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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 38
A few comments based on the statement. Not much thoughtful discussion, mostly just numbers I jotted down while I was musing over spreadsheets.
In no particular order
I note that float, unusually, hasn't gone up. Same as three quarters earlier in nominal terms.
Trailing-four-quarters net earnings from utilities up 66% from the sum of the four quarters before that, to a new high. Nice to see that the big long dip from the fires seems to be ending. For now, at least.
I track earnings on operating subsidiaries in a way that cuts out most of the volatility: trailing four quarters sum of net earnings from each of utilities, rails, manufacturing/service/retail, and a cyclically adjusted figure for underwriting profit. Investment gains/losses and actual underwriting results are so volatile that in any give quarter or year they don't convey any information about how things are going, generally. Those "steady things" earnings have been quite weak for a few years, mainly with both rails and utilities below their prior norms. The utilities are now back out of the ditch, but rails still not prospering: TTM net income is still 15% below the *lowest* such figure in the fifteen quarterly rolling year figures to end 2022. There are other things going on as well, but generally the "steady things" real earnings have been roughly flat on trend for a few years in real terms, which has been a drag on my overall estimate of the value of a share. If you build a longer run trend of the real earnings per share of this "steady things" set, the current TTM real profit level is 7.5% below where the old trend suggests they should be now.
Investments per share are doing fine. Up inflation + 8.23%/year since mid 2013 (slope of the 32 quarter real log trend line). The current number is a hair above the trend.
The big write-off of Kraft Heinz is obviously bad, but other people have written about that. For the optimists, it is conceivable that it could "bounce" a bit, in that the current carrying value is something like 12% below book value, and they do still make money regularly. Any such bounce or gradual earn-back won't show up in book metrics any time soon, as OTTI adjustments are always down, never up, but it is still a holding that has a return.
Berkadia is not huge, but it has been a pretty good investment. Carrying value is around $450m. Berkshire's proportional net earnings were around $90m last year and distributions received around $65m.
My guess of book per A share was off by a mere $398 (0.06%). Fresh P/B is 1.527 right now.
Real book per share is up in the last one, two, five years by inflation + 8.3%, inflation + 8.5%/year, inflation + 8.5%/year.
My main "two and a half column" valuation metric is a bit more subdued, due to the soft earnings at operating subsidiaries mentioned above. Weak earnings don't hit book directly. Real value per share is up in the last one, two, five years by inflation + 7.7%, inflation + 7.1%/year, inflation + 7.9%/year, quite a big difference compared to the book/share rates.
My investment yardstick is (investments per share - 30% of float to approximate the long run drag from cash + a multiple of "steady things" earnings), with investments per share given a cyclical adjustment if there are any very large positions trading at very high multiples. Using that same method over time, if you look at a (log) trend line fit over the last 10- or 20-years, the value yardstick number is 3.8% or 3.4% below the current point implied by those trends, respectively. These represent a modest slowing, but certainly not catastrophic.
Looking at a hand full of valuation metrics and the relationship they have had to market price per share in the past, looking at 20 years of prices and value metrics suggests that, if the price today were at the average level seen since then, the various metrics would suggest a price today of about $405-435 per B share. Note the "if"--that isn't a prediction, at best just a sense of scale.
Overall I thought it was a much better quarter than the alarmist headlines would suggest. Trailing four quarter real net earnings at operating divisions are still weak and well below the old trend, but they still eked out a new high in real terms by about 1.1%. And investments per share are doing fine.
Jim
No. of Recommendations: 8
I note that float, unusually, hasn't gone up. Same as three quarters earlier in nominal terms.Float growth has definitely slowed but the data point from three quarters earlier was also sort of abnormal.
float growth trailing 4 quarters growth
2021 Q1 140 2 10
Q2 142 2 11
Q3 145 3 10
Q4 147 2 9
2022 Q1 148 1 8
Q2 147 -1 5
Q3 150 3 5
Q4 164 14 17
2023 Q1 165 1 17
Q2 166 1 19
Q3 167 1 17
Q4 169 2 5
2024 Q1 168 -1 3
Q2 169 1 3
Q3 174 5 7
Q4 171 -3 2
2025 Q1 173 2 5
Q2 174 1 5
No. of Recommendations: 1
Float growth has definitely slowed but the data point from three quarters earlier was also sort of abnormal.
Fair point. That just happened to be the one I glanced at.
Jim
No. of Recommendations: 23
PS, in case anyone is interested, the recent figures for my valuation yardstick.
