x book (given their mandate to buy back stock only below their conservatively calculated estimates of IV).

They haven't repurchased many at those levels, and they were nearly all A shares. The vast bulk of repurchases have been at 1.4 or less.

Anyone have yearly ROE numbers for Berkshire?

In effect, Berkshire's ROE is simply the percentage increase in shareholders' equity each year because there are no dividends. The main adjustment is that the increase should include any amount spent during the year on share buybacks.

So, for example, in FY 2025, (ending shareholders' equity + buybacks)/(starting shareholders' equity) - 1 = (717419 + 0)/649368-1 = 10.5%

You then have to decide how many "one off" items to exclude. For example, the increase in book due to the decrease in deferred tax liability when tax rates changed at end 2017 was not meaningful for an assessment of the quality of business efficiency. But a write-off is probably meaningful, you just have to remember that it's non-recurring. Sometimes you can get a good idea by spreading those out over time like a 4 year straight line amortization.

One could make a case that dividing the company into investments and "other than investments" and doing the calculation separately might give a better idea--you'd find the ROE of the operating side much steadier--but it's not 100% obvious how to do the split when considering things like debt and float liabilities.

Jim

In effect, Berkshire's ROE is simply the percentage increase in shareholders' equity each year because there are no dividends. The main adjustment is that the increase should include any amount spent during the year on share buybacks.

Thanks, Jim.

I was musing on some way to measure the "earnings power" of Berkshire and use that to get a less lumpy ROE trend.

A simple way might be to add up:
- non-insurance earnings
- look-through earnings (using Bloomstran's)
- interest income ("Other")

Am I missing anything?
Cap gains and underwriting are too lumpy.

Doing that, for the last 8 years I get:
ROE
2018 8.5%
2019 7.1%
2020 6.3%
2021 7.3%
2022 9.3% (Good earnings)
2023 6.9%
2024 5.7%
2025 5.2%

Average: 7.0%
A clear downtrend, as expected.

"A simple way might be to add up:
- non-insurance earnings
- look-through earnings (using Bloomstran's)
- interest income ("Other")"

"Average: 7.0%
A clear downtrend, as expected."

As discussed previously, the book value growth in the last 5 years is 11.5% CAGR.

https://www.shrewdm.com/MB?command=recommend&pid=8...

Clearly, there is a big disconnect between the metrics the firm is using to calculate book value and the above three metrics you mentioned. Are you missing anything that the firm considers relevant to calculate book value?

What multiple are you using on the look-through earnings? Assuming you use a single multiple for all their businesses (from railroad to energy to insurance to manufacturing and services, etc.), is that a valid approach?

I think the firm uses the current market value of equities for purposes of book value calculation. Fully owned subsidiaries are included at the cost of purchase (barring write-downs, etc. such as the 10B write-down on Precision Castparts some years ago). Unless one can argue that the equities held by BRK are overvalued, that seems to be a more reasonable approach to me.

Clearly, there is a big disconnect between the metrics the firm is using to calculate book value and the above three metrics you mentioned. Are you missing anything that the firm considers relevant to calculate book value?

What multiple are you using on the look-through earnings? Assuming you use a single multiple for all their businesses (from railroad to energy to insurance to manufacturing and services, etc.), is that a valid approach?


I was trying to see the trend in ROE. The "ROE" I'm attempting above is not true return on equity. Underwriting earnings and cap gains are too lumpy. Smooth them out and they make little difference to the "ROE" trend, so I didn't include them. BV obviously includes underwriting earnings and cap gains, so don't compare my "ROE" numbers with BV growth.

Multiples of earnings are not relevant to ROE. I just want to sum the earnings. For the 5-grove IV estimate I do use a single multiple. Valid? Yes, for my purposes. I don't care what Berkshire invests in, I just want to target a certain minimum portfolio earnings yield.

My conclusion: "ROE" is trending down the last three years, hypothesis confirmed?

Yet,
Sell Apple at 35x = 2.85% earnings yield
Buy T-bills at 3.6% rate
ROE goes up? Hmmm.

A better conclusion: Berkshire is far too complicated for a simple electrical engineer and financial amateur.
Buy at <=1.3x book if I have funds. That's been satisfactory so far.
Sell when I need the money, hopefully when it's >1.5x book :-)

Buffett pivoted away from Book Value to suggest the per-share owner-earnings as their new way to track IV & IV growth. “This is what Charlie and I are keeping our eyes on”. That was from about 10 years ago. Somewhat timed with the beginning of the stock buyback regime. Anyone here have an estimate of how this has worked out? What’s been that growth rate? Much appreciated if someone has done this and can share.

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