No. of Recommendations: 1
DTB:
1 - Operating Earnings at 15X - $151
2 - Equities - $107
3 - Partially Owned Businesses - $12
4 - Cash & Equivalents - $158
5 - Underwriting gains - $16
Total - $443.
...
I don't get into the details too much, just use the easy to find numbers in the report, but we get similar estimates.
I adjusted to more match up to you guys. The estimate I actually use does not include underwriting gains (Buffett didn't) and I deduct some cash since it will never be available for investment. This results in an estimate of $404. Around $400 is where I would get more interested in buying. I've been a net seller the last couple of years and still have a lot, far too much by any conventional asset allocation.
4 points:
1. Detail, but I got $15 in underwriting gains. The $443 total is fine though, except see point 4.
2. I don't think you need to deduct cash that is not available for investment - you can be pretty sure Buffett does not have $40b in cash stuffed into his mattress earning 0%, or in a chequing account earning 0.5%. It is cash that is not available for buying an elephant, sure, but it is still worth its nominal value, and is earning a return, currently about 4.5%.
3. In the end, I think the Occidental preferreds and warrants don't need to be added in in grove 3, and I willl stick with my $12 in grove 3, but that is the subject of a separate post.
4.There are a couple of pro-forma adjustments that might make sense, based on happenings this week, and one of them is that it is reasonable to anticipate a one-time step-up in earnings of about 7%. It won't happen this year, but it will probably happen next year. So I would posit that it might be useful to boost operating earnings from $151 to $162, and equities with the lesser future capital gain tax would go from $107 to $113, and underwriting earnings from $15 to $17. That would give me a pro-forma total of $462 instead of $443, if the expected tax cut is realized. That's probably a little too high, since the tax cut hasn't happened yet and will not be permanent, but the $443 I now think is just too low.
DTB