Like book value, it's something that rises approximately the same rate as value, but isn't itself fair value: it needs a constant multiplier, the value of which is unknown. However, more or less by coincidence, it tracks market price fairly closely. All figures in today's money with CPI 322.6.
I included the ratio not because the specific number is meaningful, but because of the trend: to the extent that my "2.5 column" metric has merit, it suggests that the fair P/B ratio has been drifting down a bit, not up, in this stretch. This all comes down to the slowdown in net profit in operating subsidiaries.
Real Real
Quarter Book 2.5 col Ratio
2013-12 186797 306054 1.638
2014-03 190180 305856 1.608
2014-06 193208 315483 1.633
2014-09 196001 325488 1.661
2014-12 199659 330507 1.655
2015-03 201998 334675 1.657
2015-06 203079 341058 1.679
2015-09 204876 345254 1.685
2015-12 211397 349001 1.651
2016-03 214063 329662 1.540
2016-06 214900 330808 1.539
2016-09 219328 344223 1.569
2016-12 230000 358253 1.558
2017-03 235819 371717 1.576
2017-06 241012 378468 1.570
2017-09 246289 379055 1.539
2017-12 276897 391224 1.413
2018-03 273598 395652 1.446
2018-06 279101 412519 1.478
2018-09 292718 438052 1.496
2018-12 271987 433101 1.592
2019-03 287880 451983 1.570
2019-06 294910 459896 1.559
2019-09 306668 472756 1.542
2019-12 327876 499798 1.524
2020-03 286032 452823 1.583
2020-06 309321 463637 1.499
2020-09 328208 471590 1.437
2020-12 355666 515975 1.451
2021-03 360038 542472 1.507
2021-06 372914 581834 1.560
2021-09 373176 597545 1.601
2021-12 397470 604017 1.520
2022-03 392439 609887 1.554
2022-06 346433 581663 1.679
2022-09 337471 573429 1.699
2022-12 337634 591645 1.752
2023-03 373790 570743 1.527
2023-06 395662 590809 1.493
2023-09 382000 567517 1.486
2023-12 408936 605901 1.482
2024-03 413322 617743 1.495
2024-06 430321 629677 1.463
2024-09 448280 652350 1.455
2024-12 461577 666937 1.445
2025-03 460159 666591 1.449
2025-06 466106 678111 1.455
No. of Recommendations: 1
Where would we see a reasonable likelihood of fresh Berkshire A shares buybacks?! $650K range?
No. of Recommendations: 5
Where would we see a reasonable likelihood of fresh Berkshire A shares buybacks?! $650K range?
These days?
I estimate they wouldn't start until the price gets below around $688000 (around $459 per B). Meaningful amounts only at lower numbers than that.
Obviously I might be wrong by a mile!
Jim
No. of Recommendations: 3
I note that float, unusually, hasn't gone up. Same as three quarters earlier in nominal terms.
I wonder if this is due to Berkshire refusing to write certain policies ("risk management") or a slowdown in Berkshire's insurance businesses ("recession coming")? A few years back, I remember WEB saying that Berkshire declined to write *any* new reinsurance policies that year because the competition had bid down rates so much that it wasn't worth the risk-adjusted return. A year later, prices were back in the sane realm, and Berkshire began writing new policies.
No. of Recommendations: 1
How does one pull the Real Book out of the quarterly report. Aparantly my notes here don't match what you're doing.
Thanks, G.
No. of Recommendations: 1
How does one pull the Real Book out of the quarterly report.
"Real" book is what you get when you adjust book value with CPI.
The reference CPI can be for any date, but probably it would be for the latest quarter. So all book values from the past would be scaled to put them in Q2 2025 dollars, prior to smoothing.
The scale factors would be (CPI_now / CPI_then). So a dollar from 2023 (for example) is likely worth more than $1 in today's money.
Assuming CPI_now > CPI_then.
No. of Recommendations: 0
Hi Engr27,
I've got the CPI adjustment down, what I need to figure out is how to pull "Book" out of the quarterly report. My old note are:
Go to https://berkshirehathaway.com/reports.html, download and open the latest report.
Search for 'Berkshire Hathaway shareholders' equity' (page 3: $667,989 million)But that is not the book that is being reported in this thread. So I wanted to know what I am missing here.
Thanks, G.
No. of Recommendations: 1
But that is not the book that is being reported in this thread
Divide by equivalent A shares on page 4. 1438223
667989e6 / 1438223 = 464454.40
Yahoo Finance reports 464307.84 (I don't know what the discrepancy is)
No. of Recommendations: 0
Got it, I hadn't realized that we were looking at Book per A share.
Thanks, G.
