No. of Recommendations: 5
Grove 1: $24.271b net earnings of BNSF ($5.031), BHE ($3.730b) and MSR (Manufacturing, service and retail; $13.072b) p. 5)
Grove 1: 5.031+3.73+13.072 = 21.833
Grove 2: $271.588b market value (p. K-102)
Less taxes that would be owed if sold, per Buffett's explanation.
Cost basis 75.5, tax rate 21%
Grove 2: 230
...
PE = 504.6 / (21.833 + 1.519 + 2.39) = 19.6
Or, using 15x it adds up to an estimated IV at end 2024Q4 of $440/b share (1.46x book).
Same procedure for 2025Q3 gets $471/b share (1.45x book).
It's just an interesting exercise for me. I wouldn't buy at >1.4x book.
Thanks for checking. Grove 1 I mentioned MSR at $13.072 but I should have said 'Other controlled businesses' and I seem to have added a couple of billion somehow, but you are quite right.
For grove 2, I noticed the same error you picked up, but since a lot of that tax is in the distant future, I apply the handy 0.5 factor to adjust it down a bit, and dock only $21b instead of the whole $42b.
With those changes, I get a P/E of 17.7, which I think is not outrageous but I come to the same conclusion as you, I have better opportunities. Primarily Fairfax, that is trading at 8x earnings instead of 18x and has, I think, much better growth prospects, and is less confined to the USA.
