Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 7
I know Tesla just reported 4th quarter 2024 results, but based on 3rd quarter 2024 (since Berkshire hasn't released yet):
Berkshire
TTM revenue $370 billion
TTM owner earnings $121 billion
Market cap $1 trillion
Tesla
TTM revenue $97 billion
TTM owner earnings $8 billion
Market cap $1.2 trillion
I know the arguments why Tesla deserves a premium: AI, FSD, cybercabs, humanoid robots, etc., etc. But it's fascinating Tesla is worth more than Berkshire.
(And I'm no Tesla hater. Used to own shares. Sold out in 2020 (admittedly leaving money on the table).)
No. of Recommendations: 21
I know which I prefer. I too, owned TSLA as they went public, then Musk front ran a quarterly announcement.... I sold the next day. Left a load of money on the table if I'd kept, but from that moment I knew he could not be trusted, and never rebought.. I could practically see his office from mine, and no, I didnt work there...
as Web says,, its all about reputation.
No. of Recommendations: 16
Berkshire
TTM revenue $370 billion
TTM owner earnings $121 billion
Market cap $1 trillion
Tesla
TTM revenue $97 billion
TTM owner earnings $8 billion
Market cap $1.2 trillion
Buffett had this to say about its GAAP earnings, last year, in the annual report:
It is more than silly, however, to make judgments about Berkshire’s investment value based on “earnings” that incorporate the capricious day-by-day and, yes, even year-by-year movements of the stock market.
Operating earnings in 2023 were $37.4b, and $30.9b in 2022. Berkshire doesn't show this calculation in quarterly reports, but the underlying principle is the same: most of the 'earnings' just come from investment gains, and these are capricious and often transitory. For instance, in the first 3 quarters of 2024, net earnings before tax were $86.4b, but $46.2b of that was from investment gains.
Q4 is likely to be another really good year for earnings, and your $121b figure may be about right, but we should remember that about half of this is those capricious movements of the stock market, and be careful in comparing real business earnings like Tesla's $8b with the inflated earnings that Berkshire publishes (because it is forced to), especially in a year that has been great for its equity holdings.
Your point still applies - even backing out investment earnings, Berkshire trades at a much lower multiple of its real, sustainable earnings. Whether Tesla's growth is enough to justify its much higher multiple is anyone's guess - I would say no - but the discrepancy is not as great as the GAAP earnings suggest.
Regards, DTB
No. of Recommendations: 33
But it's fascinating Tesla is worth more than Berkshire.
That word "worth" is doing a lot of heavy lifting. Not specific to Tesla OR to Berkshire: we should always remember that any "market cap" is a pretty notional thing, not very well supported by reality.
All we really know is that some folks sold some shares to some other folks today, for whatever reasons, at some agreed price. If every existing shareholder agreed to be a seller at that same price, the market cap is what it would cost to buy the whole company today. It's good to remember how unrepresentative those few traders were, and how unreasonable the assumptions in that "if" can be.
Separately, of course, price and value are different, usually very much so. The current price doesn't really tell us what either firm is "worth", only what it currently costs to buy a piece.
Jim
No. of Recommendations: 10
be careful in comparing real business earnings like Tesla's $8b with the inflated earnings that Berkshire publishes (because it is forced to), especially in a year that has been great for its equity holdings.
Small footnote - Tesla said that $600 million of their income was due to recognizing a gain on bitcoin assets, so that's at least $600 million that's not real business earnings.
No. of Recommendations: 8
Well that Tesla market cap was fleeting...
Their stores are being protested. I don't see that at, say, Geico.
No. of Recommendations: 12
I don't see that at, say, Geico.
Don't temp the gods?
Rationality is perhaps no longer the best foundation for investment strategy. Aim for resilience.
Jim
