Post New

I don't usually bother to try to forecast book per share any more, but FWIW my guess for June 30 is $421,100.

That's calculated as Q1 book per share, plus an after-tax estimate of the gains in the equity portfolio assuming no price changes in the next couple of weeks, plus an estimate of the after-tax "steady things" operating earnings: what a typical Q2 might look like for rails, utilities, manufacturing/service/retail, and cyclically adjusted underwriting profits.

Almost 80% that quarterly gain in book arises from the roughly $33.6bn rise in the market value of the Apple position. I don't think the value of the Apple position rose that much, but the price did, so it feeds into book value.

The current market price of $615,000 is 1.460 times that number. FWIW, that multiple is 7.9% above the 15 year average, before any consideration of whether Apple is ahead of itself. My models have big error bars, as prices can do anything for a while, but they suggest the next year will most likely have a single digit negative real return from here. Both the models based on book per share, and the models based on more on earnings. Range -10.6% to +0.7%, median model giving -7.5%. That will as usual be wrong, but the notion is that it's a 50/50 shot whether it's too low or too high.

Jim

Good stuff. Apple may have been sold down materially in q2.

Apple may have been sold down materially in q2.

If so, let's hope it was in the last week after the price pop : )
It's not that important in the grand scheme of things, but getting prices around $216 would be nicer than those earlier in the quarter ($165-$196).

When I do my valuation of Berkshire (not my book estimate) I'm using a price for Apple closer to $140, based on a multiple of my eyeballed trend earnings estimate. Maybe it's worth much more, maybe not, but in any case I would rather be pleasantly surprised so I don't like to use too high a multiple.

Jim

...suggest the next year will most likely have a single digit negative real return from here.

OK, Jim, you convinced me.

Here goes: https://www.shrewdm.com/MB?pid=501811538

-- sutton

OK, Jim, you convinced me.

Dang, now we're all doomed.

Jim

With due respect, Jim, I think you'll be pleasantly surprise.

However many faults that Apple has, I think the next 3 - 5 years will be another of its golden era. I just want to mark my words here.

I am happy about continuing skepticism about Apple being expansive, but value investing is not just forward P/E.

OK, Jim, you convinced me.

Here goes: https://www.shrewdm.com/MB?pid=501811538

-- sutton


I replied to your post, but since there are now a grand total of 2 posts on the Lilly board, I'll link to my post : https://www.shrewdm.com/MB?pid=992391486

.. and copy just my conclusion here:

Which one could be a homerun like Amazon or Apple? Definitely LLY/NVO - Berkshire is not going to be up 10 times, 10 years from now. But there is also a huge downside that is also possible for these 2 drug companies whose value is almost entirely supported by semaglutide and tirzepatide. I wouldn't be at all surprised that Berkshire is up 20% in 5 years and LLY/NVO are down by 50% - in fact, that may be the most likely scenario.

I am happy about continuing skepticism about Apple being expansive, but value investing is not just forward P/E.

Well, the assets of the firm matter, too. A company with $1 per year in earnings but also owning a tonne of gold is worth more than the same firm without the tonne of gold.

But other than that, I disagree emphatically. ONLY the future earnings matter, provided you mean ALL of the future earnings, not just next year's. I personally don't estimate earning power past the one decade mark, purely because it's so hard, not because it doesn't matter. The future E numbers are of course unknowable, but they will determine precisely the ultimate forward returns. A good story won't buy you food.

Always remember that the value of any purely financial instrument is the present value of the future distributions it's capable of supporting...nothing more, period. It makes plenty of sense to pay high prices for growth, but not if that growth does not ultimately lead to future earnings.

Mostly that pile of possible future coupons comes from the stream of future earnings, though it also includes some relatively minor and easily forgotten things like the firm's own ability to buy and sell things profitably which creates earnings and more assets; some positive or negative constant for debt and assets when the firm is wound up; the potential benefit from defaulting on some debts; positive or negative taxation quirks; and the bonus or premium that might happen as the last coupon if the firm is bought out at a premium or discount to its true value. But mainly it's just the pile of all future earnings for most firms.

Jim

Post New

Berkshire Hathaway FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.