No. of Recommendations: 10
"I think you’ll get as many opinions as there are contributors."
That's for sure. More opinions actually, since most of us use multiple valuation models.
My preferred model uses book value. Berkshire's stock price tracks sales, operating earnings and net earnings, but it tracks book value the best. In graphs back to 1968, Berkshire's stock price tracks book value with an r^2 of 0.99. Extrapolating BV is no more difficult or imprecise than extrapolating sales or earnings, and choosing a P/BV that corresponds to P/IV is easier than choosing a P/S or P/E that corresponds to P/IV. One good indicator of a fair P/B is the highest P/B at which Buffett has repurchased stock.
Book value is a broad indicator of value. If you want more insight into what determines Berkshire's value, a two-column valuation method (There are variations on two-column methods) will break Berkshire's valuation into two major parts, operating earnings and investments. A sum-of-the-parts valuation method (Again, there are variations on this method) will give more insight into the valuations of Berkshire's parts.
In the end, though, it all adds up to book value. Repurchases distort the relationship between book value and intrinsic value, but so far the effect of repurchases has been small.
Good luck.
